$15 BLN FOR ROSNEFT
Rosneft received advance payments for oil supplies worth more than $15bn in the third quarter — the first large-scale financing that the state-controlled Russian group has secured since western sanctions were imposed upon it.
In its third-quarter earnings statement on Wednesday, the indebted oil producer said it had taken prepayments worth 1.027tn roubles ($15.7bn) "under long-term supply contracts", without revealing the origin of the money.
However, analysts said that the majority of the payments were likely to have been made under a long-term contract with China National Petroleum Corporation.
Alexei Bulgakov, debt analyst at Sberbank CIB, said: "It's the first large wholesale financing received by a Russian-sanctioned entity from abroad" since western countries introduced economic sanctions over Russia's annexation of Crimea.
Under the terms of the sanctions, US and European entities are prohibited from providing long-term financing to certain Russian companies, including Rosneft.
As relations with the west have deteriorated, Russian president Vladimir Putin has made much of his country's warmer relations with China. Cash from Chinese companies and banks has been slow to arrive, though.
Rosneft's receipt of prepayments for its oil now removes much of the uncertainty around its short-term finances.
When it bought TNK-BP for $55bn in 2013, the company took on hefty debts, and the recent combination of falling oil prices, a weaker rouble, and western sanctions has put it under pressure. On Wednesday, the company — which does not count oil supply obligations under prepayment contracts as debt — said prepayments had helped cut its net debt by 39 per cent, to $24.5bn, at the end of September.
Rosneft still had $16.2bn in debt repayments due between the start of October and the end of 2016, according to its presentation to investors. But, having received prepayments in the last quarter, it said it had more than 1tn roubles "available for debt management".
Its contract with CNPC to supply for 360m tonnes of oil over 25 years, signed in 2013, had envisaged significant prepayments from the Chinese state company, but no details of the schedule or terms of the planned payments have been revealed. Rosneft received $15.5bn in prepayments under the contract in late 2013 and early 2014, according to Mr Bulgakov, but the recent payments represent the first since western sanctions were imposed on in July 2014.
Up until then, long-term prepayments had been one of the company's favourite forms of financing. However, inflows from large international oil traders such as Glencore, Vitol and Trafigura have also dried up following the imposition of sanctions.
"The fact that Rosneft was not able to increase prepayments over last two years wasn't a function of oil price, it was a function of sanctions," Mr Bulgakov said. He added that, on his estimates, Rosneft may have received the entire prepayment due from CNPC under its 2013 agreement.
Rosneft said its net income in the first nine months of the year was 11.7 per cent lower than 2014 in dollar terms, at $5.3bn, while earnings before interest, tax, depreciation and amortisation were 39.3 per cent lower at $15bn.
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