Gazprom Neft 1Q 20 - Free cash flow surprisingly strong due to support from WC
Today, Gazprom Neft released its 1Q 20 results, which came in almost in line with our estimates on revenue and EBITDA, while the latter was missed by the market. Besides, net income came in lower than both our and market expectations due to significant FX losses (USD 481 mn) and the hike in depreciation (+17.9% qoq to USD 879 mn). At the same time, these non-cash expenses had no impact on Gazprom Nefts net operating cash flow, which exceeded our forecast mainly due to considerable positive effect from changes in working capital (over USD 1.2 bn). As a result, even with higher than forecasted capital expenditures, free cash flow beat our expectations and came in at significant USD 242 mn. Overall, we treat the news as slightly positive for the stock due to strong FCF, but we should take into account that it was driven by working capital effect.Gazprom Neft PJSC is vertically integrated oil company operating in the Russian Federation, CIS and internationally. Co.'s principal activities include exploration, production and development of crude oil and gas, production of refined petroleum products and distribution and market ing operations through its retail outlets. Co.'s Upstream segment includes the exploration, development and production of crude oil and natural gas (including joint ventures results), oil field services. Co.'s Downstream segment processes crude into refined products and purchases and sells and transports crude and refined petroleum products (refining and marketing).
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