TIDMLKOD
RNS Number : 3510X
PJSC LukOil
27 August 2020
LUKOIL ANNOUNCES IFRS FINANCIAL RESULTS FOR THE SECOND QUARTER
AND SIX MONTHS OF 2020
PJSC LUKOIL today released its condensed interim consolidated
financial statements for the three and six month periods ended June
30, 2020 prepared in accordance with International Financial
Reporting Standards (IFRS).
Financial highlights
2 Q 1 Q 6 M 6 M
20 20 20 20 20 20 2019
------- -------- ------------------------------------------ -------- --------
(RUB bln)
1 , 666
986.4 . 0 Sales 2,652.4 3,976.5
144.
5 150.8 EBITDA 295.3 630.2
72.3 109.2 Exploration and production 181.5 470.2
78.7 40.3 Refining, marketing and distribution 119.0 173.1
(Loss) profit for the period attributable
(18.7) (46.0) to LUKOIL shareholders (64.7) 330.5
117.2 130.2 Capital expenditures 247.5 205.0
25.5 55.5 Free cash flow 81.0 308.3
Free cash flow before changes in
38.4 1 0.0 working capital 48.4 372.8
------- -------- ------------------------------------------ -------- --------
COVID-19
Since the start of COVID-19 pandemic, LUKOIL has been
undertaking necessary measures to rule out the direct impact of the
pandemic on the Group's operating activity, prioritizing proper
protection of its employees, contractors personnel and clients, as
well as continuity of production processes.
Weaker global economic activity amid the pandemic followed by an
unprecedented slump in hydrocarbon demand and prices had a negative
impact on operational and financial performance of the Group in the
second quarter and the first half of 2020 with persisting negative
effect in the third quarter of 2020.
The consequences of the pandemic for the Company's operating
results in the first half of 2020 and July-August 2020 include:
crude oil production cut at the Company's fields in Russia and some
international projects due to the new OPEC+ agreement; gas
production cut in Uzbekistan due to lower demand for Uzbek gas from
China; reduction of refinery throughput volumes due to lower
refining margins owing to lower demand for refined products; and
lower sales volumes of motor fuels through the Company's filling
stations because of lower demand.
The main impact of the pandemic on the Company's financial
performance is attributed to decline in prices for oil and refined
products as well as production volumes.
OPEC+ agreement
On April 12, 2020 a number of oil-producing countries, including
OPEC members and Russia, entered into an agreement valid until the
end of April, 2022 that aims to reduce their collective crude oil
output by 9.7 million barrels per day starting from May 1, 2020
with subsequent gradual increase. Due to the agreement, starting
from May 1, 2020 the Company cut its crude oil production in Russia
by approximately 310 thousand barrels per day as compared to the
average daily production in the first quarter of 2020. In July, the
Company increased crude oil production in Russia by approximately
20 thousand barrels per day followed by an increase in August by
approximately 60 thousand barrels per day.
Crude oil production was also reduced at some international
projects. In particular, production at the West Qurna-2 project in
Iraq decreased by approximately 70 thousand barrels per day
starting from May 1, 2020 and further by additional 50 thousand
barrels per day starting from mid-June.
Revenue
In the second quarter of 2020, our sales amounted to RUB 986.4
bln, down by 40.8% quarter-on-quarter. As a result, for the six
months of 2020 sales totaled RUB 2,652.4 bln, down by 33.3%
year-on-year.
Sales dynamics in both periods was negatively affected mainly by
lower hydrocarbon prices, lower hydrocarbon production volumes,
lower oil and refined products trading volumes, and lower refined
products sales volumes through filling stations. These factors were
partially offset by ruble devaluation to US dollar.
EBITDA
Despite a significant decrease in sales, EBITDA in the second
quarter of 2020 decreased only by 4.3% quarter-on-quarter to RUB
144.5 bln. This was due to higher EBITDA of the Refining, Marketing
and Distribution segment, which almost fully offset the decrease in
EBITDA of the Exploration and Production segment.
In the Exploration and Production segment in Russia the main
factors for decrease in EBITDA quarter-on-quarter were lower oil
prices and oil production cut due to the OPEC+ agreement. These
factors were partially offset by a positive time lag effect of
mineral extraction tax and export duty and ruble devaluation.
Outside Russia, besides price factor EBITDA was negatively
affected by lower gas production in Uzbekistan and lower EBITDA of
the West Qurna-2 project.
EBITDA of the Refining, Marketing and Distribution segment
increased almost twofold quarter-on-quarter and surpassed EBITDA of
the Exploration and Production segment. The main growth drivers
were international assets of the Company due to the reversal of
inventory write-down on the back of growing oil and refined
products prices, as well as by higher trading margins and inventory
effect at refineries. At the same time, lower benchmark refining
margins in Europe and the specifics of accounting for hedging
operations in international trading partially offset the positive
effect from the abovementioned factors.
EBITDA of the Refining, Marketing and Distribution segment in
Russia was negatively affected by lower benchmark refining margins,
as well as seasonal decrease in financial results of power
generation. These factors were partially offset by a positive
inventory effect at refineries, as well as optimization of refinery
utilization rates and product slate.
EBITDA for the six months of 2020 amounted to RUB 295.3 bln,
down by 53.2% year-on-year. The decrease was driven mainly by a
negative impact of the COVID-19 pandemic on sales prices and
volumes, as well as by a negative time lag effect of mineral
extraction tax and export duty and negative inventory effect at
refineries. At the same time, EBITDA was supported by higher share
of high-margin barrels in the crude oil production structure in
Russia, higher trading margins, the specifics of accounting for
hedging operations in international trading as well as ruble
devaluation.
Net loss
In the second quarter of 2020, the Company booked a loss
attributable to shareholders in the amount of RUB 18.7 bln. As a
result, the loss for the first six months of 2020 amounted to RUB
64.7 bln as compared to RUB 330.5 bln profit for the first six
months of 2019.
In addition to lower EBITDA, the loss for the first six months
of 2020 was impacted by non-cash foreign exchange loss due to ruble
devaluation, as well as assets impairment loss.
Capital expenditures
In the second quarter of 2020, our capital expenditures amounted
to RUB 117.2 bln, down by 10.0% quarter-on-quarter as a result of
optimization measures. For the first six months of 2020, capital
expenditures totaled RUB 247.5 bln, up by 20.7% year-on-year.
Free cash flow
Free cash flow amounted to RUB 25.5 bln in the second quarter of
2020, a 54.1% decrease quarter-on-quarter. For the first six months
of 2020, free cash flow totaled RUB 81.0 bln, down by 73.7%
year-on-year. The decrease was mainly attributable to lower
operating cash flow while working capital increase put additional
pressure on free cash flow in the second quarter of 2020.
Operating highlights
2 Q 1 Q 6 M 6 M
2020 2020 2020 2019
------ ------ ------------------------------- ------- --------
2,38
2,064 2 Hydrocarbon production, Kboepd 2,223 2 , 381
1,982 2,328 ex. West Qurna-2 2,155 2 , 352
Liquid hydrocarbon production,
1,650 1,838 Kbpd 1,744 1 , 817
1,568 1,784 ex. West Qurna-2 1,676 1 , 788
6.4 8.4 Gas production, bcm 14 . 8 17 . 4
Production of refined products 28 . 31 .
12.6 16.0 at own refineries, mln tonnes 6 8
------ ------ ------------------------------- ------- --------
For the six months of 2020 LUKOIL Group's average hydrocarbon
production excluding the West Qurna-2 project was 2,155 thousand
boe per day, which is 8.4% lower year-on-year as a result of a
significant production cut in the second quarter of 2020. The cut
was due to the new OPEC+ agreement and a decrease in gas supply
from Uzbekistan to China, that were driven by a negative impact of
the COVID-19 pandemic on hydrocarbon demand.
Liquid hydrocarbons
For the six months of 2020, production of liquid hydrocarbons
excluding the West Qurna-2 project was 1,676 thousand barrels per
day, which is 6.3% lower year-on-year due to a 12.1% production cut
in the second quarter of 2020 as compared to the first quarter. The
cut was due to the new OPEC+ agreement.
Despite a decrease in oil prices and external limitations on
production volumes, active development of the priority projects
continued. In particular, in West Siberia overall oil and gas
condensate production at the V. Vinogradov, Imilorskoye,
Sredne-Nazymskoye and Pyakyakhinskoye fields increased for the six
months of 2020 by 27% year-on-year and exceeded 2.0 million
tonnes.
Further development of the Yaregskoye field and Permian
reservoir of the Usinskoye field, including the launch of new
steam-generation facilities, allowed to increase high viscosity oil
production for the six months of 2020 by 4.5% year-on-year, to 2.5
million tonnes.
Implementation of drilling programs at the V. Filanovsky and Yu.
Korchagin fields in the Caspian Sea allowed to maintain production
at project levels. Total oil and gas condensate production at these
fields for the six months of 2020 was 3.7 million tonnes, flat
year-on-year.
The share of the abovementioned projects in the LUKOIL Group's
oil production excluding the West Qurna-2 project amounted to 20%
for the six months of 2020 as compared to the 18% for the six
months of 2019.
Gas
For the six months of 2020, LUKOIL Group's gas production was
14.8 billion cubic meters, which is 14.6% lower year-on-year. The
decline was due to lower demand from China for gas produced in
Uzbekistan amid the COVID-19 pandemic. At the same time gas
production in Russia increased by 1.3% year-on-year driven by the
launch of the second stage of the booster compressor station at the
Nakhodkinskoye field in December 2019.
Refined products
For the six months of 2020, production of refined products at
LUKOIL's refineries was 28.6 million tonnes, which is 10.0% lower
year-on-year. The decline was due to scheduled maintenance works
and throughput optimization at some of the Company's refineries in
the second quarter of 2020 on the back of decline in refining
margins and lower demand for petroleum products due to the COVID-19
pandemic.
Production of refined products in Russia for the six months of
2020 decreased by 7.0% due to scheduled maintenance works and
throughput optimization at Nizhny Novgorod and Ukhta refineries in
the second quarter of 2020. At the same time, throughput at Perm
and Volgograd refineries remained unchanged compared to the first
quarter of 2020. Production of refined products in Europe for the
six months of 2020 decreased by 15.4% due to scheduled maintenance
works at refineries in Bulgaria and the Netherlands, as well as
throughput optimization at European refineries in the second
quarter of 2020.
http://www.rns-pdf.londonstockexchange.com/rns/3510X_1-2020-8-27.pdf
http://www.rns-pdf.londonstockexchange.com/rns/3510X_2-2020-8-27.pdf
http://www.rns-pdf.londonstockexchange.com/rns/3510X_3-2020-8-27.pdf
Note:
Full set of PJSC LUKOIL condensed interim consolidated financial
statements prepared in accordance with IFRS for the three and
six-month periods ended 30 June 2020 is available on the Company's
web site: www.lukoil.com. These condensed interim consolidated
financial statements have been prepared by the PJSC LUKOIL in
accordance with IFRS and have not been audited by our independent
auditor. If these condensed interim consolidated financial
statements are audited in the future, the audit could reveal
differences in our consolidated financial results and we can not
assure that any such differences would not be material.
PJSC LUKOIL is one of the largest publicly traded, vertically
integrated oil and gas companies in the world in terms of proved
hydrocarbon reserves and production; and the second largest
producer of crude oil in Russia. Established in 1991, the Company
currently operates in more than 30 countries with core upstream
assets located in Russia. The full production cycle includes oil
and gas exploration, production and refining; production of
petrochemicals and lubricants; power generation; marketing and
distribution providing LUKOIL with maximum synergies from its
activities. The Company's shares are listed in Russia on Moscow
Exchange under the ticker "LKOH" and depositary receipts are listed
on the London Stock Exchange under the ticker "LKOD".
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