Venezuela debt worries knock Rosneft despite earnings jump

MOSCOW (Reuters) - A financial crisis in Venezuela on Tuesday hit shares in Rosneft, which has lent billions of dollars to the Latin American country, despite a big rise in quarterly income at Russia’s largest oil company.

FILE PHOTO: The shadow of a worker is seen next to a logo of Russia's Rosneft oil company at the central processing facility of the Rosneft-owned Priobskoye oil field outside the West Siberian city of Nefteyugansk, Russia, August 4, 2016. REUTERS/Sergei Karpukhin/File Photo

S&P Global Ratings declared Venezuela in selective default after the country failed to make $200 million in coupon payments on its global bonds due in 2019 and 2024 within a 30-day grace period.

State-controlled Rosneft has been buying a growing volume of Venezuelan crude, while extending loans to President Nicolas Maduro’s government. In August, it said it had made around $6 billion in pre-payments to Venezuelan state oil firm PDVSA.

At 1500 GMT, Rosneft shares were down 4 percent at 312 rubles. “Looks like the shares took a hit after S&P downgraded Venezuela,” one Moscow-based market source said.

Pavel Fyodorov, one of Rosneft’s first vice presidents, told a conference call that Venezuela was paying its debt on time at the pace of “hundreds of million of dollars,” and said the company had no plans to lend more money to the country.

The problems in Venezuela overshadowed news of an 80 percent rise in third-quarter net income at Rosneft, which is benefiting from rising crude prices. Russia’s flagship Urals blend gained 7.5 percent in rouble terms over the quarter.

Rosneft, in which BP owns a 19.75 percent stake, also said it had paid Iraqi Kurdistan a total of $1.3 billion in advances this year for crude oil deliveries.

The company has been expanding abroad, including in Iraqi Kurdistan, where it has gained control over the oil exporting pipeline and agreed to develop oilfields, much to the chagrin of the central government in Baghdad.


Oil prices have been supported by a global deal to cut output. Russia has undertaken to reduce its production by 300,000 barrels per day from the October 2016 level. Rosneft accounts for around 40 percent of Russia’s total oil output.

Eric Liron, also a first vice president, told the conference call Rosneft may delay the launch one of two of its greenfield projects - Russkoye and Yurubcheno-Tokhomskoye - if the deal is extended beyond its expiry date of March 31, 2018.

The company reported third-quarter net income of 47 billion rubles ($792 million), below a forecast of 66 billion rubles in a Reuters poll of analysts.

July-September sales rose to 1.5 trillion rubles from 1.22 trillion rubles, in line with expectations.

In its expansion drive, Rosneft has racked up billions of dollars of debt. It did not provide the current total, but said at the end of the second quarter it was 2.2 trillion rubles ($36.7 billion).

Sberbank analysts earlier estimated the debt could be as high as $73 billion.

Rosneft’s third-quarter earnings before interest, taxes, depreciation and amortization (EBITDA) rose to 371 billion rubles from 292 billion rubles, missing a forecast of 356.3 billion rubles.

The company also said it would pay $1.1 billion to Eni to compensate the Italian firm for its spending on the Zohr gas project in Egypt. That is on top of the more than $1.1 billion Rosneft has paid for a 30 percent stake in the project.

Reporting by Vladimir Soldatkin and Oksana Kobzeva; Editing by Katya Golubkova and Mark Potter