NOVATEK'S PROFIT UP BY SIX-FOLD

NOVATEK - Moscow, 24 July 2019. PAO NOVATEK today released its consolidated interim condensed financial statements as of and for the three and six months ended 30 June 2019 prepared in accordance with International Financial Reporting Standards ("IFRS").

IFRS Financial Highlights 

(in millions of Russian roubles except as stated)

** Excluding the effects from the disposal of interests in subsidiaries and joint ventures, as well as foreign exchange gains (losses)

Revenues and EBITDA

In the second quarter of 2019, our total revenues amounted to RR 218.5 billion and Normalized EBITDA, including our share in EBITDA of joint ventures, totaled RR 115.8 billion, representing increases of 11.6% and 14.3%, respectively, as compared to the corresponding period in 2018. Our total revenues and Normalized EBITDA, including our share in EBITDA of joint ventures, during the six months ended 30 June 2019 amounted to RR 452.6 billion and RR 233.8 billion, representing increases of 20.6% and 31.6%, respectively, as compared to the prior year reporting period.

The increases in total revenues and Normalized EBITDA were largely due to the production launch at the second and third LNG trains at Yamal LNG in the second half of 2018.

Profit attributable to shareholders of PAO NOVATEK

Profit attributable to shareholders of PAO NOVATEK increased to RR 69.2 billion (RR 22.97 per share), or by 115.9%, in the second quarter of 2019 and to RR 451.0 billion (RR 149.73 per share), or six-fold, in the first half of 2019 as compared to the corresponding periods in 2018. Our profit was significantly impacted by the recognition of a net gain on disposal of a 10% participation interest in Arctic LNG 2 project in March 2019 in the amount of RR 308.6 billion, and the recognition of non-cash foreign exchange effects on foreign currency denominated loans of the Group and its joint ventures in both reporting periods.

Excluding the effect from the disposal of interests in subsidiaries and joint ventures, as well as foreign exchange differences, Normalized profit attributable to shareholders of PAO NOVATEK totaled RR 64.3 billion (RR 21.35 per share) in the second quarter of 2019 and RR 130.0 billion (RR 43.17 per share) in the first half of 2019, representing increases of 18.4% and 28.5%, respectively, as compared to the corresponding periods in 2018.

Cash used for capital expenditures

Our cash used for capital expenditures increased to RR 31.2 billion, or by 41.5%, in the second quarter of 2019 and to RR 73.7 billion, or by 132.0%, in the first half of 2019 as compared to the prior year corresponding periods. A significant portion of our capital expenditures related to the development of our LNG projects (Arctic LNG 2 project prior to March 2019 and the LNG construction center located in the Murmansk region), as well as the North-Russkoye field and crude oil deposits of the East-Tarkosalinskoye and the Yarudeyskoye fields.

Hydrocarbon Production and Purchased Volumes

Total natural gas production, including our proportionate share in the production of joint ventures, for the second quarter and the first half of 2019 increased by 15.2% and 14.1%, respectively, and our total liquids production increased by 3.7% and 2.7%, respectively, as compared to the corresponding periods in 2018. The main factor positively impacting the production increase was the launch of LNG production at the second and third LNG trains at Yamal LNG in the second half of 2018.

In the second quarter and the first half of 2019, our natural gas sales volumes totaled 18.8 billion and 41.0 billion cubic meters (bcm), representing increases of 23.9% and 15.7%, respectively, as compared to the corresponding periods in 2018, due to an increase in LNG sales volumes purchased from our joint ventures OAO Yamal LNG and OOO Cryogas-Vysotsk. As at 30 June 2019, we recorded 1.4 bcm of natural gas in inventory balances compared to 1.3 bcm at 30 June 2018 relating mainly to natural gas in the Underground Gas Storage Facilities. Natural gas inventory balances depend on the Group's demand for natural gas withdrawals for the sale in the subsequent periods.

In the second quarter of 2019, our liquid hydrocarbons sales volumes decreased by 3.3% to 4.1 million tons compared to 4.3 million tons in the prior year corresponding period mainly due to changes in inventory balances. In the first half of 2019, our liquid hydrocarbons sales volumes increased marginally by 0.7% as compared to the first half of 2018. As at 30 June 2019, we recorded 852 mt of liquid hydrocarbons in transit or storage and recognized as inventory as compared to 806 mt at 30 June 2018. Our liquid hydrocarbon inventory balances tend to fluctuate period-on-period and are usually realized in the following reporting period.

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