Report

Russneft 1H 20 - Worse than expected, GEA loan impaired

Russneft has reported its 1H 20 IFRS results which were extremely negative from top to bottom driven by lower oil prices by 46% yoy in USD, higher than expected SG&A and MET. The companys EBITDA drop yoy (-85%) far surpassed the benchmark netback drop (net of MET) of 36% yoy. The company has been granted a delay in MET payment (>RUB 8 bn or around USD 110 mn) for Feb-May 2020 until June 2020e but even including that positive effect and extra capex cuts (-43% yoy), 1H 20e FCF amounted to only USD 49 mn which could be offset in 2H without a similar MET delay and capex cut. Furthermore, even assuming FCF in 2H as high as in 1H, it would still not be enough to cover both short-term debt repayments (>USD 130 mn as of end-1H 20 and USD 94 mn at end-2019) and USD 60 mn inpreferred share dividends. Thus, the company has to negotiate restructuring its debt repayments with its new creditor the Qatar CQUR Bank, to whom VTB has transferred its claim to USD 1.17 bn (to be repaid by 26e).
Underlying
RussNeft

NK Russneft' PAO is a Russia-based company engaged in the oil and gas industry. It is mainly involved in the extraction and distribution of crude oil, as well as production of associated petroleum gas (APG), natural gas and gas processing. The Company and its subsidiaries hold more than100 subsoil licenses and operate over 125 oilfields. The Company's extraction operations are structured into three geographical groups: West Siberian Group, Volga Region Group and Central Siberian Group. In addition, the Company operates on the territory of Azerbaijan. NK Russneft' PAO operates in various regions of Russia and in Belarus. The Company has its own research and technology center. The Company supplies oil both to Russian market and to export markets of Commonwealth of Independent States (CIS) and other countries, including Hungary and Slovakia.

Provider
Raiffeisen Bank International AG - Institutional Equity
Raiffeisen Bank International AG - Institutional Equity

The Institutional Equity Research team of Raiffeisen Bank International AG covers 85 stocks from Austria, Central & Eastern Europe with sell-side research and thus levers our local broker status with excellent company relationships. For corporates in Austria, CEE and Western Europe, we offer co-sponsored research, which includes research coverage and marketing activities to investors. Additionally, through our Spotlight Research product we also shed light on leading European small and micro-caps, seeking greater visibility with investors.

The Institutional Equity Research team consists of roughly 15 analysts, both in Vienna and the CEE countries. Our analysts provide long-standing sector expertise in tandem with profound local market know how and a sectoral approach across the entire region.

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