Rosneft Tamps Down Profit Expectations from Soaring Prices

Rosneft Oil Co does not expect the current high-price environment amid the war in the Middle East to inflate revenue.

"The market environment remains highly volatile this year", chief executive Igor Sechin said in the Russian state-owned company's statement of results for 2025. "After two months of relatively low prices, the oil market reacted sharply to the escalation of the conflict between the United States and Iran and the subsequent disruption of shipping through the Strait of Hormuz.

"At the same time, the positive impact of rising oil prices on industry revenues should not be overstated, as it is largely offset by higher costs for freight, insurance and currency conversion.

"The primary beneficiaries of the current price hike are, first and foremost, logistics, transport, insurance companies and financial institutions".

Rosneft reported an 18.8 percent decrease in annual revenue to RUB 8.24 trillion ($105.17 billion), citing lower prices in 2025, a sustained appreciation of the ruble and sanctions against Russia.

EBITDA dropped 28.3 percent against 2024 to RUB 2.17 trillion for 2025. Net income decreased 73 percent to RUB 293 billion. Adjusted free cash flow declined 45.9 percent to RUB 700 billion.

"The net debt/EBITDA ratio at the end of 2025 amounted to 1,5х, which continues to remain at a level significantly below the minimum covenant under the loan agreements", Rosneft said.

Liquid production averaged 3.69 million barrels per day (a total of 181.1 million metric tons), with Q4 output increasing 2.2 percent quarter-on-quarter. "The indicator performance was driven by the change in oil production quota in compliance with the decisions of the Russian government", Rosneft said, referring to Moscow's obligations to the Organization of the Petroleum Exporting Countries Plus alliance.

Rosneft produced 1.33 million barrels of oil equivalent per day (MMboed) of natural gas last year, with Q4 volumes increasing 12.4 percent sequentially. "The indicator performance was due to the scheduled preventive maintenance at the key assets", Rosneft said.

"The company's primary goal for the near future is to maintain gas production at the current level".

Rosneft's hydrocarbon production totaled 5.02 MMboed last year, while its reserves stood at 11.5 billion tons of oil equivalent at yearend, the company said.

Refining volumes decreased to 75.7 million metric tons, with Rosneft attributing the decline to "the need for maintenance and repair works as well as to the optimization of refinery utilization amid the current pricing environment, logistics constraints and demand".

"In 2025, 40.3 mln tons of petroleum products were supplied to the domestic market, including 12.3 mln tons of gasoline and 16.4 mln tons of diesel fuel", it said.

"Rosneft continues to actively participate of trading activities at the St Petersburg International Mercantile Exchange. In the reporting year, 9.4 mln tons of gasoline and diesel fuel were sold on the exchange, the share of the company's sales in the total exchange sales of these petroleum products exceeded 30 percent".

Sechin said, "In 2025, the Russian oil industry found itself in the epicenter of a ‘perfect storm’, triggered by a combination of adverse market conditions, a challenging domestic macroeconomic environment and a hostile geopolitical climate".

"Despite these challenges, the industry continues to play the leading role in ensuring socioeconomic development and generating Russian budget revenues", the CEO added. "Its contribution stems not only from the mineral extraction tax and additional income tax but also from other fiscal payments made by oil companies (corporate income tax, excise taxes on petroleum products, property tax, etc).

"Furthermore, the budget benefits from a broad range of revenues generated by related industries such as metallurgy, mechanical engineering, oilfield services, construction, transport, electricity generation.

"Additional significant revenue sources include personal income tax and social security contributions from employees in these sectors, alongside dividends from oil and gas companies.

"Consequently, the oil industry’s total contribution to budget revenues is approximately twice the oil and gas revenue figure reported by the Ministry of Finance.

"Given the scarcity of ruble liquidity, the industry essentially subsidizes the domestic market through foreign exchange earnings, which supports the stability of the ruble exchange rate and acts as a factor in curbing inflation.

"The industry’s strategic importance makes it a primary target for sanctions pressure. In addition to U.S. blocking sanctions on major oil companies, European pressure continues to mount on through embargoes and price caps.

"Systemic pressure on the key buyers of Russian energy resources is evidenced by sanctions against the tanker fleet and widespread insurance denials, which have caused insurance premiums to surge by tens of times. The heightened risks of vessel detention or seizure have exacerbated the situation. In March 2026, freight rates for transporting Russian oil from the Baltic Sea to India exceeded $20 per barrel - this represents a tenfold increase in logistics costs compared to early 2022, when delivery to traditional European markets averaged around $2 per barrel.

"Furthermore, cross-border payments remain obstructed, as the Bank of Russia has yet to establish a sanctions-resilient settlement system. Consequently, Russian exporters and their counterparties have had to independently develop foreign trade settlement solutions. This has led to a manifold increase in the total payment and conversion costs compared to the pre-crisis level.

"In addition to financial, logistical and technological constraints, the industry now faces systemic threats from terrorist attacks on oil infrastructure facilities including refineries, storage facilities, filling stations, terminals and oil pipelines".

"Falling oil prices, widening discounts, alongside the production restrictions under the OPEC+ agreement, systematic restrictions by Transneft on the acceptance of the crude oil into the pipeline system and national currency appreciation led to decline in sales revenue", Sechin explained.

"Moreover, costs were driven upward by the growth in tariffs of natural monopolies, which outpaced inflation, and the increasing complexity of cross-border settlements and logistics. These factors collectively exerted downward pressure on EBITDA for 2025.

"The Bank of Russia’s elevated high key rate is noteworthy, with its average level exceeding 19 percent in 2025. This resulted in a significant increase in debt servicing costs, which were more than four times higher in the reporting year than in 2020 despite comparable debt levels. The increase in the statutory corporate income tax rate put additional pressure on the net income.

"In Q4 20225, unlike other sector players, the company did not have to recognize significant losses following the imposition of U.S. blocking sanctions, thanks to prudent management decisions to proactively minimize its presence in unfriendly countries".

Despite the environment, Rosneft has grown its shareholders by nearly 170,000 to 1.67 million people over the past year, Sechin said.

To contact the author, email jov.onsat@rigzone.com