Russia’s LUKOIL released its condensed interim consolidated financial statements for the three-month period ended March 31, 2020 prepared in accordance with International Financial Reporting Standards (IFRS).
Since the start of COVID-19 pandemic, LUKOIL has been undertaking all necessary measures to rule out the direct impact of the pandemic on the Group’s operating activity, prioritizing proper protection of its employees, contractors’ personnel, and clients, as well as continuity of production processes.
Weaker global economic activity amid the pandemic followed by an unprecedented slump in hydrocarbon demand and prices had a negative impact on operational and financial performance of the Group in the first quarter of 2020 with persisting negative effect in the second quarter of 2020.
The consequences of the pandemic for the company’s operational results in the first quarter of 2020 and April-May 2020 include: crude oil production cut at the company’s fields in Russia and some international projects due to the new OPEC+ agreement; gas production cut in Uzbekistan due to lower demand from China; reduction of refinery throughput volumes due to lower refining margins owing to lower demand for refined products; and lower sales volumes of motor fuels through the company’s filling stations because of lower demand.
The main impact of the pandemic on the company’s financial performance is attributed to sharp decline in prices for oil and refined products.
In the first quarter of 2020, corporate sales were down by 10% year-on-year and by 12.9% quarter-on-quarter. Sales dynamics was negatively affected mainly by lower oil and refined product prices. Lower international gas sales volumes, lower trading volumes of refined products and lower sales volumes of refined products through the Group’s filling stations put additional pressure on sales dynamics. These factors were partially offset by an increase in crude oil trading volumes and the ruble devaluation to US dollar.
In the first quarter of 2020, EBITDA was down by 49.4% year-on-year and by 45.8% quarter-on-quarter. In the first quarter of 2020, the company booked a loss attributable to shareholders in the amount of RUR 46 bln ($667 mio).
In the first quarter of the year, LUKOIL’s free cash flow was down by 61.9% year-on-year and by 69.9% quarter-on-quarter. The decline was mainly attributable to lower operating cash flow, as well as higher capital expenditures year-on-year. Free cash flow was supported by inventory release in the first quarter of 2020.