Rosneft reported its consolidated financial results in accordance with US GAAP for the three months which ended March 31, 2008.
In Q1 2008, EBITDA grew by 225.3% to USD 4,698 million compared to USD 1,444 million in Q1 2007. Net Income grew approximately seven times to USD 2,564 million compared to USD 358 million in Q1 2007.
The strong increase in key financial indicators resulted from continued industry leading oil production growth (23.9%, including 6.3% organic), improved vertical integration following the acquisition of refineries in 2007, excellent cost control, and higher prices of oil, petroleum products and gas. Performance improvements were tempered by higher taxes (a total of USD 8,904 million in Q1 2008 vs 4,715 million in Q1 2007), transportation tariff growth ranging from 13-31%, and real ruble appreciation of 20.8% since Q1 2007.
Net Debt decreased by USD 2,700 million in Q1 2008 from USD 26,275 million as of December 31, 2007 to USD 23,575 million as of March 31, 2008. This resulted from the substantial increase in free cash flow, which amounted to USD 2,757 million in Q1 2008 compared to a negative cash flow of USD 139 million in Q1 2007.
Successful efforts to improve overall efficiency, eliminate unnecessary expenditures upon consolidation of recently acquired assets, and increase well productivity resulted in material real cost reductions. In Q1 2008, Rosneft's upstream production and operating expenses decreased by 1.2% to USD 3.19 per barrel from USD 3.23 per barrel in Q1 2007 despite the abovementioned real ruble appreciation of more than 20%.
The Company's capital expenditures increased by 69.2% to USD 1,748 million in Q1 2008 from USD 1,033 million in Q1 2007. The increase in capital expenditures is primarily attributable to further expansion of operating activities at Yuganskneftegaz and development of the Vankor field, where capital expenditures grew by 29.2% and 269.8%, respectively.
In Q1 2008, Rosneft remained the global leader in terms of growth in crude oil production. In this period, Rosneft's daily crude oil output (including production by subsidiaries and share in production by affiliates) increased by 23.9% to 2,125 thousand barrels per day in Q1 2008 from 1,715 thousand barrels per day in Q1 2007, including a 6.3% organic growth.
In Q1 2008, Rosneft's production of natural and associated gas (including production by subsidiaries and share in production by affiliates) amounted to 3.39 billion cubic meters, a decrease of 15%. The decline is primarily attributed to the closure of operations at certain gas fields where a significant portion of extracted gas had been flared, which produced only limited impact on gas sales. In Q1 2008, Rosneft's gas sales amounted to 2.84 billion cubic meters — an increase of 1.4% compared to the same period of 2007. In Q1 2008, the average price of gas realized by Rosneft surged 46% compared to the same period of 2007.
In Q1 2008, the Company's petroleum product output increased by 81.2% year-on-year to 11.96 million tonnes from 6.60 million tonnes in Q1 2007. The increase is explained by the organic growth in throughput at the Tuapse and Komsomolsk refineries, as well as by the acquisition of new refineries and major upstream assets that have traditionally delivered their crude oil to the newly acquired refineries.
"Q1 2008 was another strong quarter for Rosneft despite accelerating inflation and higher taxes. We will continue to focus on growing profitability through increased sales of higher margin products coupled with relentless cost control, debt reduction and leading organic production growth," Rosneft President Sergey Bogdanchikov said.
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