2015 Financial Statements
Rusneftegaz has elected to publish its full consolidated financial statements for 2015. These results were prepared in accordance with International Financial Reporting Standards, otherwise known as IFRS, and have been audited by Deloitte. Foremost, the directors can report a positive financial performance for the year. A synopsis of which is as follows:
At the end of the financial year, Rusneftegaz has overcome significant detrimental macroeconomic factors to increase its reported net profit from $122,5 million to $153,7 million, despite a fall in revenue from $552,9 million to $431,2 million. Over the course of the reporting period, there has been a consequential devaluation in our functional currency, the Russian ruble, and a global depreciation in commodity prices. However, management has mitigated this through its extensive electricity generation program, which has led to revenue earned through the sector escalating from $184,3 million to $233,5 million, and also becoming the largest segment within the Rusneftegaz group of companies. Petroleum production only attributed to $197,7 million of earned revenue, compared to $368,6 million in 2014, with oil output also diminishing from 8,35 million barrels per year to a total of 5,88 million barrels produced last year.
However, this abatement is part of our strategy in response to the fall in oil prices, and has managed to preserve the integrity and profitability of Rusneftegaz’s oil sector whilst retaining unextracted oil reserves for deployment in the future. The fulcrum of the relative prosperity of our petroleum division is largely as a result of a material reduction in mineral extraction taxes from $179,3 million to $28,2 million, due to some of our oilfields now being exempt from the tariff. The decline in the value of the Russian ruble was also responsible for falls in labor costs from $40,1 million to $38,7 million, and maintenance charges from $11,5 million to $9,9 million. There were increases in other costs affiliated with crude oil extraction, including a rise in transportation charges from $7,1 million to $8,2 million, by virtue of oil deliveries inside the European Union.
Likewise, total electricity output also fell from 11,53 TWh in 2014 to 11,39 TWh in 2015, although contrarily the net profits from the generation division rose to $37,1 million from $15,5 million the year prior. This was in spite of stagnation in fuel costs at $115,0 million, rising $0,2 million from $114,8 million, and transmission costs, which were maintained at $1,7 million across both periods. There was, however, a sizable decrease in administrative costs in 2015, which is composed of the wages of office-based staff, legal fees and insurance premiums, from $17,2 million to $9,0 million. Overall for the year, earnings per share amounted to $122 per share, and revenue per share amounted to the equivalent of $553 per share.
Rusneftegaz utilized these earned funds to invest $87,2 million in new assets, compared to an expenditure of $29,5 million the year before, mitigating a $28,6 million loss from depreciation and a further $16,0 million loss from mineral depletion. These costs represent an increase from 2014, where the total amount of depreciation, depletion and amortization was reported at $40,1 million, although the aggregate of impaired assets lowered from $2,3 million to $2,1 million. The total value of our property, plant and equipment nonetheless receded during the period from $713,8 million to $586,8 million because of a $172,4 million loss arising from fluctuations in foreign exchange rates, which was a component of the $254,5 million depression from currency conversion differences recorded during the year, although the book value of all property, plant and equipment did rise by $2,9 million following revaluation.
The contraction in the value of the ruble did not have as considerable impact as in 2014, where the total deflation was valued at $754,4 million. The continuation of the fall has led to the total value of our assets falling from $851,2 million to $695,2 million. This included a decrease in the amount of cash recorded from $107,7 million to $82,8 million, with total foreign exchange losses valued at $93,6 million. This offset gains from cash flows deriving from operations, financing and investing of $68,7 million. Of this figure, operating activities accounted for a total increase of $201,5 million, up from $167,1 million the year before, resulting in a decrease in the cash flow per share from $167 per share in 2014 to $131 in per share in 2015.
Along with cash and cash equivalents, Rusneftegaz also recognizes other non-fixed assets including those that are held specifically for sale, the balance of which remained the same at $5,0 million, and also trade and other receivables, the value of which fell from $22,0 million to $11,4 million. The only element of Rusneftegaz’s current assets to increase in value during the year was inventory, the volume of which ascended almost seven-fold from $1,1 million to $7,5 million, composed mostly of crude oil and coal, but also spare parts and other petrochemical products. The monetary worth of the majority of our non-current assets also descended, with the book value of all intangible assets falling from $0,2 million to $0,1 million as a result of currency translation differences, although a nominal rise in the value of derivative financial instruments to $0,7 million was a notable exception.
Of the $695,2 million of total assets, $588,4 million are classified as non-current, with the remaining $106,4 million regarded as current. In comparison, $715,4 million of assets were considered non-current assets in 2014, and $135,8 million of assets were reported as current. Between each of our sectors, $393,9 million of assets are affiliated with electricity generation, an expansion from $300,4 million the year before, and an additional $275,7 million are utilized in relation to petroleum production, compared to $431,5 million in 2014. Likewise, Rusneftegaz can also report $87,0 million of liabilities at the end of the financial year, down from $137,6 million, of which $40,3 million is associated with the power generation division, and $45,1 million is correlated with oil operations. In both years, current liabilities exceed the total of non-current liabilities, with $52,8 million of short-term and $34,2 million of long-term liabilities recognized in this year’s financial statements, compared to $102,2 million and $35,4 million respectively the year before.
On 31 December 2015, the largest components of reported liabilities are accounts payable at $47,6 million, which inflated from $27,6 million on 31 December 2014, and provisions appraised at $23,4 million. This particular liability is an estimation of the future financial burden of fulfilling Russian regulatory requirements once our oil extraction licenses have expired, and decreased in value solely as a result of currency fluctuations in which the approximated charge is calculated. On the other hand, there were increases in Rusneftegaz’s taxes payable from $3,9 million to $5,2 million, and also in deferred tax liabilities which rose to $10,8 million from $4,0 million the year before.
Moreover, the value of the recognized deferred tax assets also increased from $0,7 million to $0,8 million, with Rusneftegaz’s heightened profits have consequentially caused rises in almost all of our taxation assets, liabilities and charges. The largest single tax expense recorded during the financial year was income tax, which rose from $24,8 million to $32,7 million. Along with deferred tax liabilities, our organization also recognized a current liability of $5,2 million for taxes and royalties due within the next financial year, with the figure climbing from $3,9 million in 2014. The magnitude of Rusneftegaz’s foreign sales resulted in an export duty charge of $8,0 million, which was reported as a component of cost of sales in the statement of profit or loss and other comprehensive income along with other taxes that are not income tax, which deflated from $5,3 million to $4,8 million.
Overall, the continued uncertainty in worldwide commodity prices is likely to ensure that the financial performance of the Rusneftegaz’s petroleum division remains not as positive as in previous periods. Thus, the management board has undertaken an extensive plan to mitigate the effects of more challenging economic conditions, primarily by accelerating the volume of investments made in electricity infrastructure to establish greater efficiency and profitability over the next five years. In addition, our company also plans to continue its current strategy of managing the levels of oil extraction to maintain the profitability of the segment in the immediate term, whilst preserving the integrity of the oil reserves for the future when commodity process are higher and will cultivate greater revenues. Said agenda for the short-term is also encompassed in a greater strategy for Rusneftegaz’s long-term prosperity, involving our organization becoming one of the largest energy companies in the Russian Federation by the end of the next decade through an aggressive expansion program that is currently being planned
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