Novatek announces consolidated IFRS results for Q3 and 9M 2019.

In the third quarter of 2019, Novatek’s total revenues and its normalized EBITDA, including the company’s share in the EBITDA of its joint ventures, amounted to RUB189.2 billion and RUB104.5 billion, respectively, representing decreases of 13.8 percent and 11.5 percent as compared to the prior year’s corresponding period. The decreases were primarily due to lower hydrocarbons sales prices on international markets in 2019, which were largely offset by an increase in the company’s natural gas sales volumes due to the production launch at the second and third LNG trains at Yamal LNG in July and November 2018, respectively.

In the nine months ended September 30, 2019, the company’s total revenues and the normalized EBITDA, including the company’s share in the EBITDA of its joint ventures, increased to RUB641.8 billion and RUB338.3 billion, respectively, or by 7.9 percent and 14.4 percent, as compared to the corresponding period of 2018. This was largely due to an increase in LNG sales volumes and the company’s domestic average natural gas sales price, which was offset by a decrease in hydrocarbons sales prices on the international markets in 2019.

Shareholder attributable profit

The profit attributable to the shareholders of Novatek increased to RUB370.0 billion (RUB122.86 per share), or eight-fold, in the third quarter of 2019 and to RUB820.9 billion (RUB272.59 per share), or nearly seven-fold, in the nine months of 2019 as compared to the corresponding periods of 2018. Novatek’s profit was significantly impacted by the recognition of a net gain on the disposal of a 10-percent and a 30-percent participation interests in the Arctic LNG 2 project in March and July 2019, respectively, which, when taken together, amount to RUB675.0 billion. In addition, the company’s profit was impacted by the recognition of non-cash foreign exchange effects on foreign currency-denominated loans of the group and its joint ventures in both reporting periods.

Excluding the effect from the disposal of interests in Novatek’s subsidiaries and its joint ventures, as well as foreign exchange differences, the normalized profit attributable to the shareholders of Novatek totaled RUB48.5 billion (RUB16.12 per share) in the third quarter of 2019 and RUB178.6 billion (RUB59.29 per share) in the nine months of 2019. This represented a decrease of 25.9 percent and an increase of 7.1 percent, respectively, as compared to the corresponding periods of 2018.

Cash for capital expenditures

The amount of cash used for capital expenditures increased to RUB36.5 billion, or by 47.4 percent, in the third quarter of 2019 and to RUB110.2 billion, or by 94.9 percent, in the nine months of 2019 as compared to the prior year’s corresponding periods. A significant portion of the company’s capital expenditures related to the development of the company’s LNG projects (Arctic LNG 2 project prior to March 2019 and the LNG construction center located in the Murmansk region), the North-Russkoye field, the Beregovoye field, crude oil deposits of the East-Tarkosalinskoye and the Yarudeyskoye fields, and exploratory drilling.

Total natural gas production, including the company’s proportionate share in the production of joint ventures, for the third quarter and the nine months of 2019 increased by 5.3 percent and 11.1 percent, respectively, and the company’s total liquids production increased by 4.5 percent and 3.3 percent, respectively, as compared to the corresponding periods of 2018. The main factors positively affecting the production increase were the launch of LNG production at the second and third LNG trains at Yamal LNG in July and November 2018, respectively, and the commencement of crude oil commercial production at the Yaro-Yakhinskoye field of the company’s joint venture Arcticgas in December 2018.

In the third quarter and the nine months of 2019, the company’s natural gas sales volumes totaled 16.7 billion and 57.7 billion cubic meters (bcm), representing increases of 7.1 percent and 13.1 percent, respectively, as compared to the corresponding periods of 2018, due to an increase in LNG sales volumes purchased mainly from the company’s joint ventures Yamal LNG and Cryogas-Vysotsk. As of September 30, 2019, Novatek recorded 1.8 bcm of natural gas in inventory balances compared to 2.4 bcm as of September 30, 2018, mainly attributable to the natural gas contained in the underground gas storage facilities. Natural gas inventory balances depend on the group’s demand for natural gas withdrawals for the sale in the subsequent periods.

In the third quarter and the nine months of 2019, the company’s liquid hydrocarbons sales volumes totaled 4.0 million and 12.1 million tons, representing increases of 1.7 percent and 1.0 percent, respectively, as compared to the corresponding periods of 2018. The increases were mainly due to crude oil purchases from the company’s joint venture Arcticgas and resulted from the commencement of crude oil production at the Yaro-Yakhinskoye field in December 2018. As of September 30, 2019, Novatek recorded 938 mt (metric tons) of liquid hydrocarbons in transit or storage and recognized as inventory as compared to 850 mt as of September 30, 2018. The group’s liquid hydrocarbon inventory balances tend to fluctuate period-on-period and are usually realized in the following reporting period.

Novatek, a public joint stock company, is the largest independent natural gas producer in Russia. In 2017, it entered the global LNG market by successfully launching the Yamal LNG project. Founded in 1994, the company is engaged in the exploration, production, processing, and marketing of natural gas and liquid hydrocarbons. The company’s upstream activities are concentrated mainly in the prolific Yamal-Nenets autonomous region, which is the world’s largest natural gas producing area that accounts for approximately 80 percent of Russia’s natural gas production and approximately 15 percent of the world’s gas production. The company’s shares are listed in Russia on the Moscow Exchange and the London Stock Exchange under the ticker symbol NVTK.