Financial Data and Key Metrics Changes - The average price of the euros grid dropped by 23% quarter-on-quarter, while the net price excluding mineral extraction tax and export duties fell by 30% [31] - EBITDA in the first quarter was significantly impacted by the negative tax lag effect and inventory write-downs, leading to a net loss for the quarter [76][78] - Free cash flow exceeded RUB 55 billion, supported by a reduction in working capital associated mainly with lower oil prices [80] Business Line Data and Key Metrics Changes - In the upstream segment, average hydrocarbon production totaled 2.3 million barrels per day, down 2.5% quarter-on-quarter, primarily due to reduced supplies from Uzbekistan [35] - The upstream EBITDA fell by half both quarter-on-quarter and year-on-year, significantly affected by the negative tax lag effect and inventory write-downs [44] - The downstream segment's EBITDA decreased by 51% quarter-on-quarter, driven by inventory effects and write-downs to net realizable value [67] Market Data and Key Metrics Changes - Oil prices experienced unprecedented declines, with demand for hydrocarbons plunging, leading to inventory buildup and oil prices reaching 20-year lows [9] - The OPEC+ agreement led to a 19% reduction in crude oil production in Russia, amounting to about 310,000 barrels per day [38] - Retail sales of gasoline and diesel fuel were down more than 10% quarter-on-quarter, with a significant decline in April due to the pandemic [62] Company Strategy and Development Direction - The company aims to maintain operational flexibility and respond quickly to macro changes to maximize financial performance [27] - Investment program optimization is underway, with a new target for capital expenditures set between RUB 450 million to RUB 500 million [24] - The long-term strategy, including shareholder return policies, remains unchanged despite current market challenges [28] Management Comments on Operating Environment and Future Outlook - The management expects oil demand to normalize by early 2021, but full recovery will take longer due to the ongoing pandemic [10] - The company maintains a conservative approach to planning, expecting oil prices to exceed US$50 per barrel within the next 18 to 24 months [12] - Management highlighted the importance of cost optimization and maintaining positive free cash flow in any macro environment [25] Other Important Information - The company successfully placed 10-year $1.5 billion Eurobonds to cover debt repayment obligations until the end of the year [26] - The company is committed to social responsibility efforts during the pandemic, including producing sanitizers and supporting healthcare institutions [8] Q&A Session Summary Question: Share buyback triggers and retail profitability - Management stated that dividends are the priority for capital distribution, with buybacks being opportunistic [84] - Retail margins are volatile and depend on wholesale price fluctuations, making future predictions difficult [86] Question: Production cuts and fuel oil prices - The company confirmed compliance with the OPEC+ quota of 310,000 barrels per day and will continue as long as the quota exists [90] - Management indicated that they comply with legal requirements regarding excise duties on fuel oil [90] Question: Working capital expectations - Management refrained from providing specific numbers but noted that trading business benefits from current market conditions [92] Question: CapEx guidance and refining utilization - The company aims to be flexible with capital expenditures, adjusting based on market conditions [99] - Refining capacity utilization is expected to improve as scheduled repairs are completed [102] Question: Gas production in Uzbekistan and normalized EBITDA - Lower production in Uzbekistan affects cost recovery under the PSA, but the company is prepared to ramp up production quickly [107][118] - Normalized EBITDA is expected to recover as oil prices rise and the tax lag effect reverses [109]
PJSC LUKOIL(LUKOY) - 2020 Q1 - Earnings Call Transcript