Rosneft Oil Company
Interim Condensed Consolidated Financial Statements (unaudited)
Three months ended March 31, 2020
Rosneft Oil Company
Interim condensed consolidated financial statements (unaudited)
Three months ended March 31, 2020
Contents | ||
Report on Review of Interim Financial Information.......................................................................................... | 3 | |
Interim condensed consolidated financial statements (unaudited) | ||
Interim consolidated balance sheet..................................................................................................................... | 5 | |
Interim consolidated statement of profit or loss ................................................................................................. | 6 | |
Interim consolidated statement of other comprehensive income ....................................................................... | 7 | |
Interim consolidated statement of changes in shareholders' equity ................................................................... | 8 | |
Interim consolidated statement of cash flows .................................................................................................... | 9 | |
Notes to the interim condensed consolidated financial statements (unaudited) | ||
8. | Finance expenses.................................................................................................................................... | 18 |
9. | Other income and expenses.................................................................................................................... | 18 |
Othershort-termfinancial assets............................................................................................................ | ||
Otherlong-termfinancial assets............................................................................................................. | ||
Othernon-currentnon-financialassets .................................................................................................. | ||
Prepayment onlong-termoil and petroleum products supply agreements ............................................ | ||
28. | Events after the reporting date ............................................................................................................... | 36 |
2
15 | ||
Officer | ||
5
Rosneft Oil Company
Interim consolidated statement of profit or loss
(in billions of Russian rubles, except earnings per share data, and share amounts)
Three months | Three months | ||
ended | ended | ||
March 31, 2020 | March 31, 2019 | ||
Revenues and equity share in profits of associates | Notes | (unaudited) | (unaudited)* |
and joint ventures | 1,732 | ||
Oil, gas, petroleum products and petrochemicals sales | 5 | 2,031 | |
Support services and other revenues | 22 | 21 | |
Equity share in profits of associates and joint ventures | 11 | 25 | |
Total revenues and equity share in profits of | |||
associates and joint ventures | 1,765 | 2,077 | |
Costs and expenses | 202 | ||
Production and operating expenses | 162 | ||
Cost of purchased oil, gas, petroleum products, | 280 | ||
goods for retail and refining costs | 316 | ||
General and administrative expenses | 29 | 65 | |
Transportation costs and other commercial expenses | 215 | 170 | |
Exploration expenses | 2 | 1 | |
Depreciation, depletion and amortization | 176 | 174 | |
Taxes other than income tax | 6 | 633 | 667 |
Export customs duty | 7 | 127 | 181 |
Total costs and expenses | 1,664 | 1,736 | |
Operating income | 101 | 341 | |
Finance income | 24 | 40 | |
Finance expenses | 8 | (80) | (64) |
Other income | 9 | 2 | 3 |
Other expenses | 9 | (46) | (106) |
Foreign exchange differences | (177) | 15 | |
Realized foreign exchange differences on hedge instruments | 24 | - | (36) |
(Loss)/income before income tax | (176) | 193 | |
Income tax benefit/(expense) | 6 | 33 | (37) |
Net (loss)/income | (143) | 156 | |
Net (loss)/income attributable to: | (156) | ||
- Rosneft shareholders | 131 | ||
- non-controlling interests | 13 | 25 | |
Net (loss)/income attributable to Rosneft per common share | |||
(in RUB) - basic and diluted | (14.72) | 12.36 | |
Weighted average number of shares outstanding (millions) | 10,598 | 10,598 |
- Some amounts for the three months ended March 31, 2019 have been reclassified for compliance with the current period presentation.
The accompanying notes to the interim condensed consolidated financial statements are
an integral part of these statements.
6
Rosneft Oil Company
Interim consolidated statement of other comprehensive income
(in billions of Russian rubles)
Three months | Three months | ||
ended | ended | ||
March 31, 2020 | March 31, 2019 | ||
Notes | (unaudited) | (unaudited) | |
Net (loss)/income | (143) | 156 | |
Other comprehensive income/(loss) - to be reclassified | |||
to profit or loss in subsequent periods | 147 | ||
Foreign exchange differences on translation of foreign operations | (47) | ||
Foreign exchange cash flow hedges | 24 | - | 36 |
(Loss)/income from changes in fair value of debt financial assets at | (4) | ||
fair value through other comprehensive income | 1 | ||
Equity share in other comprehensive loss of associates | (5) | (1) | |
Income tax related to other comprehensive loss/(income) - to be | 2 | ||
reclassified to profit or loss in subsequent periods | (7) | ||
Total other comprehensive income/(loss) - to be reclassified | |||
to profit or loss in subsequent periods, net of tax | 140 | (18) | |
Other comprehensive (loss)/income - not to be reclassified | |||
to profit or loss in subsequent periods | |||
(Loss)/income from changes in fair value of equity financial assets at | (2) | ||
fair value through other comprehensive income | 2 | ||
Total comprehensive (loss)/income - not to be reclassified | |||
to profit or loss in subsequent periods, net of tax | (2) | 2 | |
Total comprehensive (loss)/income, net of tax | (5) | 140 | |
Total comprehensive (loss)/income, net of tax, attributable to: | (18) | ||
- Rosneft shareholders | 115 | ||
- non-controlling interests | 13 | 25 |
The accompanying notes to the interim condensed consolidated financial statements are
an integral part of these statements.
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Rosneft Oil Company
Interim consolidated statement of changes in shareholders' equity
(in billions of Russian rubles, except share amounts)
Rosneft | ||||||||||
Number | Additional | Other | share- | Non- | ||||||
of shares | Share | Treasury | paid-in | funds and | Retained | holders' | controlling | Total | ||
(millions) | capital | shares | capital | reserves | earnings | equity | interests | equity | ||
Balance at January 1, 2019 | 10,598 | 1 | - | 633 | (191) | 3,610 | 4,053 | 624 | 4,677 | |
Net income | - | - | - | - | - | 131 | 131 | 25 | 156 | |
Other comprehensive loss | - | - | - | - | (16) | - | (16) | - | (16) | |
Total comprehensive | ||||||||||
(loss)/income | - | - | - | - | (16) | 131 | 115 | 25 | 140 | |
Dividends declared | - | - | - | - | - | - | - | (7) | (7) | |
Change of interest in | ||||||||||
subsidiaries | - | - | - | 1 | - | - | 1 | 3 | 4 | |
Other movements | - | - | - | - | - | - | - | 6 | 6 | |
Balance at March 31, 2019 | ||||||||||
(unaudited) | 10,598 | 1 | - | 634 | (207) | 3,741 | 4,169 | 651 | 4,820 | |
Balance at January 1, 2020 | 10,598 | 1 | - | 635 | (154) | 4,035 | 4,517 | 635 | 5,152 | |
Net (loss)/income | - | - | - | - | - | (156) | (156) | 13 | (143) | |
Other comprehensive income | - | - | - | - | 138 | - | 138 | - | 138 | |
Total comprehensive | ||||||||||
income/(loss) | - | - | - | - | 138 | (156) | (18) | 13 | (5) | |
Dividends declared | - | - | - | - | - | - | - | (8) | (8) | |
Acquisition of treasury shares | (9) | - | (3) | - | - | - | (3) | - | (3) | |
(Note 23) | ||||||||||
Change of interest in | - | - | - | - | - | - | - | (1) | (1) | |
subsidiaries | ||||||||||
Other movements | - | - | - | - | - | - | - | 2 | 2 | |
Balance at March 31, 2020 | ||||||||||
(unaudited) | 10,589 | 1 | (3) | 635 | (16) | 3,879 | 4,496 | 641 | 5,137 | |
The accompanying notes to the interim condensed consolidated financial statements are
an integral part of these statements.
8
Rosneft Oil Company
Interim consolidated statement of cash flows
(in billions of Russian rubles)
Three months | Three months | ||
ended | ended | ||
March 31, 2020 | March 31, 2019 | ||
Operating activities | Notes | (unaudited) | (unaudited) |
(143) | |||
Net income | 156 | ||
Adjustments to reconcile net income to net cash provided by | |||
operating activities | 176 | ||
Depreciation, depletion and amortization | 174 | ||
Loss on disposal of non-current assets | 9 | 1 | 2 |
Offset of prepayments received on oil and petroleum products long | (79) | ||
term supply agreements | 22 | (92) | |
Offset of prepayments made on oil and petroleum products long term | 9 | ||
supply agreements | 39 | ||
Foreign exchange loss/(gain) on non-operating activities | 283 | (35) | |
Cash flow hedges reclassified to profit or loss | - | 36 | |
Offset of other financial liabilities | (47) | (41) | |
Equity share in profits of associates and joint ventures | (11) | (25) | |
Changes in provisions for financial assets | (6) | 25 | |
Loss from changes in estimates and impairment of assets | 46 | 91 | |
Finance expenses | 8 | 80 | 64 |
Finance income | (24) | (40) | |
Income tax (income)/expense | 6 | (33) | 37 |
Changes in operating assets and liabilities | 27 | ||
Decrease/(increase) in accounts receivable, gross | (67) | ||
Decrease/(increase) in inventories | 49 | (8) | |
Decrease in restricted cash | 1 | 1 | |
Decrease in prepayments and other current assets | 18 | 4 | |
Increase in long-term prepayments made on oil and petroleum | - | ||
products supply agreements | (15) | ||
Decrease in accounts payable and accrued liabilities | (16) | (49) | |
(Decrease)/increase in other tax liabilities | (56) | 66 | |
Increase in other current reserves | 2 | - | |
Decrease in other current liabilities | (1) | - | |
Increase in other non-current liabilities | 6 | - | |
Interest paid on long-term prepayment received on oil and petroleum | (3) | ||
products supply agreements | (2) | ||
Net increase in operating assets of subsidiary banks | (31) | (4) | |
Net increase/(decrease) in operating liabilities of subsidiary banks | 129 | (28) | |
Net cash provided by operating activities before income tax | |||
and interest | 377 | 289 | |
Income tax payments | (56) | (56) | |
Interest received | 19 | 15 | |
Dividends received | 1 | - | |
Net cash provided by operating activities | 341 | 248 |
The accompanying notes to the interim condensed consolidated financial statements are
an integral part of these statements.
9
Rosneft Oil Company
Interim consolidated statement of cash flows (continued)
(in billions of Russian rubles)
Three months | Three months | |||
ended | ended | |||
March 31, 2020 | March 31, 2019 | |||
Investing activities | Notes | (unaudited) | (unaudited) | |
(185) | ||||
Capital expenditures | (214) | |||
Acquisition of licenses and auction fee payments | (1) | (2) | ||
Acquisition of short-term financial assets | (6) | (44) | ||
Proceeds from sale of short-term financial assets | 4 | 35 | ||
Acquisition of long-term assets | (3) | (5) | ||
Proceeds from sale of long-term financial assets | 1 | 1 | ||
Acquisition of interest in subsidiaries, net of cash acquired | - | (1) | ||
Proceeds from sale of subsidiaries, net of cash disposed | - | 5 | ||
Proceeds from sale of property, plant and equipment | 4 | 1 | ||
Net cash used in investing activities | (186) | (224) | ||
Financing activities | 275 | |||
Proceeds from short-term loans and borrowings | 99 | |||
Repayment of short-term loans and borrowings | (289) | (541) | ||
Proceeds from long-term loans and borrowings | 242 | 181 | ||
Repayment of long-term loans and borrowings | (331) | (197) | ||
Proceeds from other financial liabilities | 54 | 39 | ||
Repayment of other financial liabilities | (7) | (38) | ||
Interest paid | (66) | (72) | ||
Other financing received | 1 | 6 | ||
Treasury shares acquired | (2) | - | ||
Dividends paid to non-controlling shareholders | (8) | (7) | ||
Net cash used in financing activities | (131) | (530) | ||
Net increase/(decrease) in cash and cash equivalents | 24 | (506) | ||
Cash and cash equivalents at beginning of period | 10 | 228 | 832 | |
Effect of foreign exchange on cash and cash equivalents | 13 | (24) | ||
Cash and cash equivalents at end of period | 10 | 265 | 302 | |
The accompanying notes to the interim condensed consolidated financial statements are
an integral part of these statements.
10
Rosneft Oil Company
Notes to the interim condensed consolidated financial statements (unaudited)
Three months ended March 31, 2020
(all amounts in tables are in billions of Russian rubles, except as noted otherwise)
1. General
Public Joint Stock Company ("PJSC") Rosneft Oil Company ("Rosneft") and its subsidiaries (collectively, the "Company") are principally engaged in exploration, development, production and sale of crude oil and gas and refining, transportation and sale of petroleum products in the Russian Federation and in certain international markets.
2. Basis of preparation
These interim condensed consolidated financial statements have been prepared in accordance with International Accounting Standard ("IAS") 34 Interim Financial Reporting. The interim condensed consolidated financial statements should be read in conjunction with the Company's annual consolidated financial statements for 2019 prepared in accordance with International Financial Reporting Standards ("IFRS").
These interim condensed consolidated financial statements are unaudited and do not include all the information and disclosures required in the annual IFRS financial statements. The Company omitted disclosures which would substantially duplicate the information contained in its 2019 audited consolidated financial statements, such as accounting policies and details of accounts which have not changed significantly in amount or composition. Additionally, the Company has provided disclosures where significant events have occurred subsequently to the issuance of its 2019 audited consolidated financial statements. Management believes that the disclosures in these interim condensed consolidated financial statements are adequate to ensure that the presented information is not misleading if these interim condensed consolidated financial statements are read in conjunction with the Company's 2019 audited consolidated financial statements and the notes related thereto. In the opinion of management, the financial statements reflect all adjustments necessary to present fairly the Company's financial position, results of operations, statements of changes in shareholders' equity and cash flows for the interim reporting periods.
The Company maintains its books and records and prepares financial statements in accordance with accounting and taxation principles and practices mandated by legislation of the relevant jurisdictions. The accompanying IFRS interim condensed consolidated financial statements were derived from the Company's statutory books and records.
The Company's interim condensed consolidated financial statements are presented in billions of Russian rubles ("RUB"), unless otherwise indicated.
The interim condensed consolidated financial statements for the three months ended March 31, 2020 were approved and authorized for issue by the Chief Executive Officer of the Company on May 15, 2020.
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Rosneft Oil Company
Notes to the interim condensed consolidated financial statements (unaudited)
(continued)
3. Changes in accounting policies
The accounting policies adopted are consistent with those of the previous financial year except for the adoption of the Revised version of Conceptual Framework for Financial Reporting as well as amendments to existing standards effective as of January 1, 2020:
- Revised version of Conceptual Framework for Financial Reporting. In particular, the revised version introduced new definitions of assets and liabilities, as well as amended definitions of income and
expenses. The revised version of Conceptual Frameworkdid not have a material impact on the consolidated financial statements.
- Amendments to IFRS 3 Business Combinations. The amendments enhanced definition of a business set out by the standard. The amendments did not have a material impact on the consolidated financial statements.
- Amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.The amendments to IAS 1 and IAS 8 introduced new definition of material. The amendments did not have a material impact on the consolidated financial statements.
- Amendments to IFRS 7 Financial instruments: Disclosures and IFRS 9 Financial instruments named Interest Rate Benchmark Reform.The amendments provided relief from certain requirements of hedge accounting, as their fulfillment could lead to discontinuation of hedge accounting due to uncertainty caused by the reform. The amendments did not have a material impact on the consolidated financial statements.
4. Acquisitions of subsidiaries and shares in joint operations Acquisitions of 2019
Acquisition of 100% shares in the entities of "Petersburg Fuel Company" group
In July 2019 Company completed the acquisition of 100% shares in "Petersburg Fuel Company" group ("PTK"). Fair value of consideration amounted to RUB 13 billion, including contingent consideration. The acquisition of PTK is in line with the Company's strategy aimed at developing the retail business and expanding its presence in key regions of the country.
As of March 31, 2020 the Company updated the assessment of the fair values of assets acquired and liabilities assumed. Final allocation of the purchase price to the fair value of the assets acquired and liabilities assumed will be completed within 12 months from the acquisition date.
12
Rosneft Oil Company
Notes to the interim condensed consolidated financial statements (unaudited)
(continued)
4. Acquisitions of subsidiaries and shares in joint operations (continued) Acquisitions of 2019 (continued)
Company's updated preliminary allocation of the purchase price to the fair value of assets acquired and liabilities assumed is summarized in the table below:
ASSETS | ||
Current assets | ||
Accounts receivable and other assets | 1 | |
Total current assets | 1 | |
Non-current assets | ||
Property, plant and equipment | 8 | |
Total non-current assets | 8 | |
Total assets | 9 | |
LIABILITIES | ||
Current liabilities | ||
Accounts payable and accrued liabilities | 1 | |
Loans and borrowings and other financial liabilities | 1 | |
Total current liabilities | 2 | |
Non-current liabilities | ||
Loans and borrowings and other financial liabilities | 1 | |
Deferred tax liabilities | 1 | |
Total non-current liabilities | 2 | |
Total liabilities | 4 | |
Total identifiable net assets at fair value | 5 | |
Total consideration transferred | 13 | |
Goodwill | 8 | |
The "PTK" acquisition will provide the Company with an additional synergy effect and will increase the efficiency of the fuel supply channel.
Had the "PTK" acquisition taken place at the beginning of the reporting period (January 1, 2019), revenues and net profit of the combined entity for the three months ended March 31, 2019 would have been RUB 2,078 billion and RUB 156 billion, respectively.
13
Rosneft Oil Company
Notes to the interim condensed consolidated financial statements (unaudited)
(continued)
4. Acquisitions of subsidiaries and shares in joint operations (continued) Acquisitions of 2019 (continued)
The effects of updated estimates on the consolidated balance sheet of the Company at December 31, 2019 are summarized below:
Before update | After update | |||
in estimates | in estimates | |||
December 31, 2019 | Effect of update | December 31, 2019 | ||
ASSETS | ||||
Total current assets | 2,396 | - | 2,396 | |
Non-current assets | ||||
Property, plant and equipment | 8,713 | (10) | 8,703 | |
Right-of-use assets | 160 | - | 160 | |
Intangible assets | 69 | - | 69 | |
Other long-term financial assets | 229 | - | 229 | |
Investments in associates and joint ventures | 803 | - | 803 | |
Bank loans granted | 291 | - | 291 | |
Deferred tax assets | 33 | - | 33 | |
Goodwill | 85 | 8 | 93 | |
Other non-currentnon-financial assets | 171 | - | 171 | |
Total non-current assets | 10,554 | (2) | 10,552 | |
Total assets | 12,950 | (2) | 12,948 | |
LIABILITIES AND EQUITY | ||||
Total current liabilities | 2,755 | - | 2,755 | |
Non-current liabilities | ||||
Loans and borrowings and other financial liabilities | 3,033 | - | 3,033 | |
Deferred tax liabilities | 844 | (2) | 842 | |
Provisions | 343 | - | 343 | |
Prepayment on long-term oil and petroleum products | ||||
supply agreements | 750 | - | 750 | |
Other non-current liabilities | 73 | - | 73 | |
Total non-current liabilities | 5,043 | (2) | 5,041 | |
Total equity | 5,152 | - | 5,152 | |
Total liabilities and equity | 12,950 | (2) | 12,948 | |
5. Segment information
The Company determines its operating segments based on the nature of their operations. The performance of these operating segments is assessed by management on a regular basis. The Exploration and production segment is engaged in field exploration and the production of crude oil and natural gas. The Refining and distribution segment is engaged in processing crude oil and other hydrocarbons into petroleum products, as well as in the purchase, sale and transportation of crude oil and petroleum products. Corporate and other unallocated activities are not part of any operating segment and include corporate activity, activities involved in field development, the maintenance of infrastructure and the functioning of the first two segments, as well as banking and finance services, and other activities. Substantially all of the Company's operations and assets are located in the Russian Federation.
14
Rosneft Oil Company
Notes to the interim condensed consolidated financial statements (unaudited)
(continued)
5. Segment information (continued)
Segment performance is evaluated based on both revenues and operating income, which are measured on the same basis as in the consolidated financial statements, but with intersegment transactions revalued at market prices.
The performance of the operating segments for the three months ended March 31, 2020 (unaudited) is shown below:
Total revenues and equity share in profits of associates and joint ventures
Including: equity share in profits of associates and joint ventures
Costs and expenses
Costs and expenses other than depreciation, depletion and amortization
Depreciation, depletion and amortization
Total costs and expenses
Operating income
Finance income
Finance expenses
Total finance expenses
Other income
Other expenses
Foreign exchange differences
Realized foreign exchange differences on hedge instruments
Income/(loss) before income tax
Income tax (expense)/benefit
Net income/(loss)
Corporate | ||||
Exploration | Refining and | and other | ||
and | unallocated | |||
production | distribution | activities | Adjustments | Consolidated |
863 | 1,778 | 52 | (928) | 1,765 |
2 | 8 | 1 | - | 11 |
626 | 1,722 | 68 | (928) | 1,488 |
145 | 27 | 4 | - | 176 |
771 | 1,749 | 72 | (928) | 1,664 |
92 | 29 | (20) | - | 101 |
- | - | 24 | - | 24 |
- | - | (80) | - | (80) |
- | - | (56) | - | (56) |
- | - | 2 | - | 2 |
- | - | (46) | - | (46) |
- | - | (177) | - | (177) |
- | - | - | - | - |
92 | 29 | (297) | - | (176) |
(18) | (4) | 55 | - | 33 |
74 | 25 | (242) | - | (143) |
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Rosneft Oil Company
Notes to the interim condensed consolidated financial statements (unaudited)
(continued)
5. Segment information (continued)
The performance of the operating segments for the three months ended March 31, 2019 (unaudited) is shown below:
Total revenues and equity share in profits of associates and joint ventures
Including: equity share in profits of associates and joint ventures
Costs and expenses
Costs and expenses other than depreciation, depletion and amortization
Depreciation, depletion and amortization
Total costs and expenses
Operating income
Corporate | ||||
Exploration | Refining and | and other | ||
and | unallocated | |||
production | distribution | activities | Adjustments | Consolidated |
1,223 | 2,064 | 36 | (1,246) | 2,077 |
23 | - | 2 | - | 25 |
725 | 2,042* | 41 | (1,246) | 1,562 |
142 | 30 | 2 | - | 174 |
867 | 2,072 | 43 | (1,246) | 1,736 |
356 | (8) | (7) | - | 341 |
Finance income | - | - | 40 | - | 40 | |
Finance expenses | - | - | (64) | - | (64) | |
Total finance expenses | - | - | (24) | - | (24) | |
Other income | - | - | 3 | - | 3 | |
Other expenses | - | - | (106) | - | (106) | |
Foreign exchange differences | - | - | 15 | - | 15 | |
Realized foreign exchange differences | ||||||
on hedge instruments | - | - | (36) | - | (36) | |
Income/(loss) before income tax | 356 | (8) | (155) | - | 193 | |
Income tax (expense)/benefit | (67) | 2 | 28 | - | (37) | |
Net income/(loss) | 289 | (6) | (127) | - | 156 | |
- Including reclassification of allowance for expected credit losses of RUB 27 bln from the Corporate segment.
Oil, gas, petroleum products and petrochemicals sales comprise the following (based on the country indicated in the bill of lading):
Three months | Three months | ||
ended | ended | ||
March 31, 2020 | March 31, 2019 | ||
International sales of crude oil, petroleum products and petrochemicals - | (unaudited) | (unaudited) | |
1,255 | |||
non-CIS | 1,455 | ||
International sales of crude oil and petroleum products - CIS, other than | 22 | ||
Russia | 89 | ||
Domestic sales of crude oil, petroleum products and petrochemicals | 392 | 418 | |
Sales of gas | 63 | 69 | |
Total oil, gas, petroleum products and petrochemicals sales | 1,732 | 2,031 | |
16
Rosneft Oil Company
Notes to the interim condensed consolidated financial statements (unaudited)
(continued)
6. | Income tax and other taxes | ||
Income tax expenses comprise the following: | |||
Three months | Three months | ||
ended | ended | ||
March 31, 2020 | March 31, 2019 | ||
(unaudited) | (unaudited) | ||
Current income tax expense | 12 | 53 | |
Deferred tax benefit due to the origination | (45) | ||
and reversal of temporary differences | (16) | ||
Total income tax (benefit)/expense | (33) | 37 | |
In 2012 the Company has created a consolidated group of taxpayers (hereinafter "CGT") which includes Rosneft and its 21 subsidiaries. Rosneft became the responsible taxpayer of the CGT. At present, under the terms of the agreement the number of members in the consolidated group of taxpayers is 64.
In addition to income tax, the Company accrued other taxes as follows:
Three months | Three months | |
ended | ended | |
March 31, 2020 | March 31, 2019 | |
(unaudited) | (unaudited) | |
Mineral extraction tax | 445 | 548 |
Excise tax | 125 | 73 |
Property tax | 10 | 10 |
Insurance contributions | 23 | 18 |
Tax on additional income from production of hydrocarbons | 29 | 16 |
Other | 1 | 2 |
Total taxes other than income tax | 633 | 667 |
In accordance with the Federal Law No.199-FZOn Amending Parts One and Two of the Tax Code of the Russian Federation enacted on July 19, 2018 the tax on additional income (hereinafter AIT) from production of hydrocarbons was introduced for a number of oil fields starting from January 1, 2019. The AIT tax rate is 50% charged on the income from the hydrocarbons sales calculated as the difference between the estimated sales revenues and certain costs associated with the production, preparation and transportation of hydrocarbons. At the same time the MET for these oil fields is charged at a reduced rate. Several Company's oil fields have implemented the new tax regime starting from January 1, 2019.
7. | Export customs duty | ||
Export customs duty comprises the following: | |||
Three months | Three months | ||
ended | ended | ||
March 31, 2020 | March 31, 2019 | ||
(unaudited) | (unaudited) | ||
Export customs duty on oil sales | 80 | 131 | |
Export customs duty on petroleum products and petrochemicals sales | 47 | 50 | |
Total export customs duty | 127 | 181 | |
17
Rosneft Oil Company
Notes to the interim condensed consolidated financial statements (unaudited)
(continued)
7. Export customs duty (continued)
During the first quarter of 2020, following the adoption of Federal law No. 24-FZ dated February 18, 2020 the one-off effect amounting to RUB 30 bln was recorded to reflect the customs duty exemption for the 2019 export deliveries of crude oil produced in certain subsoil areas where the tax on additional income regime was implemented in 2019.
8. | Finance expenses | |||
Finance expenses comprise the following: | ||||
Three months | Three months | |||
ended | ended | |||
March 31, 2020 | March 31, 2019 | |||
Interest expenses on | (unaudited) | (unaudited) | ||
(24) | ||||
Loans and borrowings | (31) | |||
Interest on the lease liability | (2) | (1) | ||
Prepayment on long-term oil and petroleum products supply agreements | (12) | |||
(Note 22) | (21) | |||
Other interest expenses | (5) | (4) | ||
Total interest expenses | (43) | (57) | ||
Increase in provision due to the unwinding of a discount | (6) | (5) | ||
Increase in allowance for expected credit losses on debt financial assets at | (1) | |||
amortized cost | (1) | |||
Change in fair value of financial assets measured at fair value through | (22) | |||
profit or loss | - | |||
Net loss from operations with derivative financial instruments | (7) | - | ||
Other finance expenses | (1) | (1) | ||
Total finance expenses | (80) | (64) | ||
9. Other income and expenses
Other income and expenses comprise the following:
Insurance recoveries
Other
Total other income
Sale and disposal of property, plant and equipment and intangible assets Impairment of assets
Social payments, charity, financial aid Other
Total other expenses
Three months | Three months |
ended | ended |
March 31, 2020 | March 31, 2019 |
(unaudited) | (unaudited) |
1 | 2 |
1 | 1 |
2 | 3 |
(1) | (2) |
(27) | (90) |
(4) | (6) |
(14) | (8) |
(46) | (106) |
Impairment of assets during three months ended March 31, 2020 relates to joint ventures and exploration and evaluation assets (Note 15).
18
Rosneft Oil Company
Notes to the interim condensed consolidated financial statements (unaudited)
(continued)
10. Cash and cash equivalents
Cash and cash equivalents comprise the following:
March 31, 2020 | December 31, | |
(unaudited) | 2019 | |
Cash on hand and in bank accounts in RUB | 69 | 14 |
Cash on hand and in bank accounts in foreign currencies | 76 | 92 |
Deposits | 115 | 109 |
Other | 5 | 13 |
Total cash and cash equivalents | 265 | 228 |
Cash accounts denominated in foreign currencies primarily comprise cash in U.S. dollars and euro.
Deposits are interest bearing and denominated in RUB and U.S. dollars.
Restricted cash includes the obligatory reserve of subsidiary banks with the CBR in the amount of RUB 8 billion and RUB 7 billion as of March 31, 2020 and December 31, 2019, respectively.
11. Other short-term financial assets
Other short-term financial assets comprise the following:
March 31, 2020 | December 31, | ||
Financial assets at fair value through other comprehensive income | (unaudited) | 2019 | |
159 | |||
Bonds | 158 | ||
Promissory notes | 176 | 151 | |
Shares | 45 | 46 | |
Loans granted under reverse repurchase agreements | 56 | 55 | |
Financial assets at amortized cost | 2 | ||
Bonds | 1 | ||
Loans issued | 7 | 7 | |
Loans issued to associates and joint ventures | 19 | 19 | |
Deposits and certificates of deposit | 77 | 60 | |
Financial assets at fair value through profit or loss | 2 | ||
Deposits | 1 | ||
Bonds | 1 | 1 | |
Derivative financial instruments | 1 | 2 | |
Total other short-term financial assets | 545 | 501 | |
19
Rosneft Oil Company
Notes to the interim condensed consolidated financial statements (unaudited)
(continued)
12. Accounts receivable
Accounts receivable include the following:
March 31, 2020 | December 31, | ||
(unaudited) | 2019 | ||
Trade receivables | 640 | 678 | |
Bank loans to customers | 169 | 130 | |
Other accounts receivable | 60 | 37 | |
Total | 869 | 845 | |
Allowance for expected credit losses | (100) | (95) | |
Total accounts receivable, net of allowance | 769 | 750 | |
As of March 31, 2020 and December 31, 2019 accounts receivable were not pledged as collateral for loans and borrowings provided to the Company, except as discussed in Note 19.
Set out below is the movement in the allowance for expected credit losses on accounts receivable:
As of | As of | ||||
January 1, | Increase in | Decrease in | March 31, | ||
Allowance at an amount equal to 12-month | 2020 | allowance | allowance | 2020 | |
48 | |||||
expected credit losses on trade receivables | 47 | 14 | (13) | ||
Allowance at an amount equal to lifetime | 33 | ||||
expected credit losses on trade receivables | 27 | 6 | - | ||
Allowance for expected credit losses on other | 19 | ||||
accounts receivable | 21 | 3 | (5) | ||
Total | 95 | 23 | (18) | 100 | |
Due to overall high credit quality and short-term nature of trade receivables, the allowance for expected credit losses for significant counterparties is determined based on 12-month expected credit losses. The Company has no trade receivables that were credit impaired upon initial recognition.
13. Inventories
Inventories comprise the following:
March 31, 2020 | December 31, | |
(unaudited) | 2019 | |
Crude oil and gas | 56 | 135 |
Petroleum products and petrochemicals | 190 | 186 |
Materials and supplies | 127 | 117 |
Total inventories | 373 | 438 |
20
Rosneft Oil Company
Notes to the interim condensed consolidated financial statements (unaudited)
(continued)
13. Inventories (continued)
Petroleum products and petrochemicals include those designated both for sale and for own use.
Three months | Three months | |
ended | ended | |
March 31, 2020 | March 31, 2019 | |
(unaudited) | (unaudited) | |
Cost of inventories recognized as an expense during the period | 312 | 363 |
The cost of inventories recognized as an expense during the period is included in Production and operating expenses, Cost of purchased oil, gas, petroleum products and refining costs and General and administrative expenses in the interim consolidated statement of profit or loss.
As of March 31, 2020 resulting from a significant decrease in oil prices, the cost of inventories were written down to the lower of cost or net realizable value, the relevant expense was recognized within "Production and operating expenses" in the interim consolidated statement of profit or loss in the amount of RUB 16 billion.
14. Prepayments and other current assets
Prepayments and other current assets comprise the following:
Value added tax and excise receivable
Prepayments to suppliers
-
Current portion oflong-term prepayments issued Settlements with customs
Profit and other tax payments Other
Total prepayments and other current assets
March 31, 2020 | December 31, |
(unaudited) | 2019 |
189 | 183 |
137 | 209 |
77 | 64 |
39 | 34 |
17 | 35 |
15 | 8 |
397 | 469 |
Settlements with customs primarily represent prepaid export duties related to the export of crude oil and petroleum products (Note 7).
21
Rosneft Oil Company
Notes to the interim condensed consolidated financial statements (unaudited)
(continued)
15. Property, plant and equipment
Cost as of January 1, 2020 (restated)
Depreciation, depletion and impairment losses as of January 1, 2020 (restated)
Net book value as of January 1, 2020 (restated)
Prepayments for property, plant and equipment as of January 1, 2020
Total as of January 1, 2020 (restated)
Cost
Additions
Including capitalized expenses on loans and borrowings
Disposals and other movements
Foreign exchange differences
Cost of asset retirement (decommissioning) obligations
As of March 31, 2020
Depreciation, depletion and impairment losses Depreciation and depletion charge
Disposals and other movements
Impairment of assets (Note 9)
Foreign exchange differences
As of March 31, 2020
Net book value as of March 31, 2020
Prepayments for property, plant and equipment as of March 31, 2020
Total as of March 31, 2020
Corporate | |||
Exploration | Refining and | and other | |
unallocated | |||
and production | distribution | activities | Total |
10,537 | 2,418 | 154 | 13,109 |
(3,670) | (743) | (57) | (4,470) |
6,867 | 1,675 | 97 | 8,639 |
17 | 13 | 34 | 64 |
6,884 | 1,688 | 131 | 8,703 |
199 | 20 | 2 | 221 |
41 | 13 | - | 54 |
(12) | (2) | 1 | (13) |
205 | 49 | 4 | 258 |
36 | - | - | 36 |
10,965 | 2,485 | 161 | 13,611 |
(143) | (24) | (3) | (170) |
7 | 2 | (1) | 8 |
(8) | - | - | (8) |
(102) | (12) | (1) | (115) |
(3,916) | (777) | (62) | (4,755) |
7,049 | 1,708 | 99 | 8,856 |
20 | 15 | 33 | 68 |
7,069 | 1,723 | 132 | 8,924 |
The depreciation charge for the three months ended March 31, 2020 includes RUB 4 billion of depreciation which was capitalized as part of the construction cost of property, plant and equipment and cost of inventory.
As of January 1, 2020, certain items of property, plant and equipment were reallocated between segments Exploration and production and Corporate and other activities due to the changes in the management structure.
The Company capitalized RUB 54 billion (including RUB 36 billion in capitalized interest expense) and RUB 41 billion (including RUB 41 billion in capitalized interest expense) of expenses on loans and borrowings for the three months ended March 31, 2020 and 2019, respectively. The weighted average quarterly rates used to determine the amount of borrowing costs eligible for capitalization were 3.15% and 1.83% for the three months ended March 31, 2020 and 2019, respectively.
22
Rosneft Oil Company
Notes to the interim condensed consolidated financial statements (unaudited)
(continued)
16. Other long-term financial assets
Other long-term financial assets comprise the following:
March 31, 2020 | December 31, | ||
Financial assets at fair value through other comprehensive income | (unaudited) | 2019 | |
20 | |||
Stocks and shares | 21 | ||
Financial assets at amortized cost | 26 | ||
Bonds | 26 | ||
Loans granted | 20 | 18 | |
Loans granted to associates and joint ventures | 3 | 12 | |
Deposits and certificates of deposit | 24 | 20 | |
Other accounts receivable | 12 | 10 | |
Financial assets at fair value through profit or loss | 124 | ||
Deposits | 122 | ||
Total other long-term financial assets | 229 | 229 | |
Bank deposits of the Company are placed in rubles, US dollars and euros at interest rates ranging from 1.5% to 8.75% p.a.
Bonds mainly include federal loan bonds.
No long-term financial assets were pledged as collateral as of March 31, 2020 and December 31, 2019.
17. Other non-currentnon-financial assets
Other non-currentnon-financial assets comprise the following:
March 31, 2020 | December 31, | |
(unaudited) | 2019 | |
Long-term advances issued | 201 | 169 |
Other | 2 | 2 |
Total other non-currentnon-financial assets | 203 | 171 |
Long-term advances issued represent primarily advance payments under contracts for future crude oil purchases.
18. Accounts payable and accrued liabilities
Accounts payable and accrued liabilities comprise the following:
March 31, 2020 | December 31, | ||
Financial liabilities | (unaudited) | 2019 | |
445 | |||
Accounts payable to suppliers and contractors | 544 | ||
Current operating liabilities of subsidiary banks | 622 | 438 | |
Salary and other benefits payable | 123 | 102 | |
Dividends payable | 1 | 1 | |
Other accounts payable | 21 | 19 | |
Total financial liabilities | 1,212 | 1,104 | |
Non-financial liabilities | 39 | ||
Short-term advances received | 58 | ||
Total accounts payable and accrued liabilities | 1,251 | 1,162 | |
Trade and other payables are non-interest bearing.
23
Rosneft Oil Company
Notes to the interim condensed consolidated financial statements (unaudited)
(continued)
19. Loans and borrowings and other financial liabilities
Loans and borrowings and other financial liabilities comprise the following:
March 31, 2020 | December 31, | ||
Long-term | Currency | (unaudited) | 2019 |
265 | |||
Bank loans | RUB | 397 | |
Bank loans | US$, euro | 912 | 745 |
Bonds | RUB | 550 | 548 |
Eurobonds | US$ | 156 | 157 |
Borrowings | RUB | 115 | 111 |
Other borrowings | RUB | 634 | 503 |
Other borrowings | US$ | 768 | 643 |
Less: current portion of long-term loans and borrowings | (419) | (315) | |
Total long-term loans and borrowings | 2,981 | 2,789 | |
Lease liabilities | 167 | 146 | |
Other long-term financial liabilities | 128 | 116 | |
Less: current portion of long-term lease liabilities | (21) | (18) | |
Total long-term loans and borrowings and other financial | |||
liabilities | 3,255 | 3,033 | |
Short-term | 200 | ||
Bank loans | RUB | 87 | |
Bank loans | US$, euro | - | 36 |
Borrowings | RUB | 1 | 1 |
Borrowings | US$ | 22 | 7 |
Other borrowings | RUB | 69 | 159 |
Other borrowings | US$ | 3 | 3 |
Current portion of long-term loans and borrowings | 419 | 315 | |
Total short-term loans and borrowings and current portion | |||
of long-term loans and borrowings | 714 | 608 | |
Current portion of long-term lease liabilities | 21 | 18 | |
Other short-term financial liabilities | 230 | 168 | |
Short-term liabilities related to derivative financial instruments | 8 | 1 | |
Total short-term loans and borrowings and other | |||
financial liabilities | 973 | 795 | |
Total loans and borrowings and other financial liabilities | 4,228 | 3,828 | |
Long-term loans and borrowings
Long-term bank loans from a foreign bank are denominated in U.S. dollars are partially secured by oil export contracts. If the Company fails to make timely debt repayments, the terms of such contracts normally provide the lender with the express right of claim to contractual revenue in the amount of the late loan repayments, which the purchaser generally remits directly through transit currency accounts with the lender banks. The outstanding balance of Accounts receivable arising from such contracts amounts to RUB 16 billion as of March 31, 2020 and RUB 32 billion as of December 31, 2019, respectively, and is included in Trade receivables.
During the first quarter of 2020, the Company fully repaid Eurobonds (Series 8) of USD 0.5 billion (RUB 31.6 billion at the CBR official exchange rate at the transaction date) assumed in the TNK-BP acquisition.
24
Rosneft Oil Company
Notes to the interim condensed consolidated financial statements (unaudited)
(continued)
19. Loans and borrowings and other financial liabilities (continued) Long-term loans and borrowings (continued)
During the first quarter of 2020 the Company continued to settle other long-term borrowings under the repurchasing agreement operations and entered into the new transactions. As of March 31, 2020, the liabilities of the Company under those transactions amounted to the equivalent of RUB 1,402 billion at the CBR official exchange rate as of March 31, 2020. The Company's own corporate bonds were used as an instrument for those transactions.
The Company is obliged to comply with a number of restrictive financial and other covenants contained in several of its loan agreements. Such covenants include maintaining certain financial ratios.
As of March 31, 2020 and December 31, 2019 the Company was in compliance with all restrictive financial and other covenants contained in its loan agreements.
Short-term loans and borrowings
During the first quarter of 2020 the Company drew down funds under short-term fixed and floating rates loans from Russian banks.
During the first quarter of 2020 the Company continued to settle other short-term borrowings under the repurchasing agreement operations and entered into the new transactions. As of March 31, 2020 the liabilities of the Company under those transactions amounted to the equivalent of RUB 72 billion (at the CBR official exchange rate as of March 31, 2020). Own corporate bonds were used as an instrument for those transactions.
During the first quarter of 2020 the Company was current on all payments under loan agreements and interest payments.
Liabilities related to derivative financial instruments
Short-term liabilities related to derivative financial instruments mainly include liabilities related to cross- currency rate swaps.
The Company enters into cross-currency rate swaps to sell currencies in order to balance the currency of revenues and liabilities and reduce the overall interest rates on borrowings.
The cross-currency rate swaps are recorded in the consolidated balance sheet at fair value. The measurement of the fair value of the transactions is based on a discounted cash flow model and consensus forecasts of foreign currency rates. The consensus forecasts include forecasts of the major international banks and agencies. The Bloomberg system is the main information source for the model.
25
Rosneft Oil Company
Notes to the interim condensed consolidated financial statements (unaudited)
(continued)
20. Other current tax liabilities
Other current tax liabilities comprise the following:
March 31, 2020 | December 31, | |
(unaudited) | 2019 | |
Mineral extraction tax | 86 | 181 |
VAT | 127 | 123 |
Excise duties | 65 | 30 |
Property tax | 11 | 9 |
Tax on additional income from production of hydrocarbons | 27 | 31 |
Personal income tax | 3 | 3 |
Other | 4 | 2 |
Total other tax liabilities | 323 | 379 |
21. Provisions
As of January 1, 2020, including
Non-current
Current
Provisions charged during the year Increase/(decrease) in the liability resulting from:
Changes in estimates Changes in the discount rate Foreign exchange differences Unwinding of discount Utilization
As of March 31, 2020 (unaudited), including
Non-current
Current
Asset | Environmental | Legal and tax | |
retirement | remediation | claims and | |
obligations | provision | other provisions | Total |
315 | 47 | 36 | 398 |
309 | 31 | 3 | 343 |
6 | 16 | 33 | 55 |
2 | 1 | 4 | 7 |
- | - | - | - |
34 | - | - | 34 |
17 | - | 7 | 24 |
5 | 1 | - | 6 |
(1) | (2) | (1) | (4) |
372 | 47 | 46 | 465 |
366 | 31 | 5 | 402 |
6 | 16 | 41 | 63 |
22. Prepayment on long-term oil and petroleum products supply agreements
During 2013-2014 the Company entered into a number of long-term crude oil and petroleum products supply contracts which require the buyer to make a prepayment. The total minimum delivery volume under those contracts at inception approximated 400 million tonnes. The crude oil and petroleum product prices are based on current market prices. The prepayments are settled through physical deliveries of crude oil and petroleum products.
26
Rosneft Oil Company
Notes to the interim condensed consolidated financial statements (unaudited)
(continued)
22. Prepayment on long-term oil and petroleum products supply agreements (continued)
Deliveries of oil and petroleum products that reduce the prepayment amounts commenced in 2015. The Company considers these contracts to be regular-way contracts.
Three months | Three months | ||
ended | ended | ||
March 31, 2020 | March 31, 2019 | ||
(unaudited) | (unaudited) | ||
As of January 1 | 1,082 | 1,426 | |
Received | - | - | |
Reclassified | (3) | - | |
Settled | (79) | (92) | |
Total prepayment on long-term oil and petroleum products supply | |||
agreements | 1,000 | 1,334 | |
Less current portion | (340) | (353) | |
As of March 31 | 660 | 981 | |
The off-set amounts under these contracts were RUB 79 billion and RUB 92 billion (US$ 1.6 billion and US$ 1.9 billion at the CBR official exchange rate at the prepayment dates, the prepayments are not revalued at each balance sheet date), for the first quarter of 2020 and 2019 respectively.
23. Shareholders' equity
During the first quarter of 2020 the Company acquired 9,381,466 treasury shares (including in form of global depositary receipts), as a part of the share buyback program.
24. Cash flow hedging of the Company's future exports
The Company designated certain U.S. dollar-denominated borrowings as a hedge of the expected highly probable U.S. dollar-denominated export revenue stream in accordance with IFRS 9 Financial Instruments.
A portion of future monthly export revenues expected to be received in U.S. dollars was designated as a hedged item. The nominal amounts of the hedged item and the hedging instruments were equal. To the extent that a change in the foreign currency rate impacts the fair value of the hedging instrument, the effects are recognized in other comprehensive income or loss and then reclassified to profit or loss in the period in which the hedged item affects the profit or loss.
The Company's foreign currency risk management strategy is to hedge future export revenue in the amount of the net monetary position in U.S. dollars. The Company aligns the hedged nominal amount to the net monetary position in U.S. dollars on a periodical basis. As of March 31, 2020 and December 31, 2019 hedge instruments are not designated.
27
Rosneft Oil Company
Notes to the interim condensed consolidated financial statements (unaudited)
(continued)
24. Cash flow hedging of the Company's future exports (continued)
The schedule of expected reclassification of accumulated foreign exchange loss from other comprehensive income to profit or loss, as of March 31, 2020, is presented below:
Year | 2020 | 2021 | Total |
Reclassification | 2 | - | 2 |
Income tax | - | - | - |
Total, net of tax | 2 | - | 2 |
25. Fair value of financial instruments
The fair value of financial assets and liabilities is determined as follows:
- The fair value of financial assets and liabilities quoted on active liquid markets is determined in accordance with market prices;
- The fair value of other financial assets and liabilities is determined in accordance with generally accepted models and is based on discounted cash flow analysis that relies on prices used for existing transactions in the current market;
- The fair value of derivative financial instruments is based on market quotes. In illiquid and highly volatile markets fair value is determined on the basis of valuation models that rely on assumptions confirmed by observable market prices or rates as of the reporting date.
Assets and liabilities of the Company that are measured at fair value on a recurring basis in accordance with the fair value hierarchy are presented in the table below.
Fair value measurement as of March 31, 2020 | |||||
(unaudited) | |||||
Assets | Level 1 | Level 2 | Level 3 | Total | |
Current assets | |||||
Financial assets at fair value through other | 436 | ||||
comprehensive income | 66 | 362 | 8 | ||
Financial assets at fair value recognized in | 3 | ||||
profit or loss | - | 3 | - | ||
Derivative financial instruments | - | 1 | - | 1 | |
Non-current assets | |||||
Financial assets at fair value through other | 20 | ||||
comprehensive income | - | 20 | - | ||
Financial assets at fair value recognized in | 124 | ||||
profit or loss | - | 124 | - | ||
Total assets measured at fair value | 66 | 510 | 8 | 584 | |
Liabilities | (8) | ||||
Derivative financial instruments | - | (8) | - | ||
Total liabilities measured at fair value | - | (8) | - | (8) | |
28
Rosneft Oil Company
Notes to the interim condensed consolidated financial statements (unaudited)
(continued)
25. Fair value of financial instruments (continued)
The fair value of financial assets at fair value through other comprehensive income, financial assets at fair value through profit or loss and derivative financial instruments included in Level 2 is measured at the present value of future estimated cash flows, using inputs such as market interest rates and market quotes of forward exchange rates.
The carrying value of cash and cash equivalents and derivative financial instruments recognized in these interim condensed consolidated financial statements equals their fair value.
The carrying value of accounts receivable and accounts payable, loans issued, other financial assets and other financial liabilities recognized in these interim condensed consolidated financial statements approximates their fair value.
There were no transfers of financial assets and liabilities between levels during the reporting period.
Carrying value | Fair value (Level 2) | |||
March 31, | March 31, | |||
2020 | December 31, | 2020 | December 31, | |
Financial liabilities | (unaudited) | 2019 | (unaudited) | 2019 |
Financial liabilities at amortized cost: | ||||
Loans and borrowings with a variable interest | (2,585) | (2,478) | ||
rate | (2,230) | (2,148) | ||
Loans and borrowings with a fixed interest rate | (1,110) | (1,167) | (1,116) | (1,170) |
Lease liabilities | (167) | (146) | (160) | (143) |
26. 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 the other party or exercise significant influence over the other party in making financial or operational decisions. Related parties comprise major shareholders and companies under their control (including enterprises directly or indirectly controlled by the Russian Government), associates and joint ventures, key management and pension funds.
Related parties may enter into transactions which unrelated parties might not, and transactions between related parties may not be effected on the same terms as transactions between unrelated parties.
The disclosure of related party transactions is presented on an aggregate basis for major shareholders and companies under their control, joint ventures and associates, and non-state pension funds. In addition, there may be additional disclosures of certain significant transactions (balances and turnovers) with certain related parties.
In the course of its ordinary business, the Company enters into transactions with other companies controlled by the Russian Government. In the Russian Federation, electricity and transport tariffs are regulated by the Federal Antimonopoly Service, an authorized governmental agency of the Russian Federation. Bank loans are recorded based on market interest rates. Taxes are accrued and paid in accordance with applicable tax law. The Company sells crude oil and petroleum products to and purchases crude oil and petroleum products from related parties in the ordinary course of business at prices close to average market prices.
29
Rosneft Oil Company
Notes to the interim condensed consolidated financial statements (unaudited)
(continued)
26. Related party transactions (continued)
Transactions with shareholders and companies under their control
Revenues and income
Three months | Three months | |
ended | ended | |
March 31, 2020 | March 31, 2019 | |
(unaudited) | (unaudited) | |
Oil, gas, petroleum products and petrochemicals sales | 149 | 138 |
Support services and other revenues | 1 | 2 |
Finance income | 4 | 7 |
Other income | 1 | - |
155 | 147 | |
Costs and expenses
Three months | Three months | |
ended | ended | |
March 31, 2020 | March 31, 2019 | |
(unaudited) | (unaudited) | |
Production and operating expenses | 5 | 4 |
Cost of purchased oil, gas, petroleum products and refining costs | 17 | 68 |
Transportation costs and other commercial expenses | 120 | 126 |
Other expenses | 2 | 6 |
Financial expenses | 10 | 5 |
154 | 209 | |
Other operations
Three months | Three months | |
ended | ended | |
March 31, 2020 | March 31, 2019 | |
(unaudited) | (unaudited) | |
Loans received | 180 | 10 |
Loans repaid | (170) | (166) |
Loans and borrowings issued | (8) | (9) |
Repayment of loans and borrowings issued | 6 | 9 |
Deposits placed | − | (34) |
Deposits repaid | − | 1 |
Settlement balances
March 31, 2020 | December 31, | ||
Assets | (unaudited) | 2019 | |
33 | |||
Cash and cash equivalents | 88 | ||
Accounts receivable | 89 | 100 | |
Prepayments and other current assets | 40 | 44 | |
Other financial assets | 239 | 225 | |
Liabilities | 401 | 457 | |
429 | |||
Accounts payable and accrued liabilities | 279 | ||
Loans and borrowings and other financial liabilities | 446 | 443 | |
875 | 722 | ||
30
Rosneft Oil Company
Notes to the interim condensed consolidated financial statements (unaudited)
(continued)
26. Related party transactions (continued) Transactions with joint ventures
Crude oil is purchased from joint ventures at Russian domestic market prices.
Revenues and income
Three months | Three months | |
ended | ended | |
March 31, 2020 | March 31, 2019 | |
(unaudited) | (unaudited) | |
Oil, gas, petroleum products and petrochemicals sales | 4 | 3 |
Support services and other revenues | 1 | 1 |
Finance income | 1 | 1 |
6 | 5 | |
Costs and expenses
Three months | Three months | |
ended | ended | |
March 31, 2020 | March 31, 2019 | |
(unaudited) | (unaudited) | |
Production and operating expenses | 1 | 1 |
Cost of purchased oil, gas, petroleum products and refining costs | 61 | 78 |
Transportation costs and other commercial expenses | 1 | 2 |
Other expenses | - | 1 |
Finance expenses | 1 | 1 |
64 | 83 | |
Other operations
Three months | Three months | |
ended | ended | |
March 31, 2020 | March 31, 2019 | |
(unaudited) | (unaudited) | |
Loans received | 52 | - |
Loans repaid | (39) | - |
Loans and borrowings issued | (5) | (1) |
Repayment of loans and borrowings issued | 1 | 1 |
Settlement balances
March 31, 2020 | December 31, | ||
Assets | (unaudited) | 2019 | |
8 | |||
Accounts receivable | 9 | ||
Prepayments and other current assets | 2 | 1 | |
Other financial assets | 19 | 21 | |
Liabilities | 29 | 31 | |
207 | |||
Accounts payable and accrued liabilities | 244 | ||
Loans and borrowings and other financial liabilities | 52 | 23 | |
259 | 267 | ||
31
Rosneft Oil Company
Notes to the interim condensed consolidated financial statements (unaudited)
(continued)
26. Related party transactions (continued) Transactions with associates
Revenues and income
Three months | Three months | |
ended | ended | |
March 31, 2020 | March 31, 2019 | |
(unaudited) | (unaudited) | |
Oil, gas, petroleum products and petrochemicals sales | 98 | 71 |
Finance income | 1 | 1 |
99 | 72 | |
Costs and expenses
Three months | Three months | |
ended | ended | |
March 31, 2020 | March 31, 2019 | |
(unaudited) | (unaudited) | |
Production and operating expenses | − | 3 |
Cost of purchased oil, gas, petroleum products and refining costs | 13 | 11 |
Other expenses | − | 5 |
Finance expenses | 3 | - |
16 | 19 | |
Other operations
Three months | Three months | |
ended | ended | |
March 31, 2020 | March 31, 2019 | |
(unaudited) | (unaudited) | |
Loans received | 56 | - |
Loans repaid | (41) | - |
Loans and borrowings issued | (2) | (2) |
Repayment of loans and borrowings issued | 9 | 16 |
Settlement balances
March 31, 2020 | December 31, | ||
Assets | (unaudited) | 2019 | |
87 | |||
Accounts receivable | 91 | ||
Other financial assets | 3 | 11 | |
90 | 102 | ||
Liabilities | 3 | ||
Accounts payable and accrued liabilities | 35 | ||
Loans and borrowings and other financial liabilities | 296 | 232 | |
299 | 267 | ||
32
Rosneft Oil Company
Notes to the interim condensed consolidated financial statements (unaudited)
(continued)
26. Related party transactions (continued) Transactions with non-state pension funds
Costs and expenses
Three months | Three months | |
ended | ended | |
March 31, 2020 | March 31, 2019 | |
(unaudited) | (unaudited) | |
Other expenses | 1 | 1 |
Other operations
Three months | Three months | |
ended | ended | |
March 31, 2020 | March 31, 2019 | |
(unaudited) | (unaudited) | |
Loans received | − | 3 |
Loans repaid | − | (5) |
Settlement balances
March 31, 2020 | December 31, | ||
Liabilities | (unaudited) | 2019 | |
4 | |||
Accounts payable and accrued liabilities | 2 | ||
4 | 2 | ||
27. Contingencies
Russian business environment
The Russian economy has been negatively impacted by sanctions imposed on Russia by a number of countries. Ruble interest rates remained high. The combination of the above has resulted in reduced access to capital, a higher cost of capital and uncertainty regarding economic growth, which could negatively affect the Company's future financial position, results of operations and business prospects. Management is taking appropriate measures to support the sustainability of the Company's business in the current circumstances.
The Company also has investments in subsidiaries, associates and joint ventures and advances issued to counterparties operating in foreign jurisdictions. Besides commercial risks being a part of any investment operation, assets in a number of regions of the Company's activities also bear political, economic and tax risks which are analyzed by the Company on a regular basis.
Since the beginning of March 2020, the world markets are experiencing a significant decline in oil demand and oil prices, in particular as a result of COVID-19 pandemic. Russian ruble value has fallen significantly against the major world currencies. Should the above mentioned events continue in the long-term, their impact on the Company's financial position, cash flows and results of operations may be significant.
33
Rosneft Oil Company
Notes to the interim condensed consolidated financial statements (unaudited)
(continued)
27. Contingencies (continued) Legal claims
Rosneft and its subsidiaries are involved in litigations which arise from time to time in the course of their business activities. Management believes that the ultimate results of these litigations will not materially affect the performance or financial position of the Company. Reliably estimated probable obligations were recognized within provisions in the interim condensed consolidated financial statements of the Company (Note 21).
Taxation
Legislation and regulations regarding taxation in Russia continue to evolve. Various legislative acts and regulations are not always clearly written, and their interpretation is subject to the opinions of the taxpayers, and local, regional, and national tax authorities, and the Ministry of Finance of the Russian Federation. Instances of inconsistent opinions are not unusual.
In Russia, tax returns remain open and subject to inspection for a period of up to three years. The fact that a year has been reviewed does not close that year, or any tax return applicable to that year, from further review during the period of three calendar years preceding the year when the inspection started.
In accordance with Russian tax legislation, if an understatement of a tax liability is detected as a result of an inspection, penalties and fines to be paid might be material in respect of the tax liability misstatement.
During the reporting period, the tax authorities continued their inspections of some of Rosneft subsidiaries for 2015-2018. The Company's management does not expect the outcome of the inspections to have a material impact on the Company's consolidated balance sheet or results of operations.
As part of the new regime for fiscal control over the pricing of related party transactions, the Company and the Federal Tax Service signed a number of pricing agreements from 2012 to the first quarter of 2020 with respect to the taxation of oil sales and refining transactions in Russia.
The Company believes that transfer pricing risks in relation to intragroup transactions during the three months ended March 31, 2020 and earlier will not have a material effect on its financial position or results of operations.
The Company follows the rules of tax legislation on de-offshorization, including income tax rules for controlled foreign companies to calculate its current and deferred income tax estimates.
Overall, management believes that the Company has paid and accrued all taxes that are applicable. For taxes where uncertainty exists, the Company has accrued tax liabilities based on management's best estimate of the probable outflow of resources that will be required to settle these liabilities.
Capital commitments
The Company and its subsidiaries are engaged in ongoing capital projects for the exploration and development of production facilities and the modernization of the refineries and distribution network. The budgets for these projects are generally set on an annual basis.
The total amount of contracted but not yet delivered goods and services related to the construction and acquisition of property, plant and equipment amounted to RUB 763 billion and RUB 762 billion as of March 31, 2020 and December 31, 2019, respectively.
34
Rosneft Oil Company
Notes to the interim condensed consolidated financial statements (unaudited)
(continued)
27. Contingencies (continued) Environmental liabilities
The Company periodically evaluates its environmental liabilities pursuant to environmental regulations. Such liabilities are recognized in the consolidated financial statements as and when identified. Potential liabilities, which could arise as a result of changes in existing regulations or the settlement of civil litigation, or as a result of changes in environmental standards, cannot be reliably estimated but may be material. With the existing system of control, management believes that there are no material liabilities for environmental damage other than those recorded in these interim condensed consolidated financial statements.
Risks and opportunities associated with climate change
Within the framework of its corporate risk management system, the Company on an annual basis identifies and evaluates risks and opportunities related to climate change impact on its business activities.
In the process of investment decision making, the risks associated with health, safety and environment (HSE), ecology, and climate change are analyzed. For large projects, the analysis of the alignment with the Company's strategic goals, environmental standards and requirements of the Russian and international legislation is performed, as well as the analysis and assessment of external risks related to the impact on the environment (changes in legislation, changes in technologies, market risks, reputation risks, etc.).
In addition, the risks and opportunities associated with climate change and the transition to low-carbon energy are considered in the Company's strategic management and business planning processes (especially for projects located in climate-sensitive regions: marine projects, Arctic projects, etc.) as well as for of the global energy developments scenario planning.
Other matters
Due to the pollution of oil in the trunk pipeline "Druzhba" in April 2019 a number of claims from the customers were submitted to PJSC "Rosneft Oil Company" during the first quarter of 2020, stating that the supplied oil contains substantially exceeded maximum permitted levels of organochlorine compounds (compared to levels determined by the relevant technical regulations and standards). At the same time, PJSC "Rosneft Oil Company" delivered oil to the system of oil trunk pipelines of PJSC "Transneft" in compliance with the requirements of technical regulations and standards.
Also, the Company received claims from the customers who were not delivered the contracted amounts of oil due to the oil pumping interruption in the trunk oil pipeline "Druzhba" resulting from the contamination.
Calculation of losses incurred by PJSC "Rosneft Oil Company" can be finalized after the completion of the comprehensive assessment of the impact of the incident on the Company's activities (including the forced reduction in oil production due to the reduced oil intake into the system of PJSC "Transneft"), obtaining a complete and legally supported claims from all counterparties and their re-submission to PJSC "Transneft" for compensation.
35
Rosneft Oil Company
Notes to the interim condensed consolidated financial statements (unaudited)
(continued)
28. Events after the reporting date
On April 30, 2020, the Company closed a previously announced transaction to transfer all assets in Venezuela to a company 100% owned by the Government of the Russian Federation, including interests in Petromonagas, Petroperija, Boqueron, Petromiranda and Petrovictoria exploration and production entities, as well as in oilfield services companies, commercial and trading operations. The Company's operations in Venezuela have been completely discontinued. As a result of the transaction, a 100% subsidiary of the Company became the owner of 9.6% of the registered ordinary shares of Rosneft.
As a result of the agreement reached by the OPEC+ member countries in April 2020, the Russian Federation has committed to reduce oil production in the period from May 1, 2020 to April 30, 2022. In order to ensure the fulfillment of these obligations, the Company commenced to reduce its oil production from May 1, 2020.
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Contact information
PJSC Rosneft Oil Company
Legal address:
Russian Federation, 115035, Moscow, Sofiyskaya embankment, 26/1
Mailing address:
Russian Federation, 117997, Moscow, Sofiyskaya embankment, 26/1
Phone:
+7 (499) 517-88-99
Fax:
+7 (499) 517-72-35
E-mail:
postman@rosneft.ru
Corporate website:
www.rosneft.ru(Russian)
www.rosneft.com(English)
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OAO Neftyanaya Companiya ROSNEFT published this content on 14 May 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 May 2020 07:34:03 UTC