Rosneft 2Q 20 - Strong 2Q net income, but not enough to cover 1Q 20 loss
Today, Rosneft released its 2Q results, which turned out to be close to both our estimates and the consensus on revenue and EBITDA. At the same time, we should note that the companys net income came in above market expectations as well as our projections due to higher than expected FX gain and a drop in finance expense due to one-off gain. Besides, Rosnefts net operating cash flow adj. in 2Q 20 was marginally below our forecast, with capital expenditures also falling behind the estimates. In total, the companys FCF turned negative in 2Q 20, which came in line with our expectations. It is also worth mentioning that in 2Q 20 Rosneft repaid USD 1.3 bn of obligations under prepayments, which was reduced to USD 16.9 bn, while net debt (incl. obligations under prepayments) increased to USD 66.1 bn. Overall, despite higher than expected net income in 2Q 20, we treat the results as neutral for the stock, as Rosnefts 1H 20 profit was still negative, which should result in lack of interim dividends in case dividend policy remains unchanged.OJSC OC Rosneft is a vertically-integrated Russian oil and gas company with upstream and downstream operations in each of Russia's oil-producing regions. Headquartered in Moscow, Co. operates ten oil and gas producing enterprises across Russia and is involved in over ten exploration projects. In addition to its upstream operations, Co. also owns two refineries, which have a combined capacity of 10 million tons per year, as well as four main oil export terminals and a nationwide network of over 600 service stations. Co.'s downstream operations consist of its crude oil export structure, refining operations and nationwide network of marketing subsidiaries.
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