Rosneft is increasing volumes

The company is betting not only on oil, but also on gas.
19.12.2017
Vedomosti
Origin source
The Board of Directors of Rosneft approved the company's development strategy for five years. The goal is to increase oil production on existing projects by 30 million tons of oil equivalent (AD), said Igor Sechin, chief executive officer of the state-owned company (it is about increasing production of liquid hydrocarbons, the representative of Rosneft specified). According to him, this year Rosneft plans to produce 281 million tons of oil. e. It turns out that we are talking about an increase of 10%.

And the production of liquid hydrocarbons - oil and condensate - may reach 250 million tons. e., added the first vice-president of the company Pavel Fedorov. "We are entering the production of more than 250 million tons of liquid hydrocarbons, this is an indicator that will be achieved at the expense of existing assets," he stressed.

However, Fedorov did not rule out the possibility of buying: "We are watching."

The growth of production at the expense of existing projects is one of the goals of the company's strategy until 2022. The company has the potential to increase. This year, production starts at the Yurubcheno-Takhomsky field, which will be released by approximately 5 million tons of oil by 2019, as well as at Kondinskoye (its peak production is still being evaluated). In 2018, the Tagulskoye field is planned to be launched, which after 2022 will provide more than 4.5 million tons of oil, the company said in its presentation on the results of nine months. At the end of November, Rosneft also reported that in the last two years it purchased at auctions and tenders 59 licensed areas with reserves of 243.7 million tons. e. and 2.1 billion tons of resources. e. It is a platform for future oil and gas production centers, Rosneft stressed.

In addition, Rosneft, together with Italian Eni, began drilling an exploratory well on the West Black Sea area in the Black Sea, where the resource base could reach 600 million tons of oil and 100 billion cubic meters. m gas, Sechin said.

Rosneft also refuses to increase gas production to 100 billion cubic meters. In 2016 the company produced 67.1 billion cubic meters. The company is negotiating with Gazprom on the sale of gas through it, said Rosneft's vice president Vlad Rusakova, stressing that Rosneft is not going to destroy Gazprom's monopoly on gas exports. "We are trying to work within the monopoly, trying through Gazprom to work out the possibilities of delivering Russian gas," Interfax quoted Rusakov. "If it works, it will work, if not, then no."

The focus on the development of existing projects will require the growth of capital investments. If this year the company's capex is estimated at 891 billion rubles, then the plan for 2018 is already 950 billion rubles, and in 2019 - more than 1 trillion rubles, Fedorov said. This is comparable to the capex of Gazprom, which has long been the leader in this indicator, and the planned investment program of Rosatom.

More money

Implementation of the strategy will bring Rosneft additional cash flow in the amount of 180 billion rubles. for five years, Sechin said. He did not specify whether free cash flow or operating cash flow is meant. The effect of implementing the strategy Sechin estimated in 15-20% of the capitalization of Rosneft. At the close of trading on the Moscow Stock Exchange on December 18, the company was worth 3.1 trillion rubles. The strategy of Rosneft is focused on revealing the company's internal potential, the task is to increase the return on the company's projects through the development of the service business, reducing costs, creating technological advantages, digitizing, controlling material flows, Sechin said.

One of the mechanisms is the separation of the two subholdings. One will be allocated drilling business (Rosneft-drilling), in the second - the retail sale of fuel (Rosneft-retail). "Now their cost is mixed with the valuation indicators of our company - and we see its negative impact," Fedorov explained. In these subholdings, Rosneft is ready to attract partners. "We held negotiations on a possible partnership in these two structures, there is interest," Fedorov shared, but did not disclose details.

The strategy of Rosneft is very conservative, but in the medium term this can be a good idea, Moody's vice president Denis Perevezentsev said. The key expertise of Rosneft is extraction. Therefore, the fact that the company now wants to focus on it, is quite expected, points out Perevezentsev. "If the company succeeds in preserving oil production including in the watered fields at the current level by organic means and financing capex from the cash flow, this will be a good result," continues Perevezentsev. "Perhaps the company [in the end] will be able to somewhat reduce the debt burden."

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