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PJSC Gazprom Neft (GAZ)

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Friday 16 November, 2018

PJSC Gazprom Neft

IFRS Financial Statements September 30, 2018

RNS Number : 6237H
PJSC Gazprom Neft
16 November 2018
 

 

Gazprom Neft Group

Interim Condensed Consolidated Financial Statements (unaudited)

As of and for the three and nine months ended 30 September 2018

 

Gazprom Neft Group

Interim Condensed Consolidated Statement of Financial Position (unaudited)

Currency - RUB millions

 

 

 

 

Notes

30 September 2018

31 December 2017

Assets

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

 

3

131,211

90,608

 

Short-term financial assets

 

 

4,782

10,449

 

Trade and other receivables

 

4

160,917

102,262

 

Inventories

 

5

162,299

118,322

 

Current income tax prepayments

 

 

2,237

2,540

 

Other taxes receivable

 

6

86,976

58,359

 

Other current assets

 

7

37,751

40,047

 

Total current assets

 

 

586,173

422,587

 

Non-current assets

 

 

 

 

 

Property, plant and equipment

 

8

2,263,441

2,052,275

 

Goodwill and other intangible assets

 

 

75,092

74,187

 

Investments in associates and joint ventures

9

312,671

256,758

 

Long-term trade and other receivables

 

 

1,048

901

 

Long-term financial assets

 

 

5,592

31,293

 

Deferred income tax assets

 

 

19,068

17,867

 

Other non-current assets

 

10

67,909

74,140

 

Total non-current assets

 

 

2,744,821

2,507,421

 

Total assets

 

 

3,330,994

2,930,008

Liabilities and equity

 

 

 

 

 

Current liabilities

 

 

 

 

 

Short-term debt and current portion of long-term debt

11

110,789

131,760

 

Current finance lease liabilities

 

16

1,695

1,397

 

Trade and other payables

 

12

193,237

194,438

 

Other current liabilities

 

13

32,157

32,500

 

Current income tax payable

 

 

7,515

4,534

 

Other taxes payable

 

14

123,311

84,833

 

Provisions and other accrued liabilities

 

 

20,646

29,873

 

Total current liabilities

 

 

489,350

479,335

 

Non-current liabilities

 

 

 

 

 

Long-term debt

 

15

566,419

548,654

 

Non-current finance lease liabilities

 

16

22,743

20,826

 

Other non-current financial liabilities

 

17

43,700

48,569

 

Deferred income tax liabilities

 

 

120,554

102,583

 

Provisions and other accrued liabilities

 

 

72,326

62,574

 

Other non-current liabilities

 

 

14,972

8,334

 

Total non-current liabilities

 

 

840,714

791,540

 

Equity

 

 

 

 

 

Share capital

 

 

98

98

 

Treasury shares

 

 

(1,170)

(1,170)

 

Additional paid-in capital

 

 

60,397

62,256

 

Retained earnings

 

 

1,707,010

1,431,931

 

Other reserves

 

 

91,976

60,142

 

Equity attributable to Gazprom Neft shareholders

 

1,858,311

1,553,257

 

Non-controlling interest

 

18

142,619

105,876

 

Total equity

 

 

2,000,930

1,659,133

 

Total liabilities and equity

 

 

3,330,994

2,930,008

 

 

 

 

 

 

 

 

 

 

 

 

 

A. V. Dyukov

 

 

A. V. Yankevich

 

Chief Executive Officer

 

 

Chief Financial Officer

 

PJSC Gazprom Neft

 

 

PJSC Gazprom Neft

The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.

 

Gazprom Neft Group

Interim Condensed Consolidated Statement of Profit and Loss and Other Comprehensive Income (unaudited)

Currency - RUB millions (except per share data)

 

 

Notes

3 months ended

30 September 2018

3 months ended

30 September 2017

9 months ended

30 September 2018

9 months ended

30 September 2017

Revenue

 

 

 

 

 

Crude oil, gas and petroleum products sales

 

672,137

477,124

1,776,716

1,360,521

Other revenue

 

17,420

16,400

50,577

47,335

Total revenue from sales

24

689,557

493,524

1,827,293

1,407,856

Costs and other deductions

 

 

 

 

 

Purchases of oil, gas and petroleum products

 

(166,581)

(107,576)

(432,678)

(334,536)

Production and manufacturing expenses

 

(56,819)

(57,225)

(164,991)

(157,597)

Selling, general and administrative expenses

 

(30,481)

(24,840)

(83,104)

(72,788)

Transportation expenses

 

(35,492)

(34,858)

(106,278)

(106,252)

Depreciation, depletion and amortisation

 

(46,693)

(35,781)

(126,542)

(102,075)

Taxes other than income tax

14

(182,721)

(130,491)

(489,829)

(356,522)

Export duties

 

(20,531)

(14,022)

(62,804)

(55,997)

Exploration expenses

 

(343)

(123)

(798)

(269)

Total operating expenses

 

(539,661)

(404,916)

(1,467,024)

(1,186,036)

Operating profit

 

149,896

88,608

360,269

221,820

Share of profit of associates and joint ventures

29,305

12,526

69,662

31,236

Net foreign exchange (loss) / gain

19

(6,798)

2,237

(31,115)

7,942

Finance income

 

1,665

3,041

4,595

8,266

Finance expense

20

(4,870)

(6,026)

(16,280)

(19,288)

Other (loss) / gain, net

 

(3,279)

413

(8,908)

(2,964)

Total other income

 

16,023

12,191

17,954

25,192

Profit before income tax

 

165,919

100,799

378,223

247,012

Current income tax expense

 

(19,339)

(13,119)

(47,280)

(33,733)

Deferred income tax expense

 

(6,318)

(5,232)

(13,542)

(12,780)

Total income tax expense

 

(25,657)

(18,351)

(60,822)

(46,513)

Profit for the period

 

140,262

82,448

317,401

200,499

Other comprehensive income / (loss) - to be reclassified to profit or loss

 

 

 

 

 

Currency translation differences

 

9,942

2,832

25,561

13,446

Cash flow hedge, net of tax

 

(115)

3,431

14,542

9,336

Other comprehensive income / (loss)

 

4

(420)

11

76

Other comprehensive income

 

9,831

5,843

40,114

22,858

Total comprehensive income for the period

 

150,093

88,291

357,515

223,357

Profit attributable to:

 

 

 

 

 

 - Gazprom Neft shareholders

 

132,194

77,731

298,669

189,000

 - Non-controlling interest

8,068

4,717

18,732

11,499

Profit for the period

 

140,262

82,448

317,401

200,499

Total comprehensive income attributable to:

 

 

 

 

 

 - Gazprom Neft shareholders

 

138,670

81,958

330,503

205,093

 - Non-controlling interest

 

11,423

6,333

27,012

18,264

Total comprehensive income for the period

 

150,093

88,291

357,515

223,357

Earnings per share attributable to Gazprom Neft shareholders

 

 

 

 

 

Basic earnings (RUB per share)

 

28.02

16.48

63.30

40.06

Diluted earnings (RUB per share)

 

28.02

16.48

63.30

40.06

Weighted-average number of common shares

   outstanding (millions)

 

4,718

4,718

4,718

4,718

 

 

 

 

 

 

The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.

 

 

Gazprom Neft Group

Interim Condensed Consolidated Statement of Changes in Equity (unaudited)

Currency - RUB millions

 

Attributable to Gazprom Neft shareholders

 

 

 

Share capital

Treasury shares

Additional paid-in capital

Retained earnings

Other reserves

Total

Non-controlling interest

Total

equity

Balance as of 1 January 2018

98

(1,170)

62,256

1,431,931

60,142

1,553,257

105,876

1,659,133

Profit for the period

-

-

-

298,669

-

298,669

18,732

317,401

Other comprehensive income

 

 

 

 

 

 

 

 

Currency translation differences

-

-

-

-

17,281

17,281

8,280

25,561

Cash flow hedge, net of tax

-

-

-

-

14,542

14,542

-

14,542

Other comprehensive income

-

-

-

-

11

11

-

11

Total comprehensive income for the period

-

-

-

298,669

31,834

330,503

27,012

357,515

Transactions with owners, recorded in equity

 

 

 

 

 

 

 

 

Dividends to equity holders

-

-

-

(23,590)

-

(23,590)

(11,548)

(35,138)

Transaction under common control

-

-

(2,819)

-

-

(2,819)

-

(2,819)

Change of non-controlling interest in subsidiaries (Note 18)

-

-

960

-

-

960

21,279

22,239

Total transactions with owners

-

-

(1,859)

(23,590)

-

(25,449)

9,731

(15,718)

Balance as of 30 September 2018

98

(1,170)

60,397

1,707,010

91,976

1,858,311

142,619

2,000,930

 

 

Attributable to Gazprom Neft shareholders

 

 

 

Share capital

Treasury shares

Additional paid-in capital

Retained earnings

Other reserves

Total

Non-controlling interest

Total equity

Balance as of 1 January 2017

98

(1,170)

51,047

1,276,210

33,955

1,360,140

84,027

1,444,167

Profit for the period

-

-

-

189,000

-

189,000

11,499

200,499

Other comprehensive income / (loss)

 

 

 

 

 

 

 

 

Currency translation differences

-

-

-

-

6,681

6,681

6,765

13,446

Cash flow hedge, net of tax

-

-

-

-

9,336

9,336

-

9,336

Other comprehensive income

-

-

-

-

76

76

-

76

Total comprehensive income for the period

-

-

-

189,000

16,093

205,093

18,264

223,357

Transactions with shareholders, recorded in equity

 

 

 

 

 

 

 

 

Dividends to equity holders

-

-

-

(50,388)

-

(50,388)

(2,255)

(52,643)

Transaction under common control

-

-

7,617

-

-

7,617

-

7,617

Total transactions with shareholders

-

-

7,617

(50,388)

-

(42,771)

(2,255)

(45,026)

Balance as of 30 September 2017

98

(1,170)

58,664

1,414,822

50,048

1,522,462

100,036

1,622,498

The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.

 

Gazprom Neft Group

Interim Condensed Consolidated Statement of Cash Flows (unaudited)

Currency - RUB millions

 

 

 

Notes

9 months ended

30 September 2018

9 months ended

30 September 2017

Cash flows from operating activities

 

 

 

Profit before income tax

 

378,223

247,012

Adjustments for:

 

 

 

Share of profit of associates and joint ventures

 

(69,662)

(31,236)

Net foreign exchange loss / (gain)

19

31,115

(7,942)

Finance income

 

(4,595)

(8,266)

Finance expense

20

16,280

19,288

Depreciation, depletion and amortisation

 

126,542

102,075

Other non-cash items

 

3,959

2,446

Operating cash flow before changes in working capital

 

481,862

323,377

Changes in working capital:

 

 

 

  Accounts receivable

 

(42,723)

13,780

  Inventories

 

(41,571)

(7,458)

  Taxes receivable

 

(29,123)

2,350

  Other assets

 

5,853

2,417

  Accounts payable

 

50,554

25,772

  Taxes payable

 

37,908

12,731

  Other liabilities

 

(1,659)

4,760

Total effect of working capital changes

 

(20,761)

54,352

Income taxes paid

 

(43,808)

(25,494)

Interest paid

 

(35,244)

(29,760)

Dividends received

 

9,587

3,306

Net cash provided by operating activities

 

391,636

325,781

Cash flows from investing activities

 

 

 

Acquisition of subsidiaries, net of cash acquired

(920)

-

Acquisition of investments in joint ventures

(256)

(8,093)

Disposal of investments in joint ventures

 

-

476

Bank deposits placement

 

(70)

(5,019)

Repayment of bank deposits

 

7,255

1,076

Proceeds from sales of other investments

 

-

670

Short-term loans issued

 

(28)

-

Repayment of short-term loans issued

 

202

6,112

Long-term loans issued

 

(538)

(1,105)

Repayment of long-term loans issued

 

12,480

4,442

Purchases of property, plant and equipment and intangible assets

(256,790)

(242,768)

Proceeds from sale of property, plant and equipment, intangible assets

1,441

2,006

Interest received

 

16,278

6,542

Net cash used in investing activities

 

(220,946)

(235,661)

Cash flows from financing activities

 

 

 

Proceeds from short-term borrowings

 

1,953

1,479

Repayment of short-term borrowings

 

(1,670)

(8,423)

Proceeds from long-term borrowings

 

251,588

193,476

Repayment of long-term borrowings

 

(326,406)

(187,258)

Transaction costs directly attributable to the borrowings received

 

(83)

(173)

Dividends paid to Gazprom Neft shareholders

 

(70,773)

(50,383)

Dividends paid to non-controlling interest

 

(11,635)

(2,291)

Proceeds from sale of non-controlling interest in subsidiaries

 

20,728

-

Repayment of finance lease liabilities

 

(1,139)

(568)

Net cash used in financing activities

 

(137,437)

(54,141)

Increase in cash and cash equivalents

 

33,253

35,979

Effect of foreign exchange on cash and cash equivalents

 

7,350

(924)

Cash and cash equivalents as of the beginning of the period

 

90,608

33,621

Cash and cash equivalents as of the end of the period

 

131,211

68,676

The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.

Gazprom Neft Group

Notes to the Interim Condensed Consolidated Financial Statements (unaudited)

As of and for the three and nine months ended 30 September 2018

Currency - RUB millions (unless otherwise stated)

1.         General

Description of business

PJSC Gazprom Neft (the "Company") and its subsidiaries (together referred to as the "Group") is a vertically integrated oil company operating in the Russian Federation, CIS and internationally. The Group's principal activities include exploration, production and development of crude oil and gas, production of refined petroleum products and distribution and marketing operations through its retail outlets.

The Company was incorporated in 1995 and is domiciled in the Russian Federation. The Company is a public joint stock company and was set up in accordance with Russian regulations. PJSC Gazprom ("Gazprom", a state controlled entity), the Group's ultimate parent company, owns 95.7% of the shares in the Company.

 

2.         Summary of significant accounting policies

Basis of preparation

The Group maintains its books and records in accordance with accounting and taxation principles and practices mandated by legislation in the countries in which it operates (primarily the Russian Federation). The accompanying Interim Condensed Consolidated Financial Statements were primarily derived from the Group's statutory books and records with adjustments and reclassifications made to present them in accordance with International Financial Reporting Standards ("IFRS").

The Interim Condensed Consolidated Financial Statements have been prepared in accordance with International Accounting Standard IAS 34 Interim Financial Reporting.

The Group does not disclose information which would substantially duplicate the disclosures contained in its audited Consolidated Financial Statements as of and for the year ended 31 December 2017, such as significant accounting policies, estimates and judgements, financial risk disclosures or disclosures of financial line items, which have not changed significantly in amount or composition. These Interim Condensed Consolidated Financial Statements should be read in conjunction with the Group's Consolidated Financial Statements for 2017 prepared in accordance with IFRS.

Subsequent events occurring after 30 September 2018 were evaluated through 15 November 2018, the date these Interim Condensed Consolidated Financial Statements were authorised for issue.

The results for the three and nine months ended 30 September 2018 are not necessarily indicative of the results expected for the full year.

The Group as a whole is not subject to significant seasonal fluctuations.

Changes in significant accounting policies

Significant accounting policies, judgements and estimates applied while preparing these Interim Condensed Consolidated Financial Statements are consistent with those applied during the preparation of the Consolidated Financial Statements as of and for the year ended 31 December 2017, except for those described below.

 

Application of new IFRS

Impact of adoption

The Group has adopted IFRS 9 - Financial instruments and IFRS 15 - Revenue from contracts with Customers from 1 January 2018 which resulted in changes in accounting policies and adjustments to the amounts recognized in the financial statements.

·      IFRS 9 was generally adopted without restating comparative information; no significant adjustments were recognized in financial statements. The changes in classification categories didn't result in changes of presentation in Interim Condensed Consolidated Statement of Financial Position.

·      In accordance with the transition provisions in IFRS 15, the Group has adopted the new rules retrospectively and has restated comparatives for 2017 financial year.

In summary, the following adjustments were made to amounts recognized in Interim Condensed Consolidated Statement of Profit and Loss and Other Comprehensive Income:

 

9 months ended

30 September 2017

Reclassification

9 months ended

30 September 2017 (restated)

Revenue

 

 

 

Crude oil, gas and petroleum products sales

1,305,971

54,550

1,360,521

Other revenue

45,888

1,447

47,335

Total revenue from sales

1,351,859

55,997

1,407,856

Costs and other deductions

 

 

 

Export duties

-

(55,997)

(55,997)

Total operating expenses

(1,130,039)

(55,997)

(1,186,036)

Operating profit

221,820

-

221,820

 

·      Reclassification of expenses with regard to export duties in the amount of RUB 56.0 billion,

·      Reclassification of revenue from transportation services included in contract price from Sales of petroleum products to Other revenue in the amount of RUB 1.4 billion,

·      Crude oil, gas and petroleum products sales are presented net of sales related excises in the amount of RUB 49.7 billion.

Other new standards and pronouncements. The following other new standards and pronouncements which became effective did not have any material impact on the Group:

·      Amendments to IFRS 2 - Share-based Payment (issued on 20 June 2016 and effective for annual periods beginning on or after 1 January 2018).

·      Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts - Amendments to IFRS 4 (issued on 12 September 2016 and effective, depending on the approach, for annual periods beginning on or after 1 January 2018 for entities that choose to apply temporary exemption option, or when the entity first applies IFRS 9 for entities that choose to apply the overlay approach).

·      Transfers of Investment Property - Amendments to IAS 40 (issued on 8 December 2016 and effective for annual periods beginning on or after 1 January 2018).

·      Annual Improvements to IFRSs 2014-2016 cycle ‒ Amendments to IFRS 1 an IAS 28 (issued on 8 December 2016 and effective for annual periods beginning on or after 1 January 2018).

·     

Accounting policies applied from 1 January 2018

IFRS 9 - Financial Instruments (amended in July 2014 and effective for annual periods beginning on or after 1 January 2018)

From 1 January 2018 the Group classifies its financial assets in the following measurement categories: those to be measured subsequently at fair value through profit or loss (FVPL), those to be measured subsequently at fair value through other comprehensive income (FVOCI), and those to be measured subsequently at amortized cost.

The classification of debt instruments depends on the organization's business model for managing financial assets and whether contractual cash flows of an asset give rise to payments on specified dates that are solely payments of principal and interest ("SPPI").

The Group presents in OCI changes in the fair value of all its equity investments previously classified as available-for-sale, because these investments are held as long-term strategic investments that are not expected to be sold in the short-to-medium term.

Financial assets and liabilities previously classified in accordance with IAS 39 "Financial Instruments: Recognition and Measurement" within categories loans and receivables, investments held to maturity and other financial liabilities measured at amortised cost using the effective interest method, in accordance with IFRS 9 "Financial instruments" are classified as financial assets and financial liabilities carried at amortised cost. Measurement of cash and cash equivalents, trade and other receivables and payables, long-term and short-term loans and investments, held-to-maturity investments has not changed and these financial instruments are measured at amortised cost.

The adoption of IFRS 9 did not significantly impact balance sheet classification of financial assets and liabilities in the Interim Condensed Consolidated Financial Statements of the Group. The amount of expected credit losses as at 1 January 2018 does not materially differ from the amount of recognized provisions and allowances in the Consolidated Financial Statements as at 31 December 2017 and therefore there is no quantitative effect of transition as of 1 January 2018.

New model for recognition of impairment losses - expected credit losses (ECL) model was introduced within the Group. For all trade receivables the Group applies simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables are grouped based on shared credit risk characteristics, type of products or services and the days past due. The Group calculates expected loss rates for trade receivables based on historical data which are a reasonable approximation of current loss rates.

In the reporting period the Group continued to apply IAS 39 for hedge accounting. In case of new hedging instruments arise the Group may revise its plans to switch to IFRS 9 in respect of hedging instruments in the following reporting periods.

 

IFRS 15 - Revenue from Contracts with Customers (amended in April 2016 and effective for annual periods beginning on or after 1 January 2018)

The Group recognizes Revenue from sales of crude oil, petroleum products, gas and other products and services when it satisfies a performance obligation and control over goods and services is passed. For the most contracts control over goods or services passes to a customer at point of time and consideration is unconditional because only the passage of time is required before the payment is due. Specifically:

·      For export contracts control generally passes to buyer on the border of the Russian Federation, the Group is not responsible for transportation,

·      For domestic contracts control generally passes when products are dispatched or delivered to customer. When control passes on delivery to customer transportation is not considered as a distinct performance obligation. In most contracts when control passes on dispatch the Group is not responsible for transportation or transportation is a distinct service provided to customer within a separate contract. In case of sales of petroleum products and transportation by railway performance obligation for transportation is considered to be distinct and excluded from contract price. The Group recognizes this type of revenue within Other revenue line.

The transaction price excludes amounts collected on behalf of third parties such as value added tax and sales related tax. The Group doesn't consider export duties as a part of transaction price and includes expenses with regard to export duties within operating expenses.

New accounting standards

IFRS 16 - Leases (issued on 13 January 2016 and effective for annual periods beginning on or after 1 January 2019). The new standard sets out the principles for the recognition, measurement, presentation and disclosure of leases. All leases result in the lessee obtaining the right to use an asset at the start of the lease and, if lease payments are made over time, also obtaining financing. Accordingly, IFRS 16 eliminates the classification of leases as either operating leases or finance leases as is required by IAS 17 and, instead, introduces a single lessee accounting model. Lessees will be required to recognize: (a) assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value; and (b) depreciation of lease assets separately from interest on lease liabilities in the statement of profit and loss and other comprehensive income.

The following other new standards and pronouncements are not expected to have any material impact on the Group when adopted:

·           IFRS 17 - Insurance Contracts (issued on 18 May 2017 and effective for annual periods beginning on or after 1 January 2021).

·           IFRIC 23 - Uncertainty over Income Tax Treatments (issued on 7 June 2017 and effective for annual periods beginning on or after 1 January 2019).

·           Sale or Contribution of Assets between an Investor and its Associate or Joint Venture - Amendments to IFRS 10 and IAS 28 (issued on 11 September 2014 and effective for annual periods beginning on or after a date to be determined by the IASB).

·           Prepayment Features with Negative Compensation - Amendments to IFRS 9 (issued on 12 October 2017 and effective for annual periods beginning on or after 1 January 2019).

·           Long-term Interests in Associates and Joint Ventures - Amendments to IAS 28 (issued on 12 October 2017 and effective for annual periods beginning on or after 1 January 2019).

 

3.         Cash and cash equivalents

Cash and cash equivalents as of 30 September 2018 and 31 December 2017 comprise the following:

 

30 September 2018

31 December 2017

Cash on hand

1,268

946

Cash in bank

47,364

46,107

Deposits with original maturity of less than three months

78,192

28,816

Other cash equivalents

4,387

14,739

Total cash and cash equivalents

131,211

90,608

 

 

4.         Trade and other receivables

Trade and other receivables as of 30 September 2018 and 31 December 2017 comprise the following:

 

30 September 2018

31 December 2017

Trade receivables

161,438

107,758

Other financial receivables

7,238

2,071

Less impairment provision                                                                 

(7,759)

(7,567)

Total trade and other receivables

160,917

102,262

 

 

5.         Inventories

Inventories as of 30 September 2018 and 31 December 2017 consist of the following:

 

30 September 2018

31 December 2017

Petroleum products and petrochemicals

69,645

55,828

Crude oil and gas

47,984

28,200

Materials and supplies

27,877

23,143

Other

16,793

11,151

Total inventory

162,299

118,322

 

 

6.         Other taxes receivable

Other taxes receivable as of 30 September 2018 and 31 December 2017 comprise the following:

 

30 September 2018

31 December 2017

Value added tax receivable

79,521

50,163

Prepaid custom duties

4,751

5,076

Other taxes prepaid

2,704

3,120

Total other taxes receivable

86,976

58,359

 

 

7.         Other current assets

Other current assets as of 30 September 2018 and 31 December 2017 comprise the following:

 

30 September 2018

31 December 2017

Advances paid

19,650

24,503

Prepaid expenses

3,216

1,955

Other assets                                                                                       

14,885

13,589

Total other current assets, net

37,751

40,047

 

 

8.         Property, plant and equipment

Movements in property, plant and equipment for the nine months ended 30 September 2018 and 2017 are as follows:

Cost

O&G properties

Refining assets

Marketing and distribution

Other assets

Assets under constru-ction

Total

As of 1 January 2018

1,772,103

347,738

189,603

26,638

538,965

2,875,047

Additions

2,933

1,532

-

-

258,079

262,544

Acquisitions through business combinations

-

-

1,108

-

-

1,108

Changes in decommissioning obligations

1,596

-

-

-

-

1,596

Capitalised borrowing costs

-

-

-

-

27,012

27,012

Transfers

120,542

17,466

17,305

1,590

(156,903)

-

Internal movement

1,211

(1,418)

1,591

86

(1,470)

-

Reclassification from other non-current assets

1,003

3,405

601

-

-

5,009

Disposals

(4,522)

(1,834)

(567)

(1,061)

(640)

(8,624)

Translation differences

48,894

7,077

7,441

234

8,758

72,404

As of 30 September 2018

1,943,760

373,966

217,082

27,487

673,801

3,236,096

Depreciation and impairment

 

 

 

 

 

 

As of 1 January 2018

(649,937)

(105,090)

(60,290)

(7,455)

-

(822,772)

Depreciation charge

(98,071)

(12,517)

(9,281)

(2,016)

-

(121,885)

Acquisitions through business combinations

-

-

(110)

-

-

(110)

Internal movement

(474)

565

(107)

16

-

-

Reclassification from other non-current assets

(132)

(1,780)

(14)

-

-

(1,926)

Disposals

1,991

868

239

636

-

3,734

Translation differences

(24,947)

(2,210)

(2,410)

(129)

-

(29,696)

As of 30 September 2018

(771,570)

(120,164)

(71,973)

(8,948)

-

(972,655)

Net book value

 

 

 

 

 

 

As of 1 January 2018

1,122,166

242,648

129,313

19,183

538,965

2,052,275

As of 30 September 2018

1,172,190

253,802

145,109

18,539

673,801

2,263,441

 

Capitalized borrowing costs for the nine months ended 30 September 2018 include interest expense in the amount of RUB 22.8 billion and exchange losses arising from foreign currency borrowings in the amount of RUB 4.2 billion.

 

Cost

O&G properties

Refining assets

Marketing and distribution

Other assets

Assets under constru-ction

Total

As of 1 January 2017

1,569,525

308,192

152,871

23,531

369,304

2,423,423

Additions

1,384

1,461

-

-

283,416

286,261

Changes in decommissioning obligations

660

-

-

-

-

660

Capitalised borrowing costs

-

-

-

-

21,557

21,557

Transfers

118,449

10,709

30,033

1,996

(161,187)

-

Internal movement

(419)

(326)

195

18

532

-

Disposals

(6,032)

(1,773)

(844)

(426)

(797)

(9,872)

Translation differences

(2,819)

5,897

3,937

173

(1,276)

5,912

As of 30 September 2017

1,680,748

324,160

186,192

25,292

511,549

2,727,941

Depreciation and impairment

 

 

 

 

 

 

As of 1 January 2017

(553,140)

(89,106)

(49,052)

(5,780)

-

(697,078)

Depreciation charge

(77,261)

(10,045)

(8,191)

(1,671)

-

(97,168)

Internal movement

65

31

33

(129)

-

-

Disposals

3,406

733

647

426

-

5,212

Translation differences

4,163

(1,675)

(967)

(88)

-

1,433

As of 30 September 2017

(622,767)

(100,062)

(57,530)

(7,242)

-

(787,601)

Net book value

 

 

 

 

 

 

As of 1 January 2017

1,016,385

219,086

103,819

17,751

369,304

1,726,345

As of 30 September 2017

1,057,981

224,098

128,662

18,050

511,549

1,940,340

 

 

9.         Investments in associates and joint ventures

The carrying values of the investments in associates and joint ventures as of 30 September 2018 and 31 December 2017 are summarised below:

 

 

30 September 2018

31 December 2017

 

 

Ownership percentage

Carring value

Ownership percentage

Carring value

Slavneft

Joint venture

125,579

111,679

Arcticgas

Joint venture

135,704

105,157

Messoyakha

Joint venture

33,349

17,965

Northgas

Joint venture

7,533

12,568

Others

 

 

10,506

 

9,389

      Total investments

 

312,671

 

256,758

 

The principal place of business of the most significant joint ventures and associates disclosed above is the Russian Federation.

Slavneft

PJSC NGK Slavneft and it's subsidiaries (Slavneft) are engaged in exploration, production and development of crude oil and gas and production of refined petroleum products. The control over Slavneft is divided equally between the Group and PJSC NK Rosneft.

Arcticgas

In January 2018 SeverEnergy LLC and Yamal Razvitie LLC were merged to JSC Arctic Gas Company (Arcticgas, an entity jointly controlled by the Group and PJSC NOVATEK). In March 2018 the loans issued by Gazprom Neft were converted to ordinary shares from additional share emission of Arcticgas. As result the Group's share in Arcticgas (previously was held through SeverEnergy LLC and Yamal Razvitie LLC) increased to 50.0% as of 31 March 2018.

Arcticgas is developing the Samburgskoye, Urengoiskoe and Yaro-Yakhinskoye oil and gas condensate fields and some other small oil and gas condensate fields located in the Yamalo-Nenetskiy autonomous region of the Russian Federation.

Northgas

CJSC Northgas (Northgas) is engaged in development of Severo-Urengoiskoe natural gas and oil field. The Group's investment in Northgas is held through Gazprom Resource Northgas LLC which is controlled by the Group and owns a 50% share in Northgas. The control over Northgas is divided equally between the Group and PJSC NOVATEK.

Messoyakha

JSC Messoyakhaneftegas (Messoyakha) is developing the Vostochno-Messoyakhskoe and Zapadno-Messoyakhskoe oil and gas condensate fields. The control over Messoyakha is divided equally between the Group and PJSC NK Rosneft.

The summarised financial information for the significant associates and joint ventures as of 30 September 2018 and 31 December 2017 and for the nine months ended 30 September 2018 and 2017 is presented in the tables below.

30 September 2018

Slavneft

Arcticgas

Messoyakha

Northgas

Cash and cash equivalents

2,369

13,899

2

1,277

Other current assets

105,867

37,116

30,304

3,795

Non-current assets

368,828

375,537

169,734

41,486

Current financial liabilities

(30,884)

(18,207)

(14,718)

(7,742)

Other current liabilities

(38,851)

(14,688)

(9,365)

(75)

Non-current financial liabilities

(124,929)

(94,113)

(100,000)

(16,977)

Other non-current liabilities

(43,838)

(49,978)

(9,677)

(5,327)

Net assets

238,562

249,566

66,280

16,437

 

 

31 December 2017

Slavneft

SeverEnergy

(Arcticgas)

Messoyakha

Northgas

Cash and cash equivalents

4,153

8,658

1

1,409

Other current assets

54,479

133,617

18,654

3,256

Non-current assets

344,997

259,175

152,469

54,065

Current financial liabilities

(34,666)

(49,851)

(4,913)

(6,379)

Other current liabilities

(29,617)

(18,495)

(4,812)

(77)

Non-current financial liabilities

(88,198)

(91,811)

(116,815)

(21,109)

Other non-current liabilities

(41,229)

(52,465)

(9,072)

(4,656)

Net assets

209,919

188,828

35,512

26,509

 

 

9 months ended

30 September 2018

Slavneft

Arcticgas

Messoyakha

Northgas

Revenue

237,620

147,368

90,792

17,497

Depreciation and amortisation

(29,163)

(16,279)

(14,251)

(1,941)

Finance income

290

682

-

632

Finance expense

(6,757)

(8,106)

(5,189)

(1,638)

Total income tax expense

(6,939)

(12,837)

(7,584)

(1,440)

Profit for the period

28,679

60,738

41,168

5,379

Total comprehensive income for the period

28,679

60,738

41,168

5,379

 

 

9 months ended

30 September 2017

Slavneft

SeverEnergy

(Arcticgas)

Messoyakha

Northgas

Revenue

174,545

104,402

39,767

16,725

Depreciation and amortisation

(27,571)

(17,302)

(7,382)

(1,796)

Finance income

839

760

3

863

Finance expense

(4,399)

(14,762)

(4,875)

(2,136)

Total income tax expense

(3,598)

(4,625)

(3,068)

(1,265)

Profit for the period

15,809

27,057

14,080

5,031

Total comprehensive income for the period

15,946

27,057

14,080

5,031

 

Others

The aggregate carrying amount of all individually immaterial associates and joint ventures as well as the Group's share of those associates' and joint ventures' profit or loss and other comprehensive income are not significant for both reporting dates and periods.

 

10.       Other non-current assets

Other non-current assets are primarily comprised of advances provided on capital expenditures (RUB 60.5 billion and RUB 69.3 billion as of 30 September 2018 and 31 December 2017, respectively).

 

11.       Short-term debt and current portion of long-term debt

As of 30 September 2018 and 31 December 2017 the Group has short-term debt and current portion of long-term debt outstanding as follows:

 

30 September 2018

31 December 2017

Current portion of long-term debt

110,066

131,360

Other borrowings

723

400

Total short-term debt and current portion of long-term debt

110,789

131,760

 

 

12.       Trade and other payables

Accounts payable as of 30 September 2018 and 31 December 2017 comprise the following:

 

30 September 2018

31 December 2017

Trade accounts payable

175,336

118,151

Dividends payable

2,583

49,520

Forward contracts - cash flow hedge

-

16,758

Other accounts payable

15,318

10,009

Total trade and other payables

193,237

194,438

 

During the 30 September 2018 the Group paid an interim dividend on the ordinary shares for the nine months ended 30 September 2017 in the amount of RUB 10.00 per share.

On 9 June 2018 the annual general shareholders' meeting of PJSC Gazprom Neft approved a dividend on the ordinary shares for 2017 in the amount of RUB 15.00 per share including an interim dividend on the ordinary shares in the amount of RUB 10.00 per share which were paid in July 2018.

 

13.       Other current liabilities

Other current liabilities as of 30 September 2018 and 31 December 2017 comprise the following:

 

30 September 2018

31 December 2017

Advances received

18,206

21,972

Payables to employees

3,904

3,182

Other non-financial payables

10,047

7,346

Total other current liabilities

32,157

32,500

 

 

14.       Other taxes payable

Other taxes payable as of 30 September 2018 and 31 December 2017 comprise the following:

 

30 September 2018

31 December 2017

VAT

51,926

27,515

Mineral extraction tax

47,969

31,807

Excise tax

12,391

13,201

Social security contributions

5,227

6,974

Other taxes

5,798

5,336

Total other taxes payable

123,311

84,833

 

Tax expense other than income tax expense for the three and nine months ended 30 September 2018 and 2017 comprise the following:

 

3 months ended

30 September 2018

3 months ended

30 September 2017

9 months ended

30 September 2018

9 months ended

30 September 2017

Mineral extraction tax

142,200

84,683

361,687

236,071

Excise tax

30,883

37,567

99,394

95,958

Social security contributions

5,319

4,723

16,518

14,583

Other taxes

4,319

3,518

12,230

9,910

Total taxes other than income tax

182,721

130,491

489,829

356,522

 

 

15.       Long-term debt

As of 30 September 2018 and 31 December 2017 the Group has long-term outstanding debt as follows:

 

30 September 2018

31 December 2017

Bank loans

337,533

303,173

Loan participation notes

198,096

226,110

Bonds

132,739

143,007

Other borrowings

8,117

7,724

Less current portion of long-term debt

(110,066)

(131,360)

Total long-term debt

566,419

548,654

 

Bank loans

In March and September 2018 the Group performed principal repayment in the total amount of USD 614.3 million (RUB 38.9 billion) under the Club term loan facility with the syndicate of international banks (facility agent - Mizuho) according to the payment schedule.

In March and September 2018 the Group performed principal repayment in the total amount of USD 200 million (RUB 12.4 billion) under the Club term loan facility with the syndicate of international banks (facility agent - Commerzbank) according to the payment schedule.

In January 2018 the Group borrowed RUB 51.3 billion under long-term facility agreements due payable in January 2023. In July 2018 the Group performed pre-scheduled principal repayment in the total amount of RUB 48.0 billion due to borrowing RUB 48.0 billion under long-term facility agreement due payable in July 2023.

In December 2017 the Group signed several long-term facility agreements with final maturity date in December 2022 - June 2023. In June 2018 the Group performed pre-scheduled principal repayment in the total amount of RUB 102.0 billion due to borrowing RUB 102.0 billion under long-term facility agreement due payable in June 2023.

In September 2018 the Group borrowed RUB 10.0 billion under long-term facility agreement with Alfa-Bank due payable in September 2023.

The loan agreements contain financial covenant that limits the Group's ratio of "Consolidated financial indebtedness to Consolidated EBITDA". The Group is in compliance with all covenants as of 30 September 2018 and 31 December 2017 and during nine months ended 30 September 2018.

Bonds

In March 2018 the Group placed six-year Rouble Bonds (001P-06R series) with the total par value of RUB 25.0 billion. The bonds bear interest of 7.2% per annum.

In March 2018 the Group exercised the call option on Rouble bonds (series BO-02 and BO-07) in the total amount of RUB 25.0 billion. The bonds are fully repaid.

In April 2018 the Group exercised the put option on Rouble bonds (series 4-04) in the total amount of RUB 9.9 billion.

Loan participation notes

In April 2013 the Group raised EUR 750 million (RUB 30.6 billion) financed by 2.9% Loan Participation Notes (LPN) due payable in April 2018 (Series 2). In April 2018 the Group performed principal repayment of LPN (series 2) in the total amount of EUR 750 million (RUB 56.6 billion). The LPN are fully repaid.

16.       Finance lease

Since 2017 the Group has finance lease agreements regarding vessels. As of 30 September 2018 net book value of the leased assets which are pledge for finance lease is RUB 24.4 billion (RUB 24.8 billion as of 31 December 2017). At the end of lease term ownership title to the vessels transfers to the Group. The lease contract also contains an option for early purchase of the assets by the Group.

Net book value of other items of property, plant and equipment under finance lease contracts is non significant.

The reconciliation between future minimum lease payments and their present value as of 30 September 2018 and 31 December 2017 is presented in the table below:

 

Minimum lease payments

Present value of minimum lease payments

30 September 2018

 

 

 Less than one year

3,197

3,093

 Between one and five years

13,013

10,811

 More than five years

17,422

10,534

Total minimum lease payments

33,632

24,438

31 December 2017

 

 

 Less than one year

2,784

2,693

 Between one and five years

11,204

9,273

 More than five years

17,355

10,257

Total minimum lease payments

31,343

22,223

 

The difference between the minimum lease payments and their present value represents future finance charges on finance lease liabilities.

 

17.       Other non-current financial liabilities

Other non-current financial liabilities as of 30 September 2018 and 31 December 2017 comprise the following:

 

30 September 2018

31 December 2017

Deferred consideration

42,048

47,245

Forward contracts - cash flow hedge

1,638

1,295

Other liabilities

14

29

Total other non-current financial liabilities

43,700

48,569

 

Deferred consideration represents liability to PJSC Gazprom for assets relating to Prirazlomnoe project. Payments of the principal amount of the liability are presented as financing activities at line "Repayment of long-term borrowings" in Interim Condensed Consolidated Statement of Cash Flows.

 

18.       Non-controlling interest

In September 2018 the Group completed deal on disposal of non-controlling interest equal to 49% of share capital of Gazpromneft-Vostok LLC to third parties. The Group maintained control over the Company.

In result non-controlling interest in the amount of RUB 21.3 billion was recognized. Excess of the payment over non-controlling interest was recognized at additional paid-in capital attributable to Gazprom Neft shareholders.

19.       Net foreign exchange loss / gain

Net foreign exchange loss / gain for the three and nine months ended 30 September 2018 and 2017 comprise the following:

 

3 months ended

30 September 2018

3 months ended

30 September 2017

9 months ended

30 September 2018

9 months ended

30 September 2017

Net foreign exchange (loss) / gain on financing activities, including:

(16,152)

5,664

(57,496)

15,236

foreign exchange gain

60

6,621

4,086

16,948

foreign exchange loss

(16,212)

(957)

(61,582)

(1,712)

Net foreign exchange gain / (loss) on operating activities

9,354

(3,427)

26,381

(7,294)

Net foreign exchange (loss) / gain

(6,798)

2,237

(31,115)

7,942

 

 

20.       Finance expense

Finance expense for the three and nine months ended 30 September 2018 and 2017 comprise the following:

 

3 months ended

30 September 2018

3 months ended

30 September 2017

9 months ended

30 September 2018

9 months ended

30 September 2017

Interest expense

12,388

12,115

36,917

35,640

Decommissioning provision: unwinding of discount

728

657

2,206

1,962

Less: capitalised interest

(8,246)

(6,746)

(22,843)

(18,314)

Finance expense

4,870

6,026

16,280

19,288

 

 

21.       Fair value measurement

The following assets and liabilities are measured at fair value in the Interim Condensed Consolidated Financial Statements: derivative financial instruments, equity investments and Stock Appreciation Rights plan (SARs). Derivative financial instruments and SARs refer to Level 2 of the fair value measurement hierarchy, i.e. their fair value is determined on the basis of inputs that are observable for the asset or liability either directly or indirectly. The fair value of the foreign exchange contracts is determined by using forward exchange rates at the reporting date with the resulting value discounted back to present value. The fair value of the liability under the SAR plan is estimated using the Black-Scholes-Merton option-pricing model by reference primarily to the Company's share price, historic volatility in the share price, dividend yield and interest rates for periods comparable to the remaining life of the award. There were no transfers between the levels of the fair value hierarchy during the interim period. There are no significant assets or liabilities measured at fair value categorised within Level 1 or Level 3 of the fair value hierarchy.

As of 30 September 2018 the fair value of bonds and loan participation notes is RUB 326,154 million (RUB 378,085 million as of 31 December 2017). The fair value is derived from quotations in active market and related to Level 1 of the fair value hierarchy. Carrying value of other financial liabilities approximates their fair value.

 

22.       Commitments and contingencies

Taxes

Russian tax and customs legislation is subject to frequent changes and varying interpretations. Management's treatment of such legislation as applied to the transactions and activity of the Group, including calculation of taxes payable to federal, regional and municipal budgets, may be challenged by the relevant authorities. The Russian tax authorities may take a more assertive position in their treatment of legislation and assessments, and there is a risk that transactions and activities that have not been challenged in the past may be challenged later. As a result, additional taxes, penalties and interest may be accrued. Generally, taxpayers are subject to tax audits for a period of three calendar years immediately preceding the year in which the decision to carry out a tax audit has been taken. Under certain circumstances tax audits may cover longer periods. The years 2015 - 2017 are currently open for tax audit. Management believes it has adequately provided for any probable additional tax accruals that might arise from these tax audits.

The Russian transfer pricing legislation is generally aligned with the international transfer pricing principles developed by the Organisation for Economic Cooperation and Development (OECD), although it has specific features. This legislation provides for the possibility of additional tax assessments for controlled transactions (transactions between related parties and certain transactions between unrelated parties) if such transactions are not on an arm's-length basis.

The compliance of the prices of the Group's controllable transactions with related parties with the transfer pricing rules is subject to regular internal control. Management believes that the transfer pricing documentation that the Group has prepared to confirm its compliance with the transfer pricing rules provides sufficient evidence to support the Group's tax positions and related tax returns. In addition in order to mitigate potential risks, the Group regularly negotiates approaches to defining prices used for tax purposes for major controllable transactions with tax authorities in advance. Nineteen pricing agreements between the Group and tax authorities regarding major intercompany transactions have been concluded in 2012-2018.

As Russian tax legislation does not provide definitive guidance in certain areas, the Group adopts, from time to time, interpretations of such uncertain areas that reduce the overall tax rate of the Group. While Management currently estimates that the tax positions and interpretations that it has taken can probably be sustained, there is a possible risk that an outflow of resources will be required should such tax positions and interpretations be challenged by the tax authorities. The impact of any such challenge cannot be reliably estimated; however, it may be significant to the financial position and/or the overall operations of the Group.

Economic environment in the Russian Federation

The Russian Federation displays certain characteristics of an emerging market. Its economy is particularly sensitive to oil and gas prices. The legal, tax and regulatory frameworks continue to develop and are subject to frequent changes and varying interpretations. The Russian economy was growing in 2017 and 2018, after overcoming the economic recession of 2015 and 2016. The economy is negatively impacted by volatility of oil prices, ongoing political tension in the region and international sanctions against certain Russian companies and individuals. The financial markets continue to be volatile. This operating environment has a significant impact on the Group's operations and financial position. Management is taking necessary measures to ensure sustainability of the Group's operations. However, the future effects of the current economic situation are difficult to predict and management's current expectations and estimates could differ from actual results.

In 2014 the U.S., the EU and certain other countries imposed sanctions on the Russian energy sector that partially apply to the Group. The information on the main restrictions related to sanctions was disclosed in the Consolidated Financial Statements as of and for the year ended 31 December 2014. In August 2018 the U.S. signed an act to impose further sanctions against the Russian Federation. The Group assessed that the new sanctions don't have significant impact on its activity.

Environmental matters

The enforcement of environmental regulation in the Russian Federation is evolving and the enforcement posture of government authorities is continually being reconsidered. The Group periodically evaluates its potential obligations under environmental regulation. Management is of the opinion that the Group has met the government's requirements concerning environmental matters, and therefore the Group does not have any material environmental liabilities.

Capital commitments

As of 30 September 2018 the Group has entered into contracts to purchase property, plant and equipment for RUB 372,480 million (RUB 328,697 million as of 31 December 2017).

 

23.       Related party transactions

For the purpose of these Interim Condensed Consolidated Financial Statements parties are considered to be related if one party has the ability to control or jointly control the other party or exercise significant influence over the other party in making financial and operational decisions as defined by IAS 24 - Related Party Disclosures. Related parties may enter into transactions which unrelated parties might not, and transactions between related parties may not be effected on the same terms, conditions and amounts as transactions between unrelated parties.

The Group has applied the exemption as allowed by IAS 24 not to disclose all government related transactions, as the parent of the Company is effectively being controlled by the Russian Government. In the course of its ordinary business the Group enters into transactions with natural monopolies, transportation companies and other government-related entities. Such purchases and sales are individually insignificant and are generally entered into on market or regulated prices. Transactions with the state also include taxes which are detailed in Notes 6 and 14. The Group also leases vessels under time-charter agreements with a government related entity (lease expense amounted RUB 4.1 billion and RUB 4.0 billion for the nine months ended 30 September 2018 and 2017, respectively). The tables below summarise transactions in the ordinary course of business with either the parent company or parent's subsidiaries and associates or associates and joint ventures of the Group.

The Group enters into transactions with related parties based on market or regulated prices. Short-term and long-term loans provided as well as debt are based on market conditions available for not related entities.

As of 30 September 2018 and 31 December 2017 the outstanding balances with related parties were as follows:

30 September 2018

Parent company

Parent's subsidiaries and associates

Associates and joint ventures

Cash and cash equivalents

-

33,724

-

Short-term financial assets

-

5

3,938

Trade and other receivables

261

11,917

14,286

Other current assets

100

3,865

589

Long-term financial assets

-

-

3,319

Other non-current assets

-

286

-

        Total assets

361

49,797

22,132

Short-term debt and other current financial

liability

-

65,591

690

Trade and other payables

12,840

4,259

85,633

Other current liabilities

142

171

70

Long-term debt and other non-current financial

liability

42,258

-

-

Other non-current liabilities

13,017

-

-

        Total liabilities

68,257

70,021

86,393

 

 

31 December 2017

Parent company

Parent's subsidiaries and associates

Associates and joint ventures

Cash and cash equivalents

-

27,201

-

Short-term financial assets

-

1,322

3,776

Trade and other receivables

4,567

4,172

9,813

Other current assets

23

2,708

783

Long-term financial assets

-

-

27,673

Other non-current assets

-

309

-

        Total assets

4,590

35,712

42,045

Short-term debt and other current financial

liability

-

-

367

Trade and other payables

52,970

2,257

38,173

Other current liabilities

130

318

137

Long-term debt and other non-current financial

liability

47,480

57,600

-

Other non-current liabilities

6,394

-

-

        Total liabilities

106,974

60,175

38,677

 

For the nine months ended 30 September 2018 and 2017 the following transactions occurred with related parties:

9 months ended

30 September 2018

Parent company

Parent's subsidiaries and associates

Associates and joint ventures

Crude oil, gas and petroleum products sales

24,313

53,216

48,885

Other revenue

119

3,327

5,134

Purchases of crude oil, gas and petroleum products

-

36,112

157,900

Production related services

19

19,999

17,336

Transportation costs

6,710

1,481

6,704

Interest expense

3,910

1,787

34

Interest income

-

340

887

 

 

9 months ended

30 September 2017

Parent company

Parent's subsidiaries and associates

Associates and joint ventures

Crude oil, gas and petroleum products sales

26,240

28,541

38,979

Other revenue

3

4,505

7,250

Purchases of crude oil, gas and petroleum products

-

33,765

97,282

Production related services

24

22,741

15,867

Transportation costs

7,408

1,252

7,293

Interest  expense

4,130

2,313

32

Interest income

-

141

5,640

 

Transactions with Key Management Personnel

For the nine months ended 30 September 2018 the Group recognised RUB 2,021 million as compensation for key management personnel (members of the Board of Directors and Management Committee). Comparative data for the nine months ended 30 September 2017 are disclosed in Interim Condensed Consolidated Financial Statements as of and for the three and nine months ended 30 September 2017. Key management remuneration includes salaries, bonuses, quarterly accruals of SAR and other contributions.

 

24.       Segment information

Operating segments are components that engage in business activities that may earn revenues or incur expenses, whose operating results are regularly reviewed by the chief operating decision maker (CODM), and for which discrete financial information is available.

The Group manages its operations in 2 operating segments: Upstream and Downstream.

Upstream segment (exploration and production) includes the following Group operations: exploration, development, production and sale of crude oil and natural gas (including joint ventures results), oil field services. Downstream segment (refining and marketing) processes crude into refined products and purchases, sells and transports crude oil and refined petroleum products.

The information about the Group's operating segments for the nine months ended 30 September 2018 and 2017 is presented below:

9 months ended 30 September 2018

Upstream

Downstream

Eliminations

Total

Revenue from sales:

 

 

 

 

                 External customers

41,457

1,785,836

-

1,827,293

                 Inter-segment

857,334

15,975

(873,309)

-

Total revenue from sales

898,791

1,801,811

(873,309)

1,827,293

 

 

 

 

 

Adjusted EBITDA

526,477

87,985

-

614,462

Depreciation, depletion and amortisation

98,468

28,074

-

126,542

Capital expenditure

136,415

120,375

-

256,790

 

 

9 months ended 30 September 2017

Upstream

Downstream

Eliminations

Total

Revenue from sales:

 

 

 

 

                 External customers

156,171

1,251,685

-

1,407,856

                 Inter-segment

448,021

21,515

(469,536)

-

Total revenue from sales

604,192

1,273,200

(469,536)

1,407,856

 

 

 

 

 

Adjusted EBITDA

298,297

100,949

-

399,246

Depreciation, depletion and amortisation

78,214

23,861

-

102,075

Capital expenditure

151,487

91,281

-

242,768

 

Intersegment revenues are based upon prices effective for local markets and linked to market prices.

Eliminations and other adjustments section encompasses elimination of inter-segment sales and related unrealised profits, mainly from the sale of crude oil and petroleum products, and other adjustments.

Adjusted EBITDA represents the Group's EBITDA and its share in associates' and joint ventures' EBITDA. Management believes that adjusted EBITDA represents useful means of assessing the performance of the Group's ongoing operating activities, as it reflects the Group's earnings trends without showing the impact of certain charges. EBITDA is defined as earnings before interest, income tax expense, depreciation, depletion and amortisation, net foreign exchange gain (loss), other non-operating expenses and includes the Group's share of profit of associates and joint ventures. EBITDA is a supplemental non-IFRS financial measure used by Management to evaluate operations.

The geographical segmentation of the Group's revenue and capital expenditures for the nine months ended 30 September 2018 and 2017 is presented below:

9 months ended 30 September 2018

Russian Federation

CIS

Export and international operations

Total

Sales of crude oil

67,668

29,680

436,976

534,324

Sales of petroleum products

789,941

67,773

357,100

1,214,814

Sales of gas

26,697

-

881

27,578

Other sales

38,316

1,838

10,423

50,577

Revenues from external customers, net

922,622

99,291

805,380

1,827,293

9 months ended 30 September 2017

 

 

 

 

Sales of crude oil

63,040

20,694

311,137

394,871

Sales of petroleum products

638,943

55,476

242,794

937,213

Sales of gas

27,432

-

1,005

28,437

Other sales

37,404

1,553

8,378

47,335

Revenues from external customers, net

766,819

77,723

563,314

1,407,856

 

For the nine months ended 30 September 2018 and 2017 export sales of crude oil include sales from upstream segment in the amount of RUB 27,259 million and RUB 144,051 million, respectively. The remaining amount of RUB 409,717 million for nine months ended 30 September 2018 (RUB 167,086 million for nine months ended 30 September 2017) represents sales from downstream segment.

 

Russian Federation

CIS

Export and international operations

Total

Non-current assets as of 30 September 2018

2,365,104

12,066

348,583

2,725,753

Capital expenditures for the nine months ended

30 September 2018

232,351

1,023

23,416

256,790

Non-current assets as of 31 December 2017

2,159,510

11,097

318,947

2,489,554

Capital expenditures for the nine months ended

30 September 2017

226,210

661

15,897

242,768

 

Adjusted EBITDA for the three and nine months ended 30 September 2018 and 2017 is reconciled below:

 

3 months ended

30 September 2018

3 months ended

30 September 2017

9 months ended

30 September 2018

9 months ended

30 September 2017

Profit for the period

140,262

82,448

317,401

200,499

Total income tax expense

25,657

18,351

60,822

46,513

Finance expense

4,870

6,026

16,280

19,288

Finance income

(1,665)

(3,041)

(4,595)

(8,266)

Depreciation, depletion and amortisation

46,693

35,781

126,542

102,075

Net foreign exchange (loss) / gain

6,798

(2,237)

31,115

(7,942)

Other (loss) / gain, net

3,279

(413)

8,908

2,964

EBITDA

225,894

136,915

556,473

355,131

less share of profit of associates and joint ventures

(29,305)

(12,526)

(69,662)

(31,236)

add share of EBITDA of associates and joint ventures

49,673

29,050

127,651

75,351

Total adjusted EBITDA

246,262

153,439

614,462

399,246

 

25.       Subsequent events

In October 2018 the Group borrowed RUB 15.0 billion under long-term facility agreement with Gazprombank due payable in October 2021.

In November 2018 the Board of Directors recommended to approve interim dividends on the ordinary shares for the nine months ended 30 September 2018 in the amount of RUB 22.05 per share.

The company's address for correspondence is:

3-5 Pochtamtskaya St,

St Petersburg, Russian Federation

190000

 

Ul. Pochtamtskaya, 3-5

Saint Petersburg

190000, Russian Federation

Telephone: +7 (812) 363 3152

Hotline: 8 800 700 3152

Fax: +7 (812) 363 3151

www.gazprom-neft.ru

 

Investor Relations

Tel.: +7 (812) 385 9548

Email: [email protected]

 


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