St Petersburg November 15, M and 3Q 2017 IFRS FINANCIAL AND OPERATING RESULTS

Transcription

1 St Petersburg November 15, M and 3Q 2017 IFRS FINANCIAL AND OPERATING RESULTS

2 Agenda Highlights, Financials Alexey Yankevich Member of the Management Board, CFO Upstream Alexey Urusov Head of Economics and Investment Directory Downstream Vladimir Konstantinov Head of Economics and Investment Department, Downstream 2

3 Disclaimer The presentation contains forward-looking statements concerning the financial condition, results of operations and businesses of and its consolidated subsidiaries. All statements other than statements of historical facts are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management s current expectations and assumptions and involve known and unknown risks and uncertainties that may cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of to market risks and statements expressing management s expectations, beliefs, estimates, forecasts, projections and assumptions. These forwardlooking statements are identified by their use of terms and phrases such as anticipate, believe, could, estimate, expect, intend, may, plan, objectives, outlook, probably, project, will, seek, target, risks, goals, should and similar terms and phrases. There are a number of factors that can affect the future operations of and can cause those results to differ materially from those expressed in the forward-looking statements included in this presentation, including (without limitation): (a) price fluctuations in crude oil and oil products (b) changes in demand for the Company s products (c) currency fluctuations (d) drilling and production results (e) reserve estimates (f) loss of market and industry competition (g) environmental and physical risks (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions (i) economic and financial market conditions in various countries and regions (j) political risks, project delays or advancements, approvals and cost estimates (k) changes in trading conditions All forward-looking statements contained in this presentation are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on these forward-looking statements. Each forward-looking statement speaks only as of the date of this presentation. Neither nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. 3

4 Highlights financial performance: Sales: RUB 1458 bln (+19.3% y-o-y) EBITDA*: RUB 399 bln (+22.9% y-o-y) Net Income: RUB 189 bln (+28.2% y-o-y) Operational progress in : Hydrocarbon production up 5.6% MMToe y-o-y, (5.3% y-o-y, MMboe) Refining volumes down 4.4% y-o-y due to scheduled repairs at refineries Average throughput per filling station in Russia up 4.5% y-o-y 3Q17 vs. 2Q17 Sales up 7.9% EBITDA* up 19.9% Net Income up 57.6% Hydrocarbon production up 4.3% Refining throughput up 11.8% * Including GPN share in EBITDA of associates and joint ventures 4

5 Exploration and Production Production growth in greenfields continues 5

6 Strong production growth y-o-y, driven by greenfield projects Hydrocarbon production, MMtoe Production growth reconciliation ( vs. ), MMtoe % Novoport Messoyakha Prirazlomnoye Brownfields*** -0.6 Other Q16 4Q16 1Q17 JVs** Joint operations* 2Q17 3Q17 *Joint operations: proportionally consolidated companies (Tomskneft, SPD) ** Joint ventures: equity accounted entities (Slavneft, SeverEnergia (Arcticgas), Northgas and Messoyakhaneftegas) ***NNG, MN, Khantos, Vostok 6

7 Stable upstream OPEX due to increased production at new projects Operational expenses: vs., RUB/Toe -46 0% ,758 1,751 International assets* Greenfields** Joint operations Brownfields*** *NIS, Badra, Kurdistan ** Novoport, Prirazlomnoye, Orenburg ***NNG, MN, Khantos, Vostok 7

8 Discovered new offshore field in Okhotsk Sea: Neptun Completed drilling of a prospecting and appraisal well at Ayashsky license block, located on the continental shelf of the Okhotsk Sea. As a result, a new hydrocarbon field has been discovered sea depth Ayashsky license block Okhotsk Sea Yuzhno- Sakhalinsk formation depth MMToe Geological reserves Cutting-edge technological solutions applied for the construction of the well metres Core samples 8

9 Gas utilization at new projects Badra Gas pipeline and first train of gas plant commissioned GPF Gas pipeline began filling the gas pipeline with marketable gas the Az-Zubaydiyah power plant started receiving gas Novy Port and Messoyakha Construction works on associated gas utilization continues Technological availability of gas compressor station & GPF at Novy Port, and gas injection start-up is scheduled for 4Q17 Gas cycling scheme approved at Messoyakha 9

10 Downstream Optimal crude mix in current macro environment 10

11 Increase in crude exports driven by Northern projects Crude price and average netbacks, $/bbl Crude mix, MMTonnes +5.9% 60 Brent International market % % Crude export % % y-o-y 40 Refining netback Crude to CIS Crude to Russia % -18.4% % Oher Arctic crude 20 Crude Refining 31.2 export netback -4.4% Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 11

12 Optimal refining throughput Refining throughput, MMTonnes Conversion ratio in Russia, % NIS Mozyr Yaroslavl % +8.5% +4.4% Yaroslavl Moscow Omsk Moscow % 6.6 Light product yield in Russia, % Yaroslavl Omsk % 15.1 Moscow Omsk

13 Russian Market Avg. retail station throughput, tpd retail fuel sales outpace Russian market Retail gasoline sales in Russia, MMTonnes Retail diesel sales in Russia, MMTonnes filling stations in Russia in units +0.8% +1.2% +4.5% % 14.2% 0.5% ,169 1,175 Fuel quality control system of filling stations was recognised at the Safety leaders awards Brand recognition and consumer confidence are maintained through regular advertising campaigns 13

14 B2B business development Aero Bunkering Lubricants Bitumen +8.3% -3.4% +9.8% +14.8% Premium sales (1000 tonnes) 1,947 2,109 2,108 2, Key events Presence at 247 airports (+28 y-o-y) International conference organised with IATA on developing electronic data interchange (EDI) in aviation fuels supply Reduced volume due to logistical disadvantages in the Russian Far East Started production of environmentally friendly marine fuels (minimum sulphur content of no more than 0.1%) at Omsk refinery Number of G-Energy Service premiumbrand stations increased to 120 Started production of own-brand drilling fluids (Gazpromneft Drilline) Concluded agreement with Sakhalin region regarding bitumen supplies obtained conformity declaration for base bitumen production under GosStandart Note: Percentage changes of premium sales volumes may differ from data presented in Management s Discussion and Analysis due to rounding differences 14

15 Implementation of best practices in ecological standards 99.9% Efficiency of wastewater treatment BIOSPHERE Innovative multi-stage water treatment complex Leak-Proofness Zero oil products evaporation into atmosphere x2.5 times Reduced intake of river water Closed-loop cycle >70% of treated effluent returned to production cycle Commission Y2017 Moscow Y2020 Omsk 15

16 Financials Substantial increase in adjusted EBITDA defined strong bottom line 16

17 Solid financials y-o-y and q-o-q Sales RUB bln 450 3Q16 +14% Q16 1Q17 +8% +19% ,221 1,458 2Q17 3Q17 Sales rose by 19.3% y-o-y due to rising crude production and an increase of crude and petroleum product prices on domestic and international markets Increased volume of petroleum product sales and higher crude and petroleum product prices ensured sales growth by 7.9% q-o-q EBITDA* RUB bln % % % 399 Strong rise in production at major projects, retail sales growth and higher crude oil prices boosted adjusted EBITDA by 22.9% y-o-y Increased crude oil production and higher refining throughput resulted in 19.9% q-o-q adjusted EBITDA growth 3Q16 4Q16 1Q17 2Q17 3Q17 Net income RUB bln % % % 189 Net income rose by 28.2% y-o-y, mainly due to higher EBITDA Net income increased by 57.6% q-o-q due to higher EBITDA and as a result of FX gain from debt revaluation vs. FX loss for 2Q17 3Q16 4Q16 1Q17 2Q17 3Q17 *Including GPN share in EBITDA of associates and joint ventures 17

18 EBITDA reconciliation vs., RUB bln Group share in JV s EBITDA Internal factors = Prices and taxes Upstream volumes Scheduled refinery maintenance Management effectiveness 18

19 EBITDA reconciliation 3Q17 vs. 2Q17, RUB bln 153 Group share in JV s EBITDA Internal factors = Q17 Price factor Upstream volumes Management effectiveness 3Q17 19

20 Free cash flow demonstrates superior performance 9M 2017 Cash flow reconciliation, RUB bln Operating cash flow Investments* Free cash flow Other cash inflow Dividends Net cash flow * Includes changes in the amount of prepayments and materials for capital construction 20

21 IFRS CAPEX IFRS CAPEX Balanced CAPEX: deceleration in Upstream investments while downstream ramps up 1.3% Y-o-Y decrease in IFRS CAPEX Investments, RUB bln Brownfield CAPEX declined 11% Y-o-Y due to decrease in drilling volumes Greenfield CAPEX decreased by 15% Y-o-Y due to completion of infrastructure construction at Novoport Refining CAPEX increased by 93% Y-o-Y as the modernization projects continue at the Moscow and Omsk refineries Marketing CAPEX increased by 3% Y-o-Y driven mainly by continued modernization of retail stations and expansion in retail and aviation business infrastructure Changes in the amount of prepayments and materials for capital construction includes the cost of materials and equipment for ongoing projects New projects Advances issued Others Marketing and distribution Refining Greenfields Brownfields 21

22 Better perception of on debt capital markets Net debt/ebitda dynamics Debt maturity profile at the end of 3Q % bank loans 48% EUR 15% % bonds 17% USD 47% RUB 667 bln 21% 17% LPN 34% RUB 38% year 1-2 years 3-5 years over 5 years other 1% Board of Directors recommended interim dividend payment for, at Rub 10 per ordinary share In September 2017, Dagong revised Company s outlook from negative to stable (credit rating AA-) and Fitch - from stable to positive (credit rating BBB-) In October 2017, successfully completed bond-placement: RUB 25 bln 5-year 7.85% p.a. bonds (record low coupon rate for 5-year corporate Russian bonds at the time of the deal since the end of 2013 and the lowest rate in placement history). Credit Rating Agency (ACRA) assigns AAA(RU) rating to new bond issue 22