Tatneft 1Q 20 - Support from WC and banking activities made FCF strong
Today, Tatneft published its 1Q 20 IFRS results, which came in line with the consensus on revenue, while EBITDA and net income were slightly weaker than the market expectations. At the same time, the companys sales came in lower than our estimates due to lower than expected crude oil purchases, whereas EBITDA and net income beat our forecasts because of lower than projected operating expenses. More importantly, Tatnefts net operating cash flow surpassed our estimates and accounted for significant USD 1.1 bn thanks to support from both changes in WC (USD 223 mn) and cash flows from banking activities (USD 204 mn). As a result, even with higher than expected capital expenditures, the companys free cash flow exceeded our projections and reached over USD 0.7 bn compared to USD 148 mn in 4Q 19. Overall, we treat it as slightly positive, as the growth in FCF was driven mainly by changes in WC as well as banking activities.Tatneft PJSC and its subsidiaries are engaged in crude oil exploration, development and production principally in the Republic of Tatarstan, Russia. Co. is a holding structure, which incorporates oil and gas production boards, crude oil and gas refining companies, as well as enterprises and servicing works selling the crude oil and also the products of crude oil and gas refining and petrochemical products. In addition to this, Co. is also participating in the banking and insurance activities. Co.'s operations are divided into the following main segments: Exploration and Production; Refining and Marketing; and Petrochemicals.
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