Naftogaz third Quarter and nine months 2020 financial results: Improvements deliver cash in a difficult environment

Operating cash flow for the quarter was UAH 0.5 billion

Financial results

- Reported loss for the quarter was UAH 5.5 billion, compared with a loss of UAH 4.8 billion for the third quarter of 2019, excluding discontinued operations*. Compared to the previous quarter, the result was impacted by significantly lower gas prices and higher volumes of gas sold.

- For the nine months, reported loss was UAH 17.0 billion, compared with a profit of UAH 12.9 billion for the same period in 2019, excluding discontinued operations, reflecting lower demand and gas prices.

- After abolishment of the Public Service Obligations (PSO) on 1 August 2020, Ukrainian gas consumers can switch freely from gas suppliers and benefit from market-based pricing, whilst gas intermediaries pay for gas supplies. However, payments for deliveries made before 31 July 2020 and under the PSO remain outstanding which results in provisions for bad debts, UAH 3.7 billion in the nine months. Provisions for bad debts will likely have again a negative impact on profitability in the next quarter.

- Operating cash flow for the quarter was UAH 0.5 billion, compared with a negative operating cash flow of UAH 12.6 billion in Q3 2019 (excluding discontinued operations). For the nine months in a challenging environment, operating cash flow was UAH 16.1 billion, almost in line with the operating cash flow of UAH 16.9 billion in the same period last year.

- For the nine months, gas production was 10.7 bcm and 12.0 bcm of gas was sold.

- Capital expenditure in the first three quarters of 2020 was UAH 11.8 billion, below the full-year target of UAH 20 billion. Free cash flow was resilient at UAH 4.1 billion.

- Net debt reduced from UAH 42.6 billion at the end of 2019 to UAH 19.7 at the end of the third quarter.

- Total contribution paid to the State Budget amounts to UAH 87.0 billion.

- In respect of full year 2019, a dividend of UAH 39.6 billion was paid to the State Budget this year and a dividend of UAH 8.5 billion was prepaid late 2019.

*As at 31 December 2019, gas domestic transmission and gas transit segments are presented as discontinued operations.

Financial Summary

In UAH billion, 2019 excluding discontinued operations Third quarter 2020 Third quarter 2019 9 months 2020 9 months 2019
Net profit from continuing operations (5.5) (4.8) (17.0) 12.9
Adjusted EBITDA 0.5 (2.8) (1.2) 26.0
Operating Cash flows 0.5 (12.6) 16.1 16.9
Free cash flows (2.9) (17.5) 4.1 (1.1)
Capital expenditures (4.0) (6.3) (11.8) (22.2)

Naftogaz Chief Financial Officer Peter van Driel commented: “Despite a challenging environment, we are performing while transforming. Our operating cash flow is improving and we remain focused on capital discipline. We continue to strengthen the efficiency of our operations.”


Performance by Segment – Adjusted EBITDA

In UAH billion, 2019 excluding discontinued operations 9 months 2020 9 months 2019
Exploration and production 16.3 34.5
Oil midstream and downstream 1.3 1.9
Commercial (16.3) (9.9)
Gas storage 3.8 0.8
Ukrnafta (2.2) 1.0
Other (4.1) (2.3)
Total (1.2) 26.0
Exploration and production result reflected lower gas prices that were partially offset by lower subsoil royalties as compared to the nine months of 2019.

Oil midstream and downstream was primarily attributable to lower selling prices for petroleum products which were not wholly offset by attributable cost savings over the period.

Commercial was negatively impacted by lower volumes and selling prices offset by lower purchases, as well higher provisions for deliveries made under the PSO to intermediaries.

Gas storage reflected higher revenues from pumping and storage services due an increased demand.

Ukrnafta’s result were negatively impacted by lower gas selling prices as well as lower volumes of crude oil sold.

Other Segments include results of joint operations under the concession agreement for exploration and development with the Arab Republic of Egypt, capital investment activities of the Group, corporate administrative functions, new energy and other activities. The result was negatively impacted by impairment losses recognised in respect of accounts receivable on Egyptian product sharing agreement.


Contributions to the State Budget. In 2020, the Group transferred UAH 87.0 billion of taxes and dividends to the State Budget, including UAH 11.8 billion of corporate income tax.

For the nine months of 2020, the Group paid dividends of UAH 39.6 billion (excluding UAH 8.5 billion of interim dividends paid in 2019), or 95% of the 2019 net profit.

The Group remains one of the largest net contributors to the State Budget of Ukraine.


The Group Unaudited Condensed Consolidated Interim Financial Statements as at and for the nine months ended 30 September 2020 is available here.

Integrated Communications Department
NJSC Naftogaz of Ukraine


Other news