Rosneft cuts upstream operating costs, Q3 results hit by pandemic, OPEC+ cuts

MOSCOW (MRC) -- Rosneft cut its third-quarter upstream operating costs by 3.4% on the quarter to USD2.8/b of oil equivalent, as liquids output continued to slide due to constraints under the OPEC+ agreement and implications from the coronavirus pandemic, the company reported Nov. 13 in its financial results, reported S&P Global.

Rosneft's Q3 liquids production was down 16.2% on the year and 2.1% on the quarter to 48.51 million mt, or 3.91 million b/d, as the company was allowed to produce more in April, when the new OPEC+ deal was not yet in force.

Rosneft CEO Igor Sechin lauded the company's ability "to work successfully in difficult conditions of crude oil output restrictions and relatively low hydrocarbon prices."

"Significant achievements of the third quarter include a reduction of upstream operating costs to US2.8/boe and a decrease in interest costs by 24% in USD terms year on year," he said in a release.

Rosneft's overall liquids output in January-September amounted to 4.19 million b/d, down 10.3% on the year, it said.

The company continued to restrain production without well suspension to retain the ability of prompt output increase, if needed.

As a result, Rosneft managed to quickly increase oil production by over 6% in August, when OPEC+ cuts were eased to 7.7 million b/d.

Rosneft's Q3 gas production constituted 14.96 Bcm, down 8.2% on the year and 1.3% on the quarter, also affected by decline in demand caused by the coronavirus pandemic.

The company's total Q3 hydrocarbon output amounted to 4.9 million boe/d, down 14.7% on the year and 3% on the quarter.

Rosneft's Q3 refining throughput increased by 6.1% on the quarter to 25.5 million mt in accordance with Russia's pledge to direct output increase to the domestic market.

However, refining volumes were still down 15.3% on the year due to lower demand for petroleum products and low refining margin due to the pandemic.

In addition, Rosneft started drafting a "carbon management" plan through 2035, which will help the company to transition to the low-carbon economy, manage climate risks and meet future energy demand.

"The plan implementation will be instrumental in strengthening Rosneft's leading position in the global energy market in the context of the energy transition process and the maximum monetization of the company's proven reserves," it said.

As MRC wrote previously, Russian state oil company Rosneft's decision to cease operations in Venezuela and sell its assets there to a Russian government-owned company was a "maneuver" made in reaction to collapsing oil prices, a US State Department official said earlier this year.

We remind that Angarsk Polymers Plant (part of Rosneft) has resumed its low density polyethylene (LDPE) production after a scheduled turnaround. The plant"s customers said Angarsk Polymers Plant brought on-stream its LDPE production on 31 July after the scheduled maintenance. The outage started on 22 June and lasted for more than one month. The plant"s annual production capacity is about 75,000 tonnes.

According to MRC's ScanPlast report, September estimated LDPE consumption in Russia fell to 23,930 tonnes from 47,610 tonnes a month earlier. Russian producers reduced their domestic LDPE shipments due to shutdowns for maintenance at production capacities in Ufa, Tomsk and Kazan. Russia's estimated LDPE consumption totalled about 406,500 tonnes in January-September 2020, which virtually corresponded to the last year's figure.

Rosneft became Russia's largest publicly traded oil company in March 2013 after the USD55 billion takeover of TNK-BP, which was Russia’s third-largest oil producer at the time.
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German chemical industry showed signs of recovery in third quarter

MOSCOW (MRC) -- Germany's chemical industry association VCI (Frankfurt) says that after setbacks in the first half of the year caused by COVID-19, Germany’s chemical-pharmaceutical industry rebounded in the third quarter with a sequential increase of 1.9% in production and 2.8% in sales, reported Chemweek.

Producer prices also edged up 0.5% compared with the previous quarter, and the number of employees in the industry remained stable at about 464,000, VCI says. However, on a year-on-year (YOY) basis the figures were below the levels of 2019.

Chemical-pharmaceutical production declined 1.7% YOY but compared with the previous quarter, chemical production alone went up 4.9% driven by higher demand, VCI says. Average capacity utilization rose sequentially, from 77.5% to 81.6%, so operating rates were back to almost normal in the third quarter, VCI says.

Industry sales increased sequentially by 2.8%, to EUR43.8 billion (USD51.6 billion), with sales to domestic and foreign customers going up by 3.5% and 2.5%, respectively, VCI says. It adds that there was positive development especially in business with European customers. Nevertheless, sales to foreign customers were 8% lower YOY, and sales overall were 7.5% down YOY.

Germany-based chemical companies' selling prices were 2.6% lower YOY in the third quarter in line with weak oil prices and soft demand caused by COVID-19, VCI says. Crude prices went up by about 36% sequentially, but were almost 30% lower YOY, VCI says. The price of naphtha also increased sequentially by 50%, but remained 25% cheaper YOY.

VCI notes that the global economic crisis is far from over and with a second wave of infections building up, the industry’s optimism has been replaced by concern about the future, resulting in a deteriorated outlook for 2020. VCI continues to expect a production decline in the chemical-pharmaceutical industry of 3% for 2020. Prices are expected to be 2% lower, helping drive sales down 6% to €186.4 billion, VCI says.

Germany’s chemical-pharmaceutical industry faces a difficult fourth quarter, with COVID-19 threatening the industry’s recovery, VCI says. “Business and society are required to reduce the risk of infection through effective measures and correct behavior. The federal government must prevent permanent economic damage,” says Christian Kullmann, VCI president and chairman of Evonik Industries.

As MRC informed before, BASF has recetnly broken ground on a new cathode active materials production plant. The plant in Schwarzheide, Germany is scheduled to come online in 2022, creating 150 new jobs and will enable the supply of around 400,000 full electric vehicles a year. This new site will complement BASF’s multi-step investment plan in the European battery materials market, using precursors from the company’s previously announced plant in Harjavalta, Finland. The German government are putting €175m towards the project which is part of the Important Project of Common European Interest (IPCEI) approved by the European Commission in December 2019, under the EU State aid rule

We remind that Russia's output of chemical products rose in September 2020 by 6.7% year on year. At the same time, production of basic chemicals increased by 6.1% year on year in the first nine months of 2020, according to Rosstat's data. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the January-September output. September production of primary polymers decreased to 852,000 tonnes from 888,000 tonnes in August due to shutdowns in Tomsk, Ufa and Kazan. Overall output of polymers in primary form totalled 7,480,000 tonnes over the stated period, up by 16.4% year on year.
MRC

Hexion Q3 revenue declines

MOSCOW (MRC) -- Hexion saw revenues decline in Q3 year on year, but the recovery began to take shape with a solid sequential rebound in volumes, said the company.

"Third quarter 2020 results reflected steadily improving volume gains each month during the quarter as ongoing improvement in several key end markets drove Segment EBITDA that exceeded the prior year by 6 percent if excluding the prior year impact of fresh start accounting,” said Craig Rogerson, Chairman, President and Chief Executive Officer. “We were also pleased to post strong sequential Segment EBITDA from continuing operations gains of 60% in the third quarter of 2020 compared to second quarter Segment EBITDA from continuing operations of $56 million. Favorable residential construction trends drove strong sequential improvement in our third quarter volumes and EBITDA for our Adhesives segment. Our Coatings & Composites segment posted positive Segment EBITDA gains in the third quarter of 2020 versus the prior year due to our specialty epoxy resins business and continued positive demand in wind energy, as well as our Versatic Acids™ and Derivatives business due to strength in architectural coatings and recovering automotive demand."

Mr. Rogerson added: "We were pleased to recently announce a divestiture and continue to explore other portfolio optimization opportunities. Upon closing, we plan to use the proceeds to invest in our business and reduce our debt. While our volumes continued to improve sequentially in October, visibility remains limited regarding the fourth quarter of 2020 because of the pandemic as well as normal year-end volatility. Our balance sheet, liquidity, and ability to generate cash remain strong, and we are encouraged by the recent trends in housing, wind energy, automotive and several other markets, although we continue to keep a close eye on key economic indicators to monitor the impact of COVID-19. In addition, we expect to be free cash flow1 positive in 2020. We remain focused on the things we can control, such as completing the pending divestiture, maintaining our streamlined cost structure and continuing to accelerate new product development, which we believe positions us favorably as demand recovers. We also plan to expand our investments in productivity and growth-oriented capital expenditures to drive future growth in 2021 and future years."

On September 27, 2020, the Company entered into a Purchase Agreement for the sale of its Phenolic Specialty Resin (PSR), Hexamine and European-based Forest Products Resins businesses (together with PSR, the “Held for Sale Business” or the “Business”) for approximately $425 million to Black Diamond and Investindustrial. The consideration consists of $335 in cash and certain assumed liabilities with the remainder in future proceeds based on the performance of the Held for Sale Business. The final purchase price is subject to customary post-closing adjustments.

The business includes approximately 900 associates and 11 manufacturing facilities globally where phenolic specialty resins and engineered thermoset molding compounds are produced for a wide range of end markets including building and construction, industrial, automotive, electronics, agriculture and consumer. The Company expects to use the net sale proceeds to reduce indebtedness as well as for general corporate purposes including investments in its business. The transaction is intended to close in the first quarter of 2021, subject to regulatory approvals and other customary closing conditions, including Works Council consultation.

As MRC informed earlier, Hexion, a major American manufacturer of phenol and bisphenol A (BPA), has shut down its BPA plant in Pernis, the Netherlands for scheduled maintenance. Hexion is currently carrying out scheduled repairs at the enterprises for the production of epichlorohydrin with a capacity of 90,000 tonnes/year and bisphenol-A (BPA) with a capacity of 120,000 tonnes/year in Pernis in the Netherlands. The renovation began in early November and will last until the end of November, a company source added. The exact dates were not disclosed.

According to MRC's ScanPlast report, Russia's estimated consumption of PC granules (excluding imports and exports to/from Belarus) rose in the first three quarters of 2020 by 32% year on year to 75,600 tonnes (57,200 tonnes a year earlier).

Hexion Inc., formerly Momentive Specialty Chemicals Inc., is a chemical company based in Columbus, Ohio. It manufactures thermosetting resins and related technologies and specialty products. Hexion has two divisions: the epoxy, phenolic and coating resins division and the forest products division.
MRC

Plastics distributor Piedmont acquires Empire Plastics

MOSCOW (MRC) -- Piedmont Plastics (Charlotte, North Carolina) say it has acquired rival plastics distributor Empire Plastics (Sioux Falls, South Dakota), marking the company’s expansion into the Upper Midwest region of the US, said Chemweek.

Terms of the transaction, including purchase price, were not disclosed. Empire also increases the number of Piedmont branch locations in North America to 50.

"This part of the country is a natural extension of our growing branch network and we feel that Empire Plastics is a great fit both culturally and strategically," says Tyler Booth, president of Piedmont Plastics.

All of Empire Plastics’s employees will join Piedmont, the companies say. Empire Plastics owner Doug Edwards will remain in a key role through the end of the year to assist with the transition. Piedmont Plastics is a wholesale distributor of plastic sheet, rod, and tube and film products.

As MRC informed earlier, Empire Precision Plastics Inc., specializing in high-volume injection molding and mold manufacturing, announced that it is installing two, precision 55-ton Arburg injection molding presses with Arburg automation for an OEM customer with requirements for medical disposables.

We remind that Russia's output of chemical products rose in September 2020 by 6.7% year on year. At the same time, production of basic chemicals increased by 6.1% year on year in the first nine months of 2020, according to Rosstat's data. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the January-September output. Last month's production of primary polymers decreased to 852,000 tonnes from 888,000 tonnes in August due to shutdowns in Tomsk, Ufa and Kazan. Overall output of polymers in primary form totalled 7,480,000 tonnes over the stated period, up by 16.4% year on year.
MRC

Elementis signs distribution agreement for personal care products with DKSH

MOSCOW (MRC) -- Specialty chemicals producer Elementis (London, UK) says it has entered an exclusive distribution agreement with DKSH (Zurich, Switzerland), a holding company specializing in market expansion services, for personal care applications in the French market, said Chemweek.

The two companies have a 40-year relationship and, under the terms of the new agreement, DKSH will provide sales and marketing, distribution, logistics, and customer management for Elementis’s entire range of specialty ingredients for personal care products, including antiperspirant actives, in France, Elementis says.

As MRC informed earlier, Elementis (London, UK) says it has committed to reducing waste by 10%, water usage in operations by 10%, increasing energy efficiency by 20%, and reducing greenhouse gas emissions by 25% by 2030, as part of its environmental sustainability goals.

As MRC reported earlier, Elementis PLC (ELM.L) said in February, 2013, it agreed, through its wholly owned subsidiary Elementis Specialties to purchase the assets of Hi-Mar Specialty Chemicals, LLC or "Hi-Mar" a US coatings additives company, for a cash consideration of USD33 million. Hi-Mar is a supplier of defoamers to the coatings, construction and oilfield drilling industries, with manufacturing and technical facilities based in Milwaukee, Wisconsin. The acquisition of Hi-Mar would further expand Elementis' product and technical service offering in these high value segments.

We remind that Russia's output of chemical products rose in September 2020 by 6.7% year on year. At the same time, production of basic chemicals increased by 6.1% year on year in the first nine months of 2020, according to Rosstat's data. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the January-September output. Last month's production of primary polymers decreased to 852,000 tonnes from 888,000 tonnes in August due to shutdowns in Tomsk, Ufa and Kazan. Overall output of polymers in primary form totalled 7,480,000 tonnes over the stated period, up by 16.4% year on year.

Elementis plc is one of the UK's largest speciality chemicals business. The Company comprises three businesses: Specialty Products, Surfactants and Chromium. Both Specialty Products and Chromium hold leading market positions in their chosen sectors. Elementis employs over 1,200 people at more than 30 locations worldwide.
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