Rosneft’s full-year 2025 IFRS results showed how sharply external pressure is now hitting Russia’s largest oil producer. Revenue fell 18.8% year over year to 8.236 trillion rubles, EBITDA dropped 28.3% to 2.173 trillion rubles, and net income attributable to shareholders slumped 73% to 293 billion rubles. Adjusted free cash flow nearly halved to 700 billion rubles, though it remained positive for a 22nd straight quarter.

The company blamed the weaker performance on a mix of lower oil prices, a stronger ruble, wider discounts on Russian crude, OPEC+ production limits, pipeline intake restrictions, and sharply higher logistics and financing costs. Rosneft also pointed to elevated domestic interest rates, saying the Bank of Russia’s average key rate above 19% in 2025 materially increased debt-servicing costs. Capital expenditure fell 5.7% to 1.36 trillion rubles as the company tightened project screening and spending discipline.

Operationally, the picture was steadier. Rosneft said hydrocarbon production totaled 246.6 million tonnes of oil equivalent in 2025, including 181.1 million tonnes of liquids and 79.6 billion cubic meters of gas. Fourth-quarter liquids output rose 2.2% sequentially to 46.4 million tons, while quarterly gas production climbed 12.4% to 21.3 bcm. Development drilling exceeded 11.8 million meters, with more than 3,000 new wells brought online, nearly three-quarters of them horizontal.

Reserve performance was a brighter point. Rosneft said its 2P reserves under PRMS stood at 11.5 billion tonnes of oil equivalent at year-end, with a reserve replacement ratio of 122% and a reserve life of 49 years. The company also reported six new fields and 112 new hydrocarbon deposits discovered during 2025.

Refining weakened, reflecting maintenance, repairs, and what Rosneft described as optimization of refinery utilization amid difficult pricing and logistics conditions. Russian refinery throughput fell to 75.7 million tons. Even so, the company supplied 40.3 million tons of petroleum products to the domestic market, including 12.3 million tons of gasoline and 16.4 million tons of diesel, underscoring the Kremlin’s continued reliance on major producers to keep local fuel markets supplied.

The results offer another sign of the strain facing Russia’s oil sector as sanctions evolve from a pricing problem into a broader operating constraint. Rosneft described a harsher environment marked by tanker sanctions, insurance denials, payment bottlenecks, and rising freight costs. Chief Executive Igor Sechin said freight rates for Russian oil shipments from the Baltic to India topped $20 per barrel in March 2026, compared with about $2 per barrel for deliveries to Europe in early 2022. He also said the recent spike in oil prices tied to tensions involving Iran and disruption in the Strait of Hormuz should not be overstated, arguing that much of the upside is being absorbed by transport, insurance, and financial intermediaries rather than producers.

Despite the earnings slump, Rosneft highlighted its balance sheet resilience. Net debt to EBITDA ended 2025 at 1.5x, which the company said remained comfortably below covenant thresholds. Management also reiterated its commitment to dividends, noting that shareholders approved an interim payout of 11.56 rubles per share for the first half of 2025 and that the shareholder base grew by nearly 170,000 over the past year.

For investors, the key takeaway is that Rosneft is still generating cash and replacing reserves, but profitability is being compressed by forces largely outside its control: sanctions, freight inflation, restricted trade flows, higher taxes, and Russia’s punishing interest-rate backdrop. That leaves 2026 hinging less on volumes than on whether the company can keep costs contained while navigating a more fragmented and expensive export system.

By Charles Kennedy for Oilprice.com

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