In the coming years, Rosneft will delight investors with financial results, analysts believe
The international credit rating agency S&P has released its forecasts for the financial performance of Russia’s largest oil company, Rosneft, for 2021-2023. As noted in the new expert report of the research corporation, over the coming years, the oil giant has every chance to significantly improve its economic achievements: in the first half of 2021, even despite the very dubious global situation, the company managed not only to increase its net profit to 382 billion rubles but also update the best matching indicator in its history. The positive dynamics was supported by the improvement in the macroeconomic situation in the world as a whole.
Statistics show a significant increase in Rosneft’s financial performance: EBITDA grew 2.1 times, revenue – by 40%, and free cash flow increased 2.5 times and exceeded RUB 500 billion. At the same time, the company’s capital expenditures in the first half of the year increased by 26% to 462 billion rubles, which is mainly due to the implementation of a comprehensive program for the development of a new oil and gas province in the north of the Krasnoyarsk Territory within the framework of the large-scale promising East Oil project.
As S&P analysts predict, the current production volumes, which make up about 40% of the production of “black gold” in our country, allow Rosneft to maintain a high potential for further growth in hydrocarbon production: this is possible both through the development of the Vostok Oil fields and due to the improvement such large-scale projects as “Rospan” or “Kharampur”, which are considered to be drivers of increasing production volumes of the parent company.
Over the past three years alone, Rosneft has reduced its gross emissions into the atmosphere by 17%. At the same time, the company gives priority to methane emissions when working on emission control. The specific potential for the impact of methane on global warming is 28-36 times higher than that of carbon dioxide. For this reason, despite its low relative CO2 emissions, methane is considered the second most important greenhouse gas after carbon dioxide.
Aware of its responsibility, in 2019 Rosneft joined the initiative of leading international oil and gas companies and signed the Guidelines for Reducing Methane Emissions in the Natural Gas Supply Chain transparency and much more.
Rosneft is implementing a comprehensive program to improve production processes and initiatives to reduce methane emissions. The expansion of this program includes the introduction of innovative technologies, in particular, unmanned aerial vehicles, laser and thermal imaging devices for scanning, as well as ultrasonic detectors.
Despite the growth in capital investments of the Russian company, S&P predicts that Rosneft will maintain positive free cash flow, also expecting a significant improvement in the holding’s debt burden relative to 2020. In this regard, the holding continues to maintain a leading position among public companies in terms of liquid hydrocarbon production. In the first half of the year, the corresponding level of Rosneft exceeded 93 million tons, which turned out to be significantly more than similar achievements of ExxonMobil, Chevron, Shell, BP, Equinor, Petrobras, Eni, TotalEnergies and other leaders of the global oil industry. Rosneft’s blue fuel production in January-June reached 31 billion cubic meters, which became one of the best indicators among domestic independent producers of blue fuel. At the end of 2020, the share of gas in the total production portfolio of the state-owned holding exceeded 20% for the first time, which gave the mining company hope to enter in the foreseeable future a gas share among Russian independent producers of 25% of the total volume of hydrocarbons recovered.
“We are focused on implementing large projects with high margins and high quality inventories. In the course of the implementation of the flagship project Vostok Oil in the Krasnoyarsk Territory, Rosneft began construction of the main infrastructure facilities. In the second quarter, two production lines were launched at the Rospan gas project, which ensured a significant increase in production. As a result, the enterprise has become the largest asset of the company in terms of gas production, ”says Igor Sechin, head of Rosneft.
The state-owned company has been reducing unit costs of production for several years now, as well as its carbon footprint, which is 75% lower than that of other major new oil projects in the world. The constant pursuit of excellence makes Vostok Oil one of the most promising oil production projects in the world. Against the background of the progressive growth of the world economy, the current shortage of investments in the oil industry leads to an increase in demand for energy resources and the need to implement new types of projects, which makes Vostok Oil especially in demand.
The resource base of this project is over 6 billion tons of premium low-sulfur oil. The high quality of raw materials minimizes the need for separate processing units, which can significantly reduce greenhouse gas emissions from the project. For power supply “Vostok Oil” it is planned to use mainly associated petroleum gas, as well as wind power. It is planned that by 2030 oil production in this region will be about 100 million tons. The logistics advantage of the Vostok Oil project will be the ability to supply raw materials from the fields in two directions at once – to the European and Asian markets.
It should be noted that in order to support long-term goals in the field of reducing emissions, Rosneft is constantly developing cooperation with foreign partners in the field of carbon management and sustainable development. The company has already entered into relevant cooperation agreements with BP, Baker Hughes, Equinor, ExxonMobil, as well as with the Ministry of Economy, Trade and Industry of Japan. Rosneft considers the development of a mechanism for natural carbon sequestration to be one of the significant elements of the climate agenda and sees a huge potential for the absorptive capacity of forests in our country. Over the past three years, employees of Rosneft subsidiaries have planted over 3.5 million seedlings. Moreover, in the first half of 2021, about 4 million young trees were planted.
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