USD 88.4375

-0.25

EUR 96.2383

-0.07

Brent 83.41

-0.9

Natural gas 2.67

-0.16

1050

Russian producers fall behind as big oil booms

While Big Oil beat analyst expectations with its 1st-quarter performance, Rosneft, missed expectations, reporting $200 mln in net profits for the period.

Russian producers fall behind as big oil booms


While Big Oil beat analyst expectations with its 1st-quarter performance, Russia’s biggest player Rosneft, missed expectations, reporting $200 mln in net profits for the period. The company’s CEO blamed the discrepancy on higher costs of services and the continuing volatility on international markets.

It seems that the OPEC production cut deal, to which Russia is an important party given that it is one of the top 3 producers in the world, has been somewhat of a mixed blessing.

While it has been good for the state coffers with higher prices in the 1st quarter raising budget revenues from oil, it hasn’t been so good for the industry.

The price increase pushed the Russian ruble to a high that hasn’t been seen in over a year, which made services more costly for Rosneft and its sector players.

According to one local analyst, the ruble effectively offset the gains from the OPEC agreement for the industry.

Rosneft’s net profit was, according to its financial reports, flat on Q1 2016, although revenues and its equity share from joint ventures improved by 71 %.

Free cash flow, which is what pays the bills as industry insiders like to say, declined in the 1st quarter of 2017, by 6.7 %, highlighting the ruble troubles of Rosneft.

The other big Russian producers Lukoil and Surgutneftegas have not yet reported results, but chances are the situation will be pretty similar.

At the same time, Big Oil has been in bloom ever since OPEC struck that deal and prices jumped.

Everyone in the select club reported profits that beat analyst expectations, despite a dire warning from Barclays before profit season began that the majors will disappoint.

Clearly, the OPEC deal has been good for Big Oil, motivating higher production and boosting bottom lines.

Rosneft, on the other hand, had to cut 70,000 bpd from its daily average in the 1st quarter to comply with the OPEC deal.

However, oil is now back below $50 a barrel, despite the deal, and there are voices questioning the point of an extension.

Several OPEC officials have already signed up for the extension, including Saudi Arabia’s Khalid al-Falih, who 2 months ago said he would not support an extension as it would only help U.S. shale boomers.

Russia’s Alexander Novak is also on board – there really is precious little else OPEC or Russia could do to support prices.

The extension is all but official now, so the rest of the year will likely also be tough for Rosneft and its local sector players.



Author: Irina Slav


Follow us on Google News
Advertising at neftegaz.ru

Subscribe to our newsletter

of the best materials Neftegaz.RU

* Incorrect E-Mail Address

By clicking the "Subscribe" button I accept the "Agreement on the processing of personal data"


Advertising at neftegaz.ru