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  • 24
    Nov

    LUKOIL: 2021 9M and Q3 Financial Results – Revenue Up 17.6% qoq

    PJSC LUKOIL today published condensed interim consolidated financial statements for the three and nine months ended September 30, 2021, prepared in accordance with International Financial Reporting Standards (IFRS).

    Key financial indicators

    sq. 2021 sq. 2021 

      months 2021 

    months 2020 

    (RUB bln)
    2,588.7 2 201.9 Revenues from sales 6 667.1 4 109.1
    355.2 339.8 EBITDA 1,009.4 497.5
    192.5 189.8 Net income (net loss) attributable to shareholders 539.7 (14.3)
    94.3 104.2 Capital expenditures 305.8 360.3
    227.7 112.2 Free cash flow  503.5 195.6
    233.5 212.0 Free cash flow before changes in working capital 633.2 131.1

    COVID-19

    Since the beginning of the COVID-19 pandemic, LUKOIL has been taking the necessary measures to eliminate the direct impact of the pandemic on its operations, prioritizing the proper protection of its employees, contractors and customers, as well as the continuity of production processes.

    The decline in global economic activity due to the pandemic and the ensuing unprecedented drop in demand and prices for hydrocarbons had a significant negative impact on the Company’s operating and financial performance in 2020 and continued to have a negative impact in 2021.

    Among the consequences of the pandemic for the Company’s operating indicators for 2020: a decrease in oil production at the Company’s fields in Russia and in some foreign projects in connection with the OPEC + agreement, a decrease in gas production in Uzbekistan due to a temporary decrease in demand for Uzbek gas from China , a decrease in refining volumes due to a decrease in refining margins and demand for some petroleum products, a decrease in sales of motor fuel at filling stations due to a decrease in demand.

    The main impact of the pandemic on the financial performance of the Company is associated with the volatility of prices for oil and oil products and a decrease in production volumes in 2020.

    OPEC + Agreement

    In April 2020, a number of oil producing countries, including OPEC countries and Russia, entered into an agreement to cut oil production starting from
    May 1, 2020, with a subsequent gradual increase. In connection with the agreement, the Company reduced its oil production in Russia in May 2020 by about 310 thousand barrels per day relative to the average daily production in Q1 2020. Subsequently, the Company gradually increased its oil production in Russia. As a result, in Q3 2021, the Company’s oil production in Russia was approximately 210 thousand barrels per day higher than the level of May 2020.

    Oil production has also been cut in some international projects. In particular, at the West Qurna-2 project in Iraq in the 3rd quarter of 2021, production was approximately 50 thousand barrels per day below the design capacity.

    Revenue

    In the 3rd quarter of 2021, sales revenue amounted to RUB 2,588.7 billion, which is 17.6% higher compared to the previous quarter. The growth in revenue was due to an increase in prices for oil and petroleum products, an increase in hydrocarbon production and oil refining, an increase in the volume of trading in oil and petroleum products, as well as the volume of retail sales of petroleum products.

    Compared to 9 months of 2020, revenue increased by 62.3%, mainly due to higher prices for hydrocarbons, devaluation of the ruble, growth in gas production, as well as volumes of refining and trading of oil and oil products.

    EBITDA

    sq. 2021 sq. 2021 

      months 2021 

    months 2020
    (RUB bln)
    355.2 339 8 EBITDA 1,009.4 497.5
    245.0 220.9    Exploration and production 689.7 333.5
    206.9 193.4 Russia 587.3 273.6
    38.1 27.5 Abroad 102.4 59.9
    125.8 126.9    Processing, trading and marketing  372.9 196.7
    107.9 85.0 Russia 259.5 137.2
    17.9 41.9 Abroad 113.4 59.5

    EBITDA in Q3 2021 increased by 4.5% compared to the previous quarter and amounted to RUB 355.2 billion.

    In the Exploration and Production segment in Russia, in addition to the increase in oil prices, the EBITDA dynamics was positively affected by the increase in oil production due to the dynamics of external restrictions under the OPEC + agreement. A limiting factor was the reduction in the positive effect of the time lag on export duties and MET. Abroad, the dynamics of EBITDA is mainly related to the rise in gas prices and the restoration of gas production in Uzbekistan.

    The main drivers of EBITDA growth in the Refining, trading and distribution segment in Russia were the growth of margins and refining volumes. Growth was constrained by a decrease in the positive effect of inventories at refineries, as well as a deterioration in results in the petrochemicals and retail business. Overseas EBITDA declined mainly due to deterioration in international trading results and a decrease in the positive effect of inventories at refineries. The negative impact of these factors was partially offset by the specifics of hedging transactions in international trading, increased refining volumes and margins, and improved retail business results.

    Compared to 9 months of 2020, EBITDA more than doubled, mainly due to the rise in hydrocarbon prices, the devaluation of the ruble, the positive effect of reserves at refineries, an increase in refining margins in Russia, a positive effect of the time lag on export duties and MET , as well as growth in gas production abroad. At the same time, EBITDA growth was constrained by the cancellation of tax incentives for high-viscosity oil and the deterioration of the results of the retail business in Russia.

    Net profit

    In the 3rd quarter of 2021, net income attributable to shareholders amounted to RUB 192.5 billion, an increase of 1.4% compared to the previous quarter. As a result, over 9 months of 2021, the indicator increased to 539.7 billion rubles. compared with a loss of 14.3 billion rubles. for the same period in 2020. In addition to the increase in EBITDA, the dynamics of net income was due to the impact of non-cash losses from asset depreciation and exchange rate differences in 2020.

    Free cash flow

    Free cash flow in Q3 2021 amounted to RUB 227.7 billion, more than doubling compared to the previous quarter. The main driver of growth was the accumulation of working capital in the 2nd quarter of 2021.

    For 9 months of 2021, free cash flow increased to RUB 503.5 billion. compared to 195.6 billion rubles. for the same period in 2020. The growth was due to an increase in operating profitability and a decrease in capital expenditures.

    Key operating indicators

    sq. 2021 sq. 2021 

      9 months 2021 

    9 months 2020 

    2 152 2 100 Hydrocarbon production, thousand barrels n. e. / day 2 150 2,124
    2 132 2065 incl. excluding West Qurna-2 2 116 2065
    1662 1643 Production of liquid hydrocarbons, thousand barrels per day 1643 1,678
    1642 1 608 incl. excluding West Qurna-2 1 609 1619
    7,7 7.1 Gas production, billion cubic meters m 23.5 20.8
    16.5 15.1 Production of petroleum products at own refineries, mln tons  45.2 42.6

    For 9 months of 2021, hydrocarbon production by LUKOIL Group, excluding the West Qurna-2 project, amounted to 2,116 thousand barrels. n. e. / day, which is 2.5% higher compared to the same period in 2020. At the same time, production in Q3 2021 increased by 3.2% compared to Q2 2021. The increase in production is due to the dynamics of external restrictions on oil production associated with the OPEC + agreement, as well as the growth in gas production.

    Liquid hydrocarbons

    For 9 months of 2021, production of liquid hydrocarbons, excluding the West Qurna-2 project, amounted to 1,609 thousand barrels per day, which corresponds to the level of the same period in 2020. At the same time, in the 3rd quarter of 2021, the production of liquid hydrocarbons amounted to 1,642 thousand barrels per day, which is 2.1% more than in the 2nd quarter of 2021. The dynamics of oil production is associated with the OPEC + agreement concluded in April 2020, which led to the limitation of oil production by the LUKOIL Group in Russia and for some international projects.

    Despite external restrictions on production volumes, the development of priority projects continued. In particular, in Western Siberia, the total production of oil and gas condensate at the fields named after V. Vinogradov, Imilorsk, Sredne-Nazymsk and Pyakyakhinsky for 9 months of 2021 increased by 6.8% compared to the same period in 2020, to 3.3 million tons.

    In the Caspian Sea at the fields named after V. Filanovsky and them. Yuri Korchagin, thanks to the implementation of drilling programs, the total production of oil and gas condensate for 9 months of 2021 amounted to 5.6 million tons, which is 0.6% higher than the level of the same period in 2020. The development of the field to them. V. Greifer, the construction of cable lines has been completed, the laying of underwater pipelines is underway, the construction of the topsides of the platforms is nearing completion at the shipyards.

    Gas

    Gas production for 9 months of 2021 increased in average daily terms by 13.7% compared to the same period in 2020, to 23.5 billion cubic meters. m. The growth is due to the recovery of gas production in Uzbekistan after a temporary reduction in 2020 associated with a decrease in demand for gas produced in Uzbekistan from China against the backdrop of the COVID-19 pandemic.

    Gas production in Q3 2021 in average daily terms increased by 7.2% compared to Q2 2021, amounting to 7.7 billion cubic meters. m. Growth is mainly associated with the completion of scheduled repair work on projects in Uzbekistan.

    Petroleum products

    For 9 months of 2021, the production of petroleum products at the LUKOIL Group refineries amounted to 45.2 million tons, an increase of 6.2% compared to the same period in 2020.

    In the 3rd quarter of 2021, the production of petroleum products amounted to 16.5 million tons, which is 8.7% higher than in the 2nd quarter of 2021. The increase in the production of petroleum products in Russia and abroad is associated with the restoration of the utilization of the refineries after repairs, as well as with the optimization of the production programs of the refineries in accordance with the market conditions.