Novatek Profits Soar on Arctic LNG-2 Sales

Profits at Russia’s Novatek soared in the third quarter, thanks to a gain from the sale of shares in its Arctic LNG-2 project on the Gydan Peninsula.

The private gas producer saw revenues decline by 13.8% yr/yr to rubles 189bn ($2.96bn) in the three-month period, it said on October 30, as weaker international gas prices more than offset an increase in capacity at its flagship 16.5mn mt/yr Yamal LNG terminal. Pretax earnings (Ebitda) were also down 11.5% yr/yr at rubles 105bn.

Novatek nevertheless achieved an income of rubles 370bn ($5.8bn) for the three months, versus rubles 45.9bn a year earlier. This was thanks to cash generated from the sale of a 30% stake in its Arctic LNG-2 venture to China’s CNPC and Cnooc, and Japan’s Mitsui and Jogmec. Novatek made a total gain of rubles 675bn from these sales and the transfer of a 10% share to France’s Total in March.

A final investment decision was taken at the 19.8mn mt/yr Arctic LNG-2 in September.

Novatek managed to ramp up overall hydrogen production by 5.2% to 145.2mn barrels of oil equivalent in three months, as previously reported. Its capital expenditure ballooned to rubles 36.5bn from rubles 24.8bn a year earlier, to pay for work at Arctic LNG-2 and various upstream development.

Higher profits this year have allowed Novatek cut the percentage of the income it distributes in dividends to cover capital spending, but the returns are still higher.