Rosneft production recovery, efficiencies help boost Q4 results

Moscow — Rosneft's Q4 liquids output recovered by 2% on the quarter after OPEC+ production cuts were eased in August, which together with record low operating costs of $2.60/b of oil equivalent helped mitigate the challenges of the pandemic, the company said Feb. 12 in its financial and operational results.

The company, which returned to profit in Q4 after losses in Q3 as the sale of a stake in Vostok Oil boosted net income, also managed to increase exports, despite its initial pledge to direct additional volumes to the domestic market.

Rosneft's Q4 liquids output rose to 49.46 million mt, or 3.94 million b/d, although for the whole of 2020 it fell 11.2% to average 4.1 million b/d due to production constraints under the OPEC+ agreement.

To partially offset this drop in liquids output, Rosneft announced a cost optimization program in the third quarter, which included an oil production cut at high-water fields, as well as the amount of well maintenance and repair costs.

"We were not only able to successfully meet the challenges of 2020, but also demonstrated the ability to work in challenging conditions of unprecedented low prices. This was made possible by the high level of operational and investment efficiency," CEO Igor Sechin said in a press release.

Rosneft's Q4 gas production amounted to 16.08 Bcm, up 7.5% on the quarter due to recovery in demand and completion of repairs. In 2020, gas output declined by 6.2% on the year to 62.83 Bcm, the company said.

The company's Q4 hydrocarbons output was up 3.1% on the quarter to 5.05 million b/d of oil equivalent, while annual output was down 10.4% on the year to 5.19 million b/d of oil equivalent.

Rosneft's Q4 refining throughput also rose 2.4% on the quarter to 23.1 million mt on rising demand for petroleum products. 2020 refining volumes declined 7.1% on the year to 93 million mt amid the pandemic.

Vostok Oil

Rosneft's Q4 revenues rose 2.5% to $20.6 billion on higher oil exports and prices, as Urals prices increased by 3.5% on the quarter to average $44.5/b. Since then, Urals has climbed to $59.885/b, according to the S&P Global Platts assessment Feb. 12.

A positive effect from deals related to the Vostok Oil development in Siberia was a key driver that helped Rosneft's Q4 net income to reach a record high of $4.3 billion, compared with a net loss of $800 million in the third quarter, and positive annual net income of $2.2 billion, down 79.8% on the year.

On Dec. 30, global commodity trader Trafigura completed the acquisition of a 10% stake in Vostok Oil, which was worth Eur7 billion ($8.46 billion), according to Rosneft.

Rosneft was currently holding talks with other international partners to join Vostok Oil and was considering selling up to 49% in the project, the company management said in a call on the results.

Vostok Oil includes 50 license areas and reserves are estimated at 6 billion mt of liquid hydrocarbons, or 44 billion barrels.

Rosneft previously said the project may supply 25 million mt, or around 500,000 b/d, of oil to global markets in 2024, the estimated launch date.

The company plans to ship production from the project via the Northern Sea Route. Warming temperatures are facilitating the development of the route, which ships to both European and Asian markets through Arctic waters.