A loss making year due to provisions for bad debts, with robust underlying profits and resilient cash flow performance

The company has entered into a period of improved profitability with an expected underlying profit in the first quarter of 2021

Financial results

- For the full year, reported loss was UAH 19.0 billion, compared with a profit of UAH 2.6 billion for 2019 (1), reflecting lower demand and gas prices, and material provisions for bad debts.

- The underlying profit for the full year, excluding provisions for bad debts and other unusual items, was UAH 3.2 billion.

- Reported loss for the fourth quarter was UAH 2.0 billion, compared with a loss of UAH 10.3 billion for the fourth quarter of 2019.

- The company has entered into a period of improved profitability with an expected underlying profit in the first quarter of 2021.

- 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 under the PSO remain outstanding which results in material provisions for bad debts, UAH 23.2 billion in the year, which negatively impacts our profitability and operating cash flow.

- In December government provided compensation for gas deliveries under the PSO during 2015 to 2019. The amount of compensation was UAH 26.4 billion after tax.

- Impairment of assets was UAH 8.0 billion (2019: UAH 9.4 billion), reflecting revised price assumptions.

- For the full year, operating cash flow was UAH 19.5 billion, more than double the operating cash flow of UAH 6.9 billion in 2019 despite a challenging environment. Operating cash flow for the quarter was UAH 3.4 billion, compared with an operating cash flow of UAH (10.0) billion in Q4 2019.

- In 2020 gas production was 15.4 bcm and 18.2 bcm of gas was sold.

- Capital expenditure was UAH 15.0 billion, below the target of UAH 20 billion and 46% lower than 2019.

- Free cash flow was resilient at UAH (3.4) billion. It included the purchase of State treasury bonds. In March 2021 an amount of UAH 11.5 billion matured and returned to the Group.

- Net debt reduced from UAH 42.6 billion at the end of 2019 to UAH 29.2 billion at the end of 2020.

- Total contribution paid to the State Budget amounts to UAH 141.0 billion. A dividend of UAH 39.6 billion was paid in 2020 and a dividend of UAH 8.5 billion was prepaid late 2019.

1. 2019 excludes the results of the discontinued operations including the Gas Transit Arbitration award of UAH 55.7 billion. See note 20 of the consolidated financial statements.

Naftogaz Chief Financial Officer Peter van Driel commented: “Despite a challenging environment with low prices and demand, we are showing a robust underlying performance after our swift and decisive action to reduce operating costs and capital expenditure. Gas customers not paying for deliveries negatively impacts our bottom line. Our operating cash flow is strong and we remain focused on capital discipline. We continue to strengthen the efficiency of our operations.”

Financial Summary

In UAH billion, 2019 excluding discontinued operations and Gazprom arbitration award Fourth quarter 2020 Fourth quarter 2019 Full year2020 Full year2019
Net profit from continuing operations (2.0) (10.3) (19.0) 2.6
Adjusted EBITDA 24.6 4.3 23.4 31.2
Operating Cash flows 3.4 (10.0) 19.5 6.9
Free cash flows (7.5) (15.3) 3.4 (16.3)
Capital expenditures (3.3) (5.2) (15.0) (27.4)

Performance by Segment – Adjusted EBITDA (2)

In UAH billion, 2019 excluding discontinued operations and Gazprom arbitration award Full year2020 Full year2019
Exploration and production 28.0 43.7
Oil midstream and downstream 2.1 1.6
Commercial (15.7) (9.6)
Gas storage 3.3 1.5
Ukrnafta 9.6 (1.3)
Others (3.9) (4.8)
Total 23.4 31.2
2. See note 3 of the consolidated financial statements.

Performance by Segment:

Exploration and production result reflected lower gas prices that were partially offset by lower subsoil royalties as compared to 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 sales prices offset by lower purchases, as well bad debt provisions.

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

Ukrnafta’s result was positively impacted by higher volumes of crude oil sold and lower fines and penalties in respect of outstanding tax liabilities which were settled during 2020.

Other Segments include results the gas transit services, joint operations under the concession agreement for exploration and development in Egypt, corporate capital investment activities of the Group, low carbon solutions 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 141.0 billion of taxes and dividends to the State Budget. 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 Consolidated Financial Statements as at and for the year ended 31 December 2020 is available here.

For your reference, we also publish the Naftogaz Standalone Financial Statements for the year ended 31 December 2020, click here.

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