LUKoil 1Q 20 - Strong FCF propped up by changes in working capital
Today, LUKoil published its 1Q 20 IFRS results, which slightly exceeded consensus on revenue, while EBITDA came in almost in line with the market expectations. Compared to our estimates, the revenue was also stronger than expected due to higher than forecasted oil products purchases, whereas EBITDA surpassed the estimates because of lower than projected exploration expenses. Besides, the net income turned negative and came in weaker than both our and market expectations due to considerable non-cash expenses, including FX losses (USD 225 mn) as well as impairment loss (USD 664 mn). However, these expenses should not affect LUKoils dividend payments, since they are based on its free cash flow, which came in higher than expected and accounted for over USD 0.8 bn despite significant capex of almost USD 2.0 bn. At the same time, we should note that this was due to support from changes in WC of USD 686 mn, while excluding this effect FCF was even lower than our estimates. Overall, we treat the news as slightly positive for the stock.PJSC Lukoil is a vertically-integrated oil company engaged in the exploration and production of crude oil and natural gas. Co. is engaged in all main sectors of the modern oil business including supplies, refining, marketing, transportation, petrochemicals and oil-related activities. Co.'s operations are divided into five business segments: Exploration and Production; Refining, Marketing and Distribution; Chemicals; Power Generation and Other Business Segments. Co. owns and operates refineries in Bulgaria (LUKOIL Neftochim Bourgas AD) and Romania (Petrotel-LUKOIL).
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