August 28, 2015. Moscow. Today, Bashneft Group, which comprises PJSOC Bashneft and its subsidiaries and affiliates, has released its unaudited consolidated financial statements for the second quarter of 2015 and the six months ended June 30, 2015 prepared in accordance with International Financial Reporting Standards (IFRS).

2Q 2015 vs. 1Q 2015:

• The Group’s revenue from sales increased by 6.9% to 152,745 million roubles.
• Adjusted EBITDA rose by 34.1% to 35,854 million roubles.
• Net income excluding minority interest soared by 57.2% to 17,908 million roubles.
• Operating cash flow grew to 37,617 million roubles as against minus 2,697 million roubles in the first quarter of 2015.
• Capital expenditure increased by 26.7% to 15,402 million roubles.
• Adjusted net debt fell by 17.9% to 106,041 million roubles.

1H 2015 vs. 1H 2014:

• The Group’s revenue from sales decreased by 4.6% to 295,675 million roubles.
• Adjusted EBITDA increased by 13.8% to 62,591 million roubles.
• Net income excluding minority interest declined by 1.7% to 29,298 million roubles.
• Operating cash flow fell by 25.9% to 34,920 million roubles.
• Capital expenditure grew by 46.5% to 27,563 million roubles.
• Adjusted net debt decreased by 1.0% to 106,041 million roubles.

Despite unfavourable market conditions and a negative impact of the tax manoeuvre, in the second quarter of 2015, the Company achieved a considerable improvement in its financial results. Revenue from sales gained 6.9% compared to the first quarter of 2015; adjusted EBITDA increased by 34.1%, while operating income jumped by 44.4%. In the second quarter of 2015, net income excluding minority interest was 57.2% higher than in the first quarter of 2015 and 12.9% higher than in the second quarter of 2014.

Strong financial performance in the second quarter of 2015 was supported by better quality and higher value of the basket of petroleum products combined with a rise in prices for crude oil and petroleum products on the domestic market. For instance, the Company completely ceased production of vacuum gas oil, reduced the output of fuel oil and started to produce all of its diesel fuel in accordance with the Euro 5 standard. Domestic sales of crude oil increased by 32.2% quarter on quarter (to 525 thousand tonnes), while revenue from oil sales grew by 50.6% (to 7,407 million roubles).

In the second quarter of 2015, revenue from wholesale distribution of petroleum products and petrochemicals on the domestic market gained 17.7% (reaching 56,799 million roubles), while sales volumes remained at the level reached in the first quarter of 2015. In the second quarter of 2015, a seasonal rise in demand resulted in an 11.1% quarter-on-quarter increase in retail sales of engine fuel (to 400 thousand tonnes), while revenue from sales grew by 12.4% (to 14,404 million roubles).

In the second quarter of 2015, the amount of cash generated from operating activities reached 37,617 million roubles, while in the first quarter of 2015, the Company’s operating cash flow was negative; this increase was driven by strong financial performance and a reduction in working capital, including due to a reduction in prepayments of customs duties and a decrease in accounts receivable.

The growth of operating cash flow enabled the Company to increase the amount of financing allocated for capital spending and to fulfil the Company’s obligations to pay dividends to its shareholders on time and in full: in July and August 2015, the Company paid dividends for 2014 totalling 20,073 million roubles.

In the second quarter of 2015, capital expenditure increased by 26.7% compared to the first quarter of 2015 (to 15,402 million roubles); this was related mainly to an increase in investments in the development of the R. Trebs and A. Titov fields, including completion of construction of a high-pressure pipeline connecting the two fields, and in the production drilling programme.

As of June 30, 2015, adjusted net debt totalled 106,041 million roubles, down by 1.0% compared to June 30, 2014 and by 17.9% compared to March 31, 2015 (129,169 million roubles).

During the six months of 2015, revenue decreased slightly (by 4.6% year on year); nevertheless, the Company achieved a 13.8% increase in adjusted EBITDA and a 10.3% increase in operating income, while its net income remained almost unchanged compared to the same period in 2014. This was due mainly to a 12.4% increase in oil production compared to the first half of 2014 (to 9,540 thousand tonnes) combined with an increase in oil sales (with export sales growing by 20.8% to 3,353 thousand tonnes and domestic sales increasing by 88.9% to 922 thousand tonnes) and the weakening of the national currency.

During the six months of 2015, operating cash flow dropped by 25.9% (to 34,920 million roubles), which was due to a high base in the first half of 2014, when Bashneft received prepayment under a long-term contract for supply of petroleum products totalling US$ 500 million.

During the six months of 2015, capital expenditure increased by 46.5% compared to the same period in 2014 (to 27,563 million roubles); this was related mainly to the development of the Sorovskoye field in Western Siberia and an increase in capital expenditure on brownfields in Bashkortostan, including on the production drilling programme.

KEY FINANCIAL AND OPERATING RESULTS FOR THE SECOND QUARTER AND THE SIX MONTHS OF 2015

Documentation

Bashneft Group IFRS financial results for 2Q 2015 (MD&A)

Full text (PDF, 544.95 ÊÁ)

Bashneft Group IFRS financial results for 2Q 2015 (Presentation)

Full text (PDF, 424 ÊÁ)

Bashneft Group Consolidated Financial Statements for 2Q 2015

Full text (PDF, 650.5 ÊÁ)