Surgutneftegas 1H 20 - Severe market conditions in 1H 20 made FCF negative
On Friday, December 11, Surgutneftegas released its 1H 20 IFRS results, which came in almost in line with our estimates on revenue and net income, while EBITDA turned out to be weaker than projected. Notably, EBITDA was lower vs our forecast on higher than projected cost of supplies, which came in unexpectedly high for 1H (USD 566 mn or +24% yoy). Apart from weaker than expected EBITDA, the companys net operating cash flow was additionally pushed below our estimates by the negative effect from WC changes (USD 206 mn) and higher than projected income tax paid (USD 1,805 mn). Combined together, this resulted in Surgutneftegas NOCF turning negative in 1H 20 at USD 289 mn. Overall, with higher than anticipated capital expenditures, the companys free cash flow came in weaker than expected and was brought to the negative zone of USD 1.5 bn. In turn, the amount of cash pile on the balance (including both short and long-term deposits) slightly decreased (-1.9% hoh) and accounted for USD 53.3 bn.Surgutneftegaz is vertically integrated oil company based in Russia. Co.'s activities include prospecting and exploration of hydrocarbons, oil and oil and- gas fields development and construction; oil products and petrochemicals manufacturing and marketing; power generation; gas processing and gas products marketing. Co.'s operations expand beyond Western Siberia in 3 oil production centers, two of which, in Eastern Siberia and Timano- Pechora, are to be built up within the next 3 years. Co. operates in 16 constituent territories of the Russian Federation from Republic of Sakha (Yakutia) to Kaliningradskaya Oblast. Co.'s mineral resource base comprises 134 license areas of 120,000 sq. km.
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