Rosneft's net profit in 2021 increased 6 times by 2020, reaching the maximum in the company's history of 883 billion rubles. ($11.8 billion), follows from the IFRS report published on February 11. Rosneft's EBITDA almost doubled in 2021 to RUB 2.33 trillion. ($31.7 billion). Net financial debt and trading prepayments decreased by $5.5 billion compared to the beginning of 2021, and the ratio of net debt to EBITDA was 1.3, almost halving in a year. At the same time, the company's free cash flow increased by 2.5 times in 2021 and exceeded RUB 1 trillion.

Rosneft Chief Executive Officer Igor Sechin, whose words are quoted in the release, noted that profit for 2021 will allow shareholders to count on record dividends. In November last year, the company paid out a record interim dividend for 2021 ahead of schedule for a total of RUB 191.04 billion, or RUB 18.03. per share.

Rosneft's dividend payout ratio of at least 50% of IFRS net profit is one of the highest in the industry.

“We maintain our BUY recommendation for Rosneft shares, which offers investors a solid combination of growth and good dividends. According to our estimates, the dividend yield will be 7% in 2021, and 10% in 2022,” said analysts from the Russian investment company Aton, commenting on the financial results. According to analysts at the American investment bank J.P. Morgan, Rosneft's net profit for 2021 implies dividends of 41.7 rubles. per share, thus, the yield on the paper is 7.4%. Analysts at the Swiss bank UBS believe that dividends for the second half of the year will amount to 28.5 rubles. per share, which in total for the year will amount to 46.5 rubles. per share. “According to the current quote, the yield is 8.3%,” UBS notes.

“At the end of 2021, the company’s board of directors approved the Rosneft 2030: Reliable Energy and Global Energy Transition strategy, which takes into account current trends related to the climate agenda,” Sechin said. “We expect that thanks to the implementation of the new strategy, Rosneft will strengthen its position in the global hydrocarbon market as a reliable producer and supplier of energy resources, while minimizing its environmental impact.”

He also added that the success in the implementation of the flagship project of Vostok Oil, as the holding's management expects, will be fully reflected in the assessment of Rosneft by investors. According to the Moscow Exchange, at 13.30 Moscow time on February 11, one ordinary share of Rosneft was worth 555 rubles, capitalization is 5.88 trillion rubles. At the same time, on January 12, Rosneft overtook Sberbank in terms of capitalization. And on October 26, 2021, during trading on the London Stock Exchange, the capitalization of Rosneft exceeded $100 billion.

What is Vostok Oil

The Vostok Oil project of Rosneft includes Lodochnoye, Vankorskoye, Suzunskoye, Tagulskoye, Payakhskoye and other fields in Taimyr and the Krasnoyarsk Territory. Resource potential - light sweet crude, superior in quality to Brent crude. The proven resource base of the project is 6 billion tons of oil (including gas condensate), or 44 billion barrels. The potential for oil supplies to commodity markets is estimated at 25 million tons in 2024, 50 million tons in 2027, and 115 million tons per year from 2030. Rosneft previously reported that the carbon footprint of Vostok Oil is 75% less than that of other major new oil projects in the world. At the end of 2020, a large international trader Trafigura acquired 10% in the project. The deal amounted to about 7 billion euros. In mid-October 2021, Vitol S.A. consortium bought another 5% in the project for 3.5 billion euros. and Mercantile & Maritime Energy Pte. Ltd. (75% - Vitol, 25% - MME).

According to Raiffeisenbank analyst Andrey Polishchuk, Rosneft shares still have significant growth potential associated with the Vostok Oil project, which costs $70-80 billion, which is comparable to the current capitalization of the entire company. According to him, the development and growth of the project's capitalization will translate into the value of the oil producer's shares.

According to Sergey Suverov, investment strategist at Arikacapital, Rosneft's record net income and EBITDA were driven both by higher commodity prices, including oil, and by softening the terms of the OPEC+ deal, which allowed the company to increase oil production in 2021. Similar reasons names and Polischuk.

In April 2020, against the backdrop of the spread of the coronavirus and a record drop in oil prices, the participants in the OPEC + deal (included and not included in the oil-producing countries of the cartel) revised the agreement in the direction of reducing production by 9.7 million barrels per day from the base level for which production at the end of 2019 was accepted. They agreed to gradually increase oil production from May 1, 2020 to May 1, 2022. At the same time, from August 2021, the participants in the OPEC + agreement monthly increase production quotas by a total of 400,000 b/d. At the same time, in December 2021, as Interfax reported with reference to the OPEC + technical committee, the oil-producing countries that joined the agreement were able to increase production by only 270,000 bpd.

In 2021, Rosneft produced 1,425.2 million barrels. (192.1 million tons) of liquid hydrocarbons, the average daily figure was 3.91 million barrels, the company said on February 11. Gas production increased by 3.1% by 2020 and amounted to 64.75 billion cubic meters. m, on average, the company produced 177.4 million cubic meters per day. m. The share of field reserves discovered by the company in 2021 amounted to 75% of all discovered in Russia.

Suverov also draws attention to the efforts of Rosneft's management to control costs, which has reduced the company's operating costs per barrel of oil produced. BCS Global Markets analyst Ronald Smith agrees with him: "The reasons for the strong financial results lie in the rise in oil prices, as well as the increase in the profitability of production."

“The price of a barrel is close to 7,000 rubles. in terms of the Russian national currency at the current exchange rate. At the same time, due to the easing of the terms of the OPEC + deal, the volume of oil production in 2022 will continue to grow,” says Suverov. Following this, in his opinion, the financial results of Rosneft will continue to improve.

Analysts of Aton give a positive forecast for 2022. “The baseline forecast for Rosneft EBITDA for 2022 is 2.62 trillion rubles. (+13% compared to 2021), which implies a net profit of RUB 1.19 trillion. and a dividend yield of 10%,” the review says. At the same time, it is emphasized that these are conservative estimates made from the forecast prices for Brent oil at $80 per barrel. Now it is trading above $90 per barrel, Aton notes. According to the ICE exchange, as of February 11, April Brent futures were worth about $91, March WTI futures were worth about $90.

BCS Global Markets also predicts an increase in financial performance: in 2022, Rosneft's EBITDA could rise to $40 billion, while net profit will exceed $20 billion, analysts have calculated.