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KPMG analyses the performance of Transneft and Overseas pipeline companies

The international consulting company KPMG has studied the 2014–2015 key performance indicators of Transneft and world leaders in pipeline transportation of crude oil and petroleum products.

KPMG analyses the performance of Transneft and Overseas pipeline companies KPMG analyses the performance of Transneft and Overseas pipeline companies


Transneft reported on August 19, 2016, that the international consulting company KPMG has studied the 2014–2015 key performance indicators of Transneft and world leaders in pipeline transportation of crude oil and petroleum products.

 

The research corroborated the lack of direct Transneft analogues among overseas pipeline companies, comparable in terms of operational scale (oil turnover and transportation, average length of haul, extension of pipelines and transportation proceeds).

To alleviate the impact of differences in the range of operations, KPMG focused above all on reviewing specific and relative indicators.

 

Turnover and transportation

In terms of oil turnover, Transneft notably surpasses the performance of overseas companies, outstripping the US oil turnover leader Enbridge Energy by more than 8 times and the aggregate turnover of all companies included in the analysis by more than 4 times.

Transneft also bests western companies by crude transportation volumes.

In terms of petroleum products turnover, Transneft ranked second next to US-based Colonial Pipeline which is the main transporter of petroleum products in the US north-eastern territory: 40,926 million tkm against 184,155 million tkm (4.5 times less).

 

Transportation proceeds and EBITDA margin

In value terms, oil turnover is expressed as the proceeds arising from transportation services. According to experts, in 2015 Transneft reported the best proceeds from crude oil transportation among all companies in the sampling: USD 9,255 million.

The EBITDA margin of Transneft in 2015 (54.8 %) exceeded the median value of other companies reviewed by 19.5 percentage points.

Transneft had a smaller ratio of the general debt to EBITDA than most of the sampled companies: it stood at 2.3 in 2015 (with the average parameter in the industry at the level of 2.4–2.5, which is also the ratio recommended by international rating agencies and lending institutions). Transneft operations cash flow (OCF) to ratio of capital expenditures (on fixed assets replacement) in 2014–2015 was higher than the median value in the sample. Conventionally, last year the company made 1.8 roubles per each invested rouble via its operating activities. The growth of this ratio from 1.5 to 1.8 in 2014–2015 was driven by the general reduction of capital expenditures relative to the operations cash flow.

 

Oil transportation tariff

The average weighted tariff of Transneft in 2015 per 100 tkm of oil turnover is 3.5 times lower than the median tariff charged by comparable companies (in 2015, it was USD 0.8 per 100 tkm against the median value of USD 2.9 per 100 tkm). This tariff is one of the lowest among the companies engaged in pipeline oil transportation, note the experts of KPMG.

In 2015, the average weighted oil transportation tariff in USD, charged by Transneft, went down y-o-y (-33.3 %), whereas the basing rate in roubles rose (+6.1 %). The comparison of average weighted tariffs charged by Transneft per 100 tkm of petroleum products turnover generally shows a similar pattern. As reported by KPMG, Transneft tariffs are about 1.5 times lower than the median value among the sampled companies (in 2015, it was USD 2.1 per 100 tkm against the median USD 3.1 per 100 tkm).

 

Transportation costs

Specific operating expenses of Transneft on oil transportation in 2015 were 4 times lower than the median value for similar companies (USD 0.3 per 100 tkm against the median USD 1.1 per 100 tkm).

KPMG experts point out that Transneft showed better performance in terms of specific expenditures compared to Enbridge Energy (the freight turnover leader among overseas companies): actually, at the level of private pipeline companies in the holding group Sunoco Logistics (West Gulf Pipeline and Excel Pipeline).

It is important to note that the specific expenditures of Transneft in the source currency (roubles), despite their insignificant growth (+5.5 %), proved more than twice lower than the inflation rate in 2015 (12.9 %), says the report.

Adjusted for the purchasing power parity, Transneft specific expenditures (in the amount of USD 0.8 per 100 tkm) practically remained unchanged on a year-on-year basis (in 2014–2015). This testifies to certain stabilization of the company’s specific operating expenses, notes KPMG.

The specific operating expenditures of Transneft per 100 tkm of petroleum products turnover were more than twice lower in 2015 than the median value for the sampled companies (USD 0.9 per 100 tkm against the median USD 2.0 per 100 tkm).

 

Energy efficiency, safety and environment

In 2015, Transneft demonstrated the level of specific electric power consumption in oil transportation lower than the median value by 21 % and was one of the most energy efficient companies in the pipeline transport sector (11.27 kWh/thou tkm).

The specific electric power consumption of Transneft in transportation of petroleum products went down 18 % in 2015 y-o-y and almost dovetailed the median (11.91 kWh/thou tkm against the median 12.68 kWh/thou tkm).

The analysis revealed that the fixed capital depreciation ratio of Transneft in 2014–2015 (40 % and 42 %, respectively) was below the median rate (50 % for 2014 and 49 % for 2015) among the sampled companies.

KPMG points out that, judging by the insignificant growth of the depreciation ratio, Transneft presently invests considerable funds in the upgrading and revamping of its depreciated assets as well as in new construction. The specific accident rate in oil transportation over Transneft trunk pipelines in 2015 was roughly 2.5 times lower than the median value for the sampled companies (0.098 against 0.239).

This is the evidence of high reliability and efficiency of the operated equipment, safety systems and organizational measures ensuring the reduction of the accident risk, argue KPMG experts.

The oil spill to pipeline extension ratio for Transneft in 2015 was more than 17 times lower than the median value for comparable sampled companies (0.8 against 14.7).

In 2015, the specific emission of air pollutants in crude oil and petroleum products transportation by Transneft went down 6.95 % y-o-y, which, in expert opinion, shows the efficiency of the measures taken to reduce the negative environmental impact. Compared to the sampled companies, this indicator of Transneft was among the lowest in 2014–2015.

 

R&D and productivity of labour

Transneft demonstrated the high productivity of labour in 2015 that almost twice exceeded the median value, as compared with the sampled overseas companies (16.9 million tkm/person against the median 8.6 million tkm/person). Last year, the productivity of labour in Transneft grew by 3 %.

The Transneft ratio of outlay on R&D to oil transportation proceeds was 1.4 % last year, which is 0.73 percentage points higher than the median and actually one of the highest among all companies in the sampling. The maximum indicator among the overseas companies under review is almost twice lower: 0.75 % of their proceeds.

Source : Neftegaz.RU