19 Aug 2009 10:31

Russia's NOVATEK beats forecasts, edges up Q2 earnings 1.8%

MOSCOW. Aug 19 (Interfax) - NOVATEK , Russia's largest independent gas producer, increased net profit under International Financial Reporting Standards (IFRS) by 1.8% to 7.178 billion rubles in the second quarter of 2009 compared to the same period of 2008, the company said in a report.

NOVATEK said the increase in net profit could be attributed to exchange rate changes and a reduction in profit taxes to 20% from 24% on January 1.

Analysts from investment companies and banks polled by Interfax had predicted NOVATEK would see IFRS earnings decline 2.6% on average to 6.873 billion rubles in the quarter. Citi's forecast was the closest at 7.27 billion rubles.

Sales revenue grew 8.4% to 23.148 billion rubles in the period, while analysts had anticipated it to total 22.181 billion rubles. The growth in sales revenue was the result of an increase in natural gas prices and hydrocarbon sales volumes. Revenue from the sale of oil and gas increased 9.6% to 22.376 billion rubles, while revenue from the sale of polymer products declined 13.6% to 501 million rubles.

EBITDA (earnings before interest, taxes, depreciation and amortization) fell 9.7% to 9.334 billion rubles, which was also above the consensus forecast of 9.145 billion rubles.

Operating costs rose 27% to 15.038 billion rubles, including transportation costs of 8.3 billion rubles, which almost doubled.

Natural gas production rose 2.5% to 7.563 billion cubic meters (bcm) in the second quarter of 2009, while gas purchases declined to 159 mcm from 801 mcm.

NOVATEK produced 759,000 tonnes of liquid hydrocarbons in the quarter, up 27% from a year earlier.

Gas sales declined 3.4% to 7.704 billion rubles in the quarter due to a reduction in purchases from third parties. Sales of stable gas condensate soared 70% to 658,000 tonnes, while sales of liquefied hydrocarbon gas increased 25% to 188,000 tonnes. The company sold 45,000 tonnes of oil in the period compared to 72,000 tonnes in the second quarter of 2008 and 3,000 tonnes of petroleum products versus 41,000 tonnes.

The company said the increase in liquid hydrocarbon sales can be attributed to growth in the production of unstable gas condensate at the Yurkharovskoye field.

In the three months ended June 30, 2009, NOVATEK sold 658,000 tonnes of stable gas condensate, of which 650,000 tonnes, or 98.8%, was exported to the United States, Europe and South Korea, and the remaining 8,000 tonnes were sold domestically. In the three months ended June 30, 2008, the company delivered 380,000 tonnes of stable gas condensate, or 99.2% of total sales volumes, to markets in the United States. In the 2009 period, total stable gas condensate sales volumes increased by 275,000 tonnes, or 71.8%, primarily due to an increase in unstable gas condensate production as well as a decrease in our "goods in transit or storage" balances at the end of the period.

NOVATEK's average export stable gas condensate contract price, including export duties, in the three months ended June 30, 2009 was approximately $483 per tonne compared to approximately $1,063 per tonne in the corresponding period in 2008.

The decrease in average realized contract price was due to an overall decrease in crude oil and related commodity prices on international markets in the 2009 period compared to 2008.

In the three months ended June 30, 2008, NOVATEK sold 82% of its LPG volumes domestically, 8.7% to the export markets and 9.3% to markets in the CIS. The increase in its share of LPG deliveries to export markets from 8.7% in the three months ended June 30 2008 to 56.9% in the 2009 period was primarily the result of optimizing netback prices as well as penetrating new export markets.

At June 30, 2009, cumulative natural gas volumes stored in Gazprom's underground gas storage facilities (UGSF) totaled 207 mmcm, representing an increase of 70 mmcm during the period.

As of June 30, 172,000 tonnes of stable gas condensate were classified as 'goods en route' and 'stocks of prepared products' among the company's reserves until they reach port compared to 149,000 tonnes on the same date of 2008.

NOVATEK also said capex fell to 4.8 billion rubles in Q2 2009 from 9.47 billion rubles in Q2 2008 and 3.871 billion rubles in Q1 2009. Most of it went into the Yurkharovskoye field.

NOVATEK paid 313 million in compensation and bonuses to executive and non-executive board members in Q2 2009, down from 411 million rubles in the same period of last year.

"We are very pleased with the financial and operational results we achieved during the second quarter 2009 compared to prior year and first quarter 2009 results, which were largely due to our ability to maintain natural gas production volumes and significantly increase liquid volumes at our Yurkharovskoye field," said Leonid Mikhelson, CEO. "During the period, we also increased our resource base by acquiring a controlling stake in the South-Tambeyskoye field. This acquisition is consistent with our long-term strategy of increasing reserves to support future production growth as well as providing us with a significant position in the development of the Yamal peninsula," he said.