Novatek (MCX: NVTK) - the second company in Russia in terms of production and sales of natural gas and one of the world leaders in terms of proven reserves. The main part of the company's natural gas is sold through the Unified Gas Supply System in the Russian market, and a smaller part is processed at own and joint plants and sold abroad in the form of liquefied natural gas (SPG).
28 April, the company's management published the results of work for 1 neighborhood 2021 of the year, where it reflected record revenue on the back of a sharp rise in natural gas prices and record sales volumes.
Position in the industry
The cold winter season of 2020-2021 provoked an increase in demand and prices for natural gas in Europe and Asia, thanks to which the gas industry quickly recovered from last year's crisis and restored production and sales volumes. IN 2021 natural gas contract prices skyrocketed due to freezes and disruptions in LNG supplies due to logistical problems.
As a result of the jump in prices and the low base of last year, the average prices on world gas exchanges 1 quarter 2020 years have grown by more than 2 times quarter to quarter. Quotes of contracts for natural gas on the UK trading floor, on average over three months, rose by 115% year on year and amounted to 6,9 $ per million BTU, and on the trading floor in the Netherlands - on 113%, to 6,6 $ per million BTU.
In May, natural gas prices on European exchanges were close to January highs, which may have a positive effect on Novatek's half-year results.
Mining
Hydrocarbons. For 1 neighborhood 2021 years, Novatek produced 5% more hydrocarbons qoq — record 158,1 million barrels of oil equivalent. This was due to the launch of new production capacities and a suitable market situation compared to the first quarter of last year..
Natural gas. Natural gas production increased by 6% - to 20,2 billion cubic meters due to the start of operation of gas condensate deposits at the Severo-Russkoye field, as well as the launch of production at the Vostochno-Tazovskoye field.
SPG. Liquefied natural gas production grew by less than 1% - to 3,1 thousands of tons. Production of liquid hydrocarbons increased by 3% quarter by quarter and reached the maximum of recent years - 3,13 million tons.
Production of hydrocarbons for 1 neighborhood, million boe
| 2017 | 130,5 |
| 2018 | 132,5 |
| 2019 | 147,1 |
| 2020 | 150,2 |
| 2021 | 158,1 |
Natural gas production for 1 neighborhood, billion m³
| 2017 | 16,2 |
| 2018 | 16,5 |
| 2019 | 18,7 |
| 2020 | 19,1 |
| 2021 | 20,2 |
Production of liquid hydrocarbons for 1 neighborhood, million tons
| 2017 | 3 |
| 2018 | 2,9 |
| 2019 | 3 |
| 2020 | 3,05 |
| 2021 | 3,13 |
realization
Hydrocarbons. Sales volumes of hydrocarbons were record for the first quarter. The main reason for the growth is an increase in sales of natural gas in Russia by 7% quarter to quarter — up to 19,6 billion cubic meters - due to frosts in winter.
SPG. Foreign sales of natural gas in the form of LNG fell by 24% - to 1,87 billion cubic meters. Joint Venture "Yamal LNG" with partners, in which Novatek owns only 60%, began to sell more LNG under long-term contracts, bypassing Novatek.
Liquid hydrocarbons. Based on the results of 1 quarter sales of liquid hydrocarbons amounted to 4,03 million tons - almost at the level of the same period last year.
Realization of natural gas for 1 neighborhood, billion m³
| In Russia | Abroad | |
|---|---|---|
| 2017 | 18,8 | 0 |
| 2018 | 19,3 | 0,96 |
| 2019 | 18,8 | 3,42 |
| 2020 | 18,2 | 2,45 |
| 2021 | 19,6 | 1,87 |
In Russia 2017 18,8 2018 19,3 2019 18,8 2020 18,2 2021 19,6 Abroad 2017 0 2018 0,96 2019 3,42 2020 2,45 2021 1,87
Sales of liquid hydrocarbons for 1 neighborhood, million tons
| 2017 | 4,11 |
| 2018 | 3,78 |
| 2019 | 3,98 |
| 2020 | 4 |
| 2021 | 4,03 |
Financial indicators
total revenues. For 1 Novatek quarter launched 244,6 billion rubles, out of which 240,7 bln rubles came from oil and gas sales. Revenue growth quarter-on-quarter 33% associated with an increase in sales volumes and the average realized price of hydrocarbons.
Operating expenses companies have grown 22% - to 178,8 billion rubles — due to the growth of expenses for the purchase of natural gas and liquid hydrocarbons, as well as due to an increase in transportation costs and a mineral extraction tax.
Operating profit. As a result, adjusted operating income increased by 67% - to 65,1 billion rubles, which was a record for 1 quarter.
To all other, the financial results of Novatek were affected by the devaluation of the ruble. After the revaluation of exchange rates, the company recorded a loss on foreign exchange differences in the amount of 4,5 billion rubles - against 142,8 billion rubles profit in 1 last year's quarter.
Net profit. In the end for 1 quarter unadjusted net income was 65,2 billion rubles — against the loss 30,7 billion rubles in 1 last year's quarter. But if you look at the adjustments for one-time non-monetary items, The company's net profit increased by 42% - to 75,8 billion rubles — a record profit for 1 quarter.
Financial performance of Novatek for 1 neighborhood, billion rubles
| Oil and gas sales revenue | Operating profit | Net income before adjustments | Net income after adjustments | |
|---|---|---|---|---|
| 2017 | 154 | 45,5 | 71 | 44,3 |
| 2018 | 178,5 | 48,5 | 43,1 | 46,91 |
| 2019 | 231,2 | 58,1 | 381,8 | 65,7 |
| 2020 | 182,6 | 38,9 | −30,7 | 53,5 |
| 2021 | 240,7 | 65,1 | 65,2 | 75,8 |
Oil and gas sales revenue 2017 154 2018 178,5 2019 231,2 2020 182,6 2021 240,7 Operating profit 2017 45,5 2018 48,5 2019 58,1 2020 38,9 2021 65,1 Net income before adjustments 2017 71 2018 43,1 2019 381,8 2020 −30,7 2021 65,2 Net income after adjustments 2017 44,3 2018 46,91 2019 65,7 2020 53,5 2021 75,8
Debts
Novatek's net debt for 1 quarter grew by 67% - to 65,1 billion rubles. At the same time, the level of debt burden according to the “net debt” ratio / EBITDA increased from 0,2 to 0,3 and remains one of the lowest in the industry, what speaks about the good financial stability of the business.
Net debt dynamics, billion rubles
| 2017 | 89,8 |
| 2018 | 102,9 |
| 2019 | 15,106 |
| 2020 | 39,557 |
| 31 Martha 2021 | 69,761 |
Dividends
At the end of last year, Novatek's board of directors approved a new dividend policy., in which he increased the minimum rate of dividend payments from 30 to 50% from adjusted net profit for the reporting period.
In March 2021 of the year, according to the new dividend policy, Board of Directors recommended paying a final dividend of 23,74 P per share, which, taking into account interim dividends, amounted to 35,56 R per share based on the results of the entire past year and became a record payment for the company.
Amount of dividends per share based on the results of the reporting period
| 2015 | 13,5 R |
| 2016 | 13,9 R |
| 2017 | 14,95 R |
| 2018 | 26,06 R |
| 2019 | 32,33 R |
| 2020 | 35,56 R |
What's the bottom line?
Novatek demonstrated strong operating and financial results following the results 1 quarter against the backdrop of growing demand and prices for natural gas. By production, in revenue and adjusted profit, the company broke its own records for the same period of previous years.
Despite weak financial results 2020 of the year, the company's management recommended paying record dividends to shareholders and approved a more attractive dividend policy for investors, increasing the minimum payout rate.
Natural gas prices at major European hubs rose to January highs in May and are close to local highs, because of which it is possible to predict good financial results for Novatek and for the entire first half of the year.
Also worth noting, that Novatek received a large field in the Yamalo-Nenets Autonomous District at its disposal, in close proximity to their production assets. The company purchased a license for 30 years for 0,8 billion rubles, at the same time, the cost of proven reserves of natural gas is estimated at 92,9 billion rubles, which will allow Novatek to increase its resource base.
