COMPANY PROFILE -Rosneft
Business Sector :Oil & Gas
Operating Geography :Russia, Europe
About Rosneft :Rosneft is an integrated oil company whose largest shareholder is JSC ROSNEFTEGAZ owned by Russian Government. The headquarters of the company is in Balchug district of Moscow. Its parent company is Rosneftegaz and “Energy for growth” is the company’s tagline. Presently, Rosneft leads petroleum industry of Russia and is the world’s largest publicly traded petroleum company and it has positioned itself as a socially responsible company which minimizes any negative effects on environment. Rosneft does oil and gas exploration and production activities on Sakhalin island, Timan-Pechora field, Siberia and in southern Russia, including Chechnya. Rosneft has markets in Europe, US and the CIS nations. As per the reports of 2016, it is 51st largest company in the world and the Sales revenues and income generated by affiliate companies(RUB billion) was 4988.
Rosneft Revenue :$64.749 billion - FY 2016
Competitive Analysis of Rosneft
|1. Increase in operating efficiency|
2. Strong marketing operations
3. Largest retail network
|1. Drop in the net income of Roseneft
2. Reserves concentration in Western Siberia
|1. Modernization and expansion of Company’s export terminals|
2. Expansion of operations in other parts of the world
|1. Weak oil prices prevalent
2. Huge drops in earnings continual
3. Local demands doldrums
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Detailed SWOT Analysis of Rosneft
Strengths1. Increase in operating efficiency - In the year 2016, Russian oil refineries’ oil production had decreased by more than 17% and Euro 5 gasoline and diesel fuel’s output increased by about 56%. In 2016, because process units were more efficient and operations were optimized resulting in increase in light product yield to 56.6% and conversion rate to 72.0%. 2. Strong marketing operations - In both the wholesale customers as well as the retail customers in the entire Russia its marketing operations are very strong and because of this fact it has an advantage of a widespread visibility in the market which in turn enables it to penetrate new markets and still expand customer base. 3. Largest retail network - Rosneft is continuously expanding retail network mostly in places of strategic importance, and it is constantly increasing retail sites which includes stores, cafes, car wash areas and service stations for vehicles. Also towards end of 2016 Rosneft had largest network in Russia considering geographical areas covered and filling stations.
Weaknesses1. Drop in the net income of Rosneft - The net income of the company dropped to one third to $1.38 in FY Q2 2016 from the total of 134bn rubles a year which was noticed earlier. For the first half of the year 2016 a whole net income fell to 46 per cent to about Rbs103bn. 2. Reserves concentration in Western Siberia - Upon observing closely, it is noticed that most of the Oil and Gas reserves of the company are in the west Siberia region. This fact increases the business risk of the company as it is not advisable to have all portfolios of similar nature to avoid business risks. This factor if not paid enough attention has the hazardous potential leading to the severe repercussions on the financial performances of the company in case of occurrence of any geo-political risks from this western Siberian region.
Opportunities1. Modernisation and expansion of Company’s export terminals - Rosneft is competitive because of its own export terminals in Tuapse, De-Kastri and Nakhod making Rosneft’s export operations a highly efficient one, improving planning optimizing costs. This feature gives Rosneft a competitive position and so it should work more upon implementation of expansion and modernization proposals at the mentioned terminals thereby ensuring about their capacity which could match up with the export needs of future. 2. Expansion of operations in other parts of the world - As of now the Oil and Gas reserves are concentrated mostly in Western Siberian region. This fact may result in significant dangers of repercussions upon finances of Rosneft if there are any geo-political risks from these region in future.
Threats1. Weak oil prices prevalent - The fall in prices of oil since the mid-2014 year has impacted the Russian economy very severely, which is now in conditions of deep recession, despite the fact that the latest GDP data has shown some signs of improvement. Russia’s economy got shrunk by 0.6 per cent year-on-year in the Q2 upon comparison with the 1.2 per cent decline in the first three months of 2016. 2. Huge drops in earnings continual - The company reported a 34% drop in earnings on June 8, 2016 due to weak oil prices. The EBITDA of Rosneft decreased by one third (quarterly basis) to $ 3.2 billion, underperforming consensus by about 8%.
3. Local demands doldrums - Local demand remains in the doldrums and not helping the company meet revenue targets. Also, there is a lack luster demand in Russia for oil and trend seems to continue for upcoming years making the situation tougher for Rosneft.
The unpublished sections of the entire SWOT analysis is available in the 'Complete Report' on purchase.
1. Rosneft Annual Report 2016: https://www.rosneft.com/upload/site2/document_file/a_report_2016_eng.pdf
2. Russia’s oil giant just saw its profits drop 75%: https://www.cnbc.com/2016/06/08/russias-oil-giant-just-saw-its-profits-drop-75.html
3. Rosneft Oil Company IFRS Results Q4 and 12M 2016: https://www.rosneft.com/upload/site2/document_file/FY2016_Results_27022017_ENG.pdf
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Rosneft SWOT and PESTLE analysis has been conducted by Farheen Rahman and reviewed by senior analysts from Barakaat Consulting.