MOSCOW Rosneft (ROSN.MM) more than doubled its cash reserves in the third quarter, as the state-owned Russian oil firm bolsters its finances ahead of its $55 billion acquisition of Anglo-Russian oil producer TNK-BP TNBP.MM.
Rosneft, set to become the world's top listed crude producer after it pulls off the biggest deal in Russian corporate history, said on Thursday its free cashflow jumped to 53 billion roubles ($1.7 billion) from 25 billion in April-June.
"It is always like this (before an acquisition)," said Vitaly Kruykov from brokerage IFD Kapital. "The company had been accumulating cash ... in this case for TNK-BP."
Rosneft's takeover of TNK-BP, expected to close in the first half of 2013, will create a firm with daily output of 4.6 million barrels in oil-equivalent terms.
While it is expected to finance the deal via a $45 billion loan and bond financing package - to include a $15 billion syndicated loan - it is possible Rosneft will dip into its own cash resources.
Lending banks are keen for Rosneft to be in top financial shape when it raises the money and a sturdy balance sheet will help them to justify lending for the deal when they face their credit committees.
"Rosneft enjoyed the largest cashflow seen since early 2011," Nomos bank analyst Denis Borisov said, adding analysts had previously criticized it for having a low cashflow.
The cash position was boosted by higher oil prices, lower taxes, cost savings and productivity improvements.
Borisov noted that Rosneft had turned more efficient than TNK-BP in terms of earnings before interest, taxation, depreciation and amortization (EBITDA) per barrel, with Rosneft recording $26.40 a barrel versus TNK-BP's $23.40.
Rosneft also beat forecasts with quarterly net income of 181 billion roubles ($5.8 billion). Analysts polled by Reuters had expected third-quarter net profit of 137.2 billion roubles.
At 1315 GMT, Rosneft's Moscow-traded shares were up 2.5 percent, beating a flat broader Russian market .
Rosneft's performance is another feather in the cap of chief executive Igor Sechin, a close ally of President Vladimir Putin.
This year, the company has signed landmark agreements with ExxonMobil (XOM.N), Statoil (STL.OL) and Eni (ENI.MI) to tap vast Arctic offshore resources.
Rosneft also said it paid Exxon 2 billion roubles for a 30 percent stake in a project to develop hard-to-recover reserves in the Canadian province of Alberta.
"The Q3 results reflect the beginning of broad-reaching transformations within the company to cut costs and improve efficiency, which have already yielded strong results in production and sales," Sechin said in a statement.
Sechin's clout was highlighted earlier on Thursday when Rosneft announced a 25-year deal to supply gas to state power firm Inter RAO (IRAO.MM), estimated at $80 billion.
Rosneft's revenue rose 12 percent to 802 billion roubles from the previous quarter, also above analysts' average forecast of 790.9 billion. EBITDA more than doubled to 191 billion roubles, compared with a Reuters poll forecast of 182.3 billion.
Rosneft switched to IFRS from U.S. Generally Accepted Accounting Principles (GAAP) late in 2011.
($1 = 31.3565 Russian roubles)
(Reporting by Vladimir Soldatkin; additional reporting by Olesya Astakhova and Michelle Meineke; Editing by Megan Davies and Mark Potter)