Russia's Novatek Sees Profit Boost in 2015

Russia's second largest gas producer after Gazprom, Novatek, has announced its annual financial results for 2015, with increased gas prices contributing to a 33% increase in total revenues. 

Announcing the results on February 25, Novatek said that its total revenues for the 12 months ending December 31 reached rubles 775.3bn (€5.8bn). Profits doubled, climbing from rubles 37.3bn in 2014 to rubles 74.4bn in 2015. 

The company attributed the higher revenues to a record amount of liquids sales volumes; a growth in both natural gas sales prices and liquid net sales prices driven by a stronger dollar relative to the ruble; and lower export duty rates. 

Though it was not referenced in the company's press release, sanctions imposed on certain Russian companies by both the US and the European Union in 2015, including Novatek, have impacted some of its key projects, including financing for the Yamal LNG project. Still, it has made some progress in financing of the project.

In December 2015, the firm signed binding definitive agreements with Chinese investment fund, the Silk Road Fund, to sell a 9.9% equity stake in the Yamal LNG project. At that time, the fund agreed to lend Novatek €730mn to finance the Yamal LNG project. The loan has a 15-year period. 

Total gas reserves for Novatek remain high. Last month, Novatek reported that it has reserves of 1.775 trillion m³ of natural gas and 143mn metric tons of liquid hydrocarbons. The assessment was calculated by petroleum engineers, DeGolyer & MacNaughton. 

Erica Mills