Net profit at Rosneft plunges more than 70 per cent as weak Brent crude oil price continues to bite

 
Francesca Washtell
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Rosneft stemmed a revenue dip in the third quarter but profit was still hammered (Source: Getty)

Russia's largest oil producer, Rosneft, has become the latest firm to report a hit from weak oil prices in the third quarter as net profit at the group plummeted 71 per cent.

The figures

Net income attributable to Rosneft's shareholders in the third quarter slid to 26bn roubles (£325m), driven by lower operating profit, while earnings before interest, tax, depreciation and amortisation (Ebitda) fell 16 per cent to 292bn roubles.

Over the first nine months, Ebitda fell 5.6 per cent to 913bn roubles and net income dropped 57.3 per cent to 129bn roubles. The group's nine month Ebitda margin increased by 25.4 per cent, thanks to "strong cost control and increased sales efficiency".

Read more: Russia’s Rosneft keeps Sechin on with a £3.1m a year packet

Revenue for the first nine months fell 11.4 per cent to 3.5 trillion roubles. However, this was stemmed in the third quarter when turnover only dipped 0.7 per cent to 1.2 trillion roubles as, despite a lower crude oil price in rouble terms, higher oil production, crude oil processing and maximising supply to premium channels helped offset the struggling commodity price.

Why it's interesting

The price of the black stuff is still less than half of what it was in mid-2014, when prices were above $100 a barrel.

Although Brent crude has recovered from a low of $27 per barrel at the beginning of this year, it is now back below the $50 threshold after a huge rise in US crude stockpiles spooked previously optimistic investors in late October.

Read more: Algeria indicates Opec could lower production further in November deal

Yesterday, the International Energy Agency (IEA) warned of "relentless" oversupply in the global market next year unless the Organisation of the Petroleum Exporting Countries (Opec) hashes out a firm production cut at a meeting later this month in Vienna.

The 14-member consortium is due to formalise a deal provisionally agreed two months ago that will cap daily production to between 32.5m and 33m barrels per day (bpd). This would represent a cut of 700,000 bpd.

However, some Opec states, such as Iraq, have indicated they will not opt out of an agreement and it is unclear at this stage how many non-Opec states the organisation will be able to tempt to cut supply. Rosneft boss, Igor Sechin, has said the company will not comply with an output freeze.

If Russia, which is not an Opec member, sustains production at current record levels its output will grow by nearly 200,000 bpd in 2017 and output is also expected to grow in Brazil, Canada and Kazakhstan.

Read more: With no new material, Opec can still move the market

What Rosneft said

Chief executive Igor Sechin said:

In the third quarter of 2016 the environment on the commodity markets remained difficult. Additional pressure on the company's profitability was from considerable negative export duty lag effect.

In October the company acquired the state-owned stake in Bashneft. We will make our best efforts to maximise the synergy potential from this asset integration. The first important steps on its realisation are being conducted at early consolidation stage in the fourth quarter of 2016.

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