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The Oil Price Tug Of War

The Oil Price Tug Of War

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Rosneft’s Q1 Profits Miss As Stronger Ruble Offsets Oil Price Gains

Rosneft

Russia’s biggest oil producer Rosneft reported on Friday a first-quarter net income rising 8.3 percent on the year, but missing analyst estimates, as the appreciation of the Russian ruble largely offset the impact of the higher oil prices in Q1 2017.

Rosneft’s net income attributable to shareholders grew to US$222.5 million (13 billion rubles) from US$205.4 million (12 billion rubles) for the first quarter last year. This past quarter’s net profit missed an average estimate of US$304.6 million (17.8 billion rubles) by six analysts surveyed by Bloomberg.

The Q1 profit saw a “significant negative effect of foreign exchange rates due to RUB appreciation,” Rosneft noted in its statement.

Revenues and EBITDA grew by 34.5 percent and 22 percent, respectively, over Q1 2016, but dropped by 5.1 percent and 8.8 percent sequentially, again due to the ruble appreciation. The annual growth in EBITDA was due to “improved macro conditions, increase in production, management efforts to control expenses and starting realization of synergy effect from the acquisition of new assets,” Rosneft said. The EBITDA of US$5.7 billion (333 billion rubles) beat the analyst estimate of US$5.27 billion (308 billion rubles).

Earlier this week, Rosneft said that its average daily liquids production decreased in Q1 2017 by a little more than 70,000 boed vs. October 2016 “due to external limitations for the Russian oil producers and unfavorable weather conditions,” with ‘external limitations’ referring to the OPEC/non-OPEC deal in which Russia pledged a total of 300,000 bpd production cut by the end of the first half of this year.

In today’s financials release, Rosneft’s chief executive Igor Sechin said:

“Environment remains difficult: continuing world commodity markets volatility, rouble appreciation – all of this impacted the Company’s financial results.”

Related: All Eyes On Saudi Arabia As OPEC Begins To Unravel

The deal with OPEC is good for Russia’s budget, but not so good for earnings of producers, Alexander Kornilov, an oil analyst at Aton, told Bloomberg in an email.

On Thursday, Russian Energy Minister Alexander Novak was quoted as saying that Moscow is inclined to extend the oil cut deal with OPEC and is inclined to believe that an extension is reasonable.

By Tsvetana Paraskova for Oilprice.com

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