3Q and 9M 2017 IFRS Financial Results

Transcription

1 Always moving forward 3Q and 9M 2017 IFRS Financial Results Record Free Cash Flow Generation November 30, 2017

2 Forward-Looking Statements Certain statements in this presentation are not historical facts and are forward-looking. Examples of such forwardlooking statements include, but are not limited to: projections or expectations of revenues, income (or loss), earnings (or loss) per share, dividends, capital structure or other financial items or ratios; statements of our plans, objectives or goals, including those related to products or services; statements of future economic performance; and statements of assumptions underlying such statements. Words such as believes, anticipates, expects, estimates, intends and plans and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that the predictions, forecasts, projections and other forward-looking statements will not be achieved. You should be aware that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. When relying on forward-looking statements, you should carefully consider the foregoing factors and other uncertainties and events, especially in light of the political, economic, social and legal environment in which we operate. Such forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update or revise any of them, whether as a result of new information, future events or otherwise. We do not make any representation, warranty or prediction that the results anticipated by such forwardlooking statements will be achieved, and such forward-looking statements represent, in each case, only one of many possible scenarios and should not be viewed as the most likely or standard scenario. 1

3 Downstream Upstream Key Operational Indicators Doubled the share of key high-margin projects year-on-year Progressed on schedule with the construction of 2 nd stage development facilities at the Caspian Sea fields Launched main production facilities at Gissar, Uzbekistan 3q17 2q17 % th. boe per day 9M17 9M16 % 2,219 2,222 (0.1) Hydrocarbon production (ex. West Qurna-2) 2,218 2, ,755 1,772 (1.0) of which crude oil and NGL 1,772 1,774 (0.1) natural and petroleum gas Increased throughput volumes by +5% in Russia, +7% in Europe q-o-q Increased further light product yield in Russia to 71.3% in 3Q 2017, another record high Growth in main high-priority sales channels 3q17 2q17 % 9M17 9M16 % Refinery throughput at own refineries, mln t ,0 p.p. Light product yield, % p.p Retail sales volume, mln t

4 Finance Key Financial Indicators Improved macro environment All-time high quarterly EBITDA 221 bln RUB in 3Q2017 Record quarterly free cash flow before changes in working capital since bln RUB in 3Q2017 Continued stringent cost control Optimization of debt structure resulting in the reduction in a weighted average cost of debt 3q17 2q17 % RUB bln 9M17 9M16 % 1,483 1, Revenue 4,274 3, EBITDA Exploration and production segment in Russia outside Russia, excluding EBITDA of the West Qurna-2 project West Qurna (62.8) Refining, marketing and distribution segment in Russia outside Russia (2.4) (29.8) Profit for the period Adjusted profit for the period* (4.6) Capital expenditures Free cash flow (13.4) Free cash flow before changes in working capital (1.3) Net debt (30.3) * Excluding FX effect and sale of diamond business Arkhangelskgeoldobycha (AGD) 3

5 Growing Core Free Cash Flow RUB bln q16 2q16 3q16 4q16 1q17 2q17 3q17 Core FCF* Core FCF* - last 12 months * FCF before changes in working capital, West Qurna-2 and 2Q17 diamond business divestment 4

6 Dividend Policy Execution Cash distribution priorities Dividend Policy M&A Investments Dividends Financial stability The priority of dividend payments Distribution of at least 25% of IFRS profit that may be adjusted by the amount of non-recurring losses and gains Intention to annually increase the amount of dividends per one ordinary share by not less than the ruble inflation rate Dividend yield 2016 scrip 6.9% Interim dividends (BoD recommendation) 85 RUB per share +13% y-o-y in rubles +24% y-o-y in USD Key dates: EGM December 4 Record date December 22 Majors LUKOIL Russia 5

7 Upstream Growth of high-margin volumes in total production 6

8 Macroeconomic and Tax Environment Upstream Oil price, exchange rate and net price долл./барр. $/bbl 80 тыс. руб./барр. KRUB/bbl 4 Price and exchange rate 3q17 2q17 % 9M17 9M16 % Brent, $/bbl Urals, $/bbl Exchange rate, RUB/$ (14.8) (30.0) - ED lag effect, RUB/bbl (64.5) 0 33q16 кв q16 кв кв. 1q q17 кв q17 кв Net price, KRUB/bbl Курс, FX rate, руб./долл. RUB/$ Urals, Юралс, $/bbl долл./барр. Net Нетто-цена, price, KRUB/bbl тыс. руб./барр. (r.sc.) Oil export duty time lag effect $/bbl кв. 16 3q16 4 кв. 16 4q16 1 кв. 17 1q17 2 кв. 17 2q17 3 кв. 17 3q Taxes 3q17 2q17 % 9M17 9M16 % $/bbl (5.5) Export duty MET KRUB/t (2.3) Export duty MET Source: external information sources, LUKOIL estimates Net price = Urals less export duty and MET 7

9 Key Operating Indicators Upstream Hydrocarbon production, mln boe Западная West Qurna-2 Курна-2 Газ Gas за abroad рубежом Газ Gas в in РФ Russia Growth factors Ramp up at Filanovsky and Pyakyakhinskoye fields Growth of heavy crude oil production in Timan-Pechora Development of gas projects in Uzbekistan Decline factors External limitations (OPEC+) Decrease in compensation crude oil from WQ-2 project Жидкие Liquids abroad УВ за рубежом Liquids production in Russia, mln bbl 29.0 (31.5) Прочая Other liquids добыча in Russia ЖУВ в РФ Ключевые высоко маржинальные Key high-margin проекты projects ЖУВ liquids * production* 3q16 9M16 2q17 3q17 9M17 9M16 Key high-margin projects* Other projects 9M17 * V. Filanovsky, Yu. Korchagin, Pyakyakhinskoye, Yaregskoye and Usinskoye (Permo-carbon) fields 8

10 North Caspian Filanovsky Field Key advantages High-margin barrels Production growth Short transportation leg, low lifting costs, high oil quality 9M 2017 results Delivering annual plans for wells launch: 3 high flow rate production wells, including 2 bilateral 2 injection wells Completion of the construction works at the field s 2 nd development stage Field s 2 nd stage Net price, $/bbl* Liquids production, Kbpd $50/bbl $50/bbl 119 MET `6 42% Export duty Net price 85% 21 `2 `3 `4 `5 `5 Standard taxation Filanovsky 3Q 16 4Q 16 1Q 17 2Q 17 3Q * 2017 tax environment under $50/bbl and 60 RUB per USD. Production wells at the end of the period 9

11 Timan-Pechora Yaregskoye Field Key advantages High-margin barrels Production growth potential 9M 2017 results Launched Yarega power plant (75 MW) Launched steam generation unit with 100 tons per hour capacity Put into operation 14 SAGD & 91 underground production wells Put into operation 37 injection wells 4Q2017 targets Launch of additional 200 tons per hour steam generation capacity Mine Net price, $/bbl* Oil production, Kbpd $50/bbl $50/bbl MET Export duty 96% 11 42% Net price Standard taxation Yaregskoe Q 17 2Q 17 3Q * 2017 tax environment under $50/bbl and 60 RUB per USD. 10

12 Timan-Pechora Permocarbon Deposit of Usinskoe Field Key advantages High-margin barrels Production growth potential Scalable technologies 9M 2017 results Launched 4 steam generation units with the capacity 96 tons per hour Put into operation 18 production wells Testing new oil recovery techniques Steam generation units Net price, $/bbl* Oil production, Kbpd $50/bbl $50/bbl MET 42% Export duty Net price 62% Standard taxation * 2017 tax environment under $50/bbl and 60 RUB per USD. Permocarbon deposit of Usinskoe field Q 17 2Q 17 3Q

13 West Siberia Pyakyakhinskoye Field Key advantages High-margin barrels Production growth High well flow rates 9M 2017 results Put into production 26 gas wells Put into production 16 oil wells 4Q2017 targets To commission 8 oil wells and 8 gas wells Oil field facilities Net price, $/bbl* Daily production, Kboepd $50/bbl $50/bbl Liquids Gas % MET Export duty Net price 62% Standard taxation Pyakyakhinskoye field 3q16 4q16 1q17 2q17 3q * 2017 tax environment under $50/bbl and 60 RUB per USD. 12

14 West Siberia Key advantages Stable region for reinvestment Lowest cost per meter drilled among the Group companies Proven track record Substantial resource base 9M 2017 results Increased production drilling by 26% y-o-y Maintained high share of horizontal wells launch 2017 targets To increase production drilling by >15% Production drilling (LUKOIL-West Siberia) New production wells * launch, YTD th. m 700 Drilling (l. sc.), th. m. y-o-y, % 140% % % % 20% Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q -20% 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec % * oil, gas, gas condensate production wells, excluding wells from exploration drilling 13

15 Uzbekistan Growth of Gas Production Key advantages Proven track record in the region Substantial production growth potential International prices (export to China) Kandym 9M 2017 results Launched gas treatment complex at Gissar, reached target production Put into operation 34 production wells Progress with Kandym gas treatment plant construction as of the end of November: 1 st train: 100% 2 nd train: 74% Gas production *, mcm per day Gissar Kandym Gissar Q 17 2Q 17 3Q * LUKOIL share 14

16 Downstream Record light product yield in Russia 15

17 Macroeconomic and Tax Environment Downstream Gross benchmark refining margin in Russia, $/bbl q16 кв q16 кв q16 кв кв. 4q q17 кв q17 кв q17 кв. 17 Gross benchmark refining margin in Europe, $/bbl 3q17 2q17 % 9M17 9M16 % Oil products, KRUB/t Fuel oil Diesel fuel Premium gasoline Taxes, KRUB/t (2.4) Export duty, diesel fuel (24.1) (2.3) Export duty, fuel oil Excise, gasoline Euro Excise, diesel fuel Gross benchmark refining margin (European part of Russia) (23) $/bbl (21) RUB/bbl q16 кв q16 кв q16 кв q16 кв q17 кв q17 кв q17 кв. 17 3q17 2q17 % 9M17 9M16 % Oil products (FOB Rotterdam), $/t Fuel oil 3.5% Diesel fuel 0.01% Gasoline Gross benchmark refining margin, $/bbl NWE MED NWE MED Source: external information sources, LUKOIL estimates 16

18 Downstream Efficient Allocation of Russian Oil Oil allocation price in Russia, $/bbl Oil Размещение allocation volumes российской in Russia, нефти, mln млн t т Delivery Поставка to own на собственные refineries НПЗ in Компании Russia в России Реализация Sales in Russiaв РФ Brent Oil Нетбэк netback нефти for refining при переработке in Russia* на НПЗ в России* Other Экспорт oil exports прочей нефти 0 Oil Нетбэк export нефти netback** при экспорте в дальнее зарубежье** 11q16 кв q16 кв кв. 3q q16 кв q17 кв q17 кв q17 кв кв.16 3q16 2кв. 2q кв. 3q1717 Exports Экспорт of нефти oil with со reduced специальной export duty ставкой экспортной пошлины * Including net sales margin of refined products produced at the refineries across all marketing channels ** West Siberian oil, standard taxation 17

19 Downstream Russian Refineries Refinery throughput, mln t Refining depth Light product yield Total * % 87.5% 89.2% 61.8% 70.6% 71.3% Refinery throughput (+5% q-o-q) Higher throughput at Perm refinery after repair Ukhta % 75% 76% 45% 52% 55% works in 2q17 Optimized throughput at Ukhta refinery to maximize light product yield Volgograd % 93% 93% 59% 72% 73% Refining depth (+1.7 p.p. q-o-q) and light product yield (+0.7 p.p. q-o-q) Perm % 98% 99% 61% 72% 70% Optimization of feedstock mix and processes at Nizhny Novgorod, Ukhta and Volgograd refineries Nizhny Novgorod % 78% 80% 63% 64% 65% 3q16 2q17 3q17 3q16 2q17 3q17 3q16 2q17 3q17 Reaching design parameters of the oil residue complex at Perm refinery after maintenance works in 2q17 * Total throughput excluding cross-supplies (i.e. dark refined products delivered as feedstock within the Group s refineries) and processing of gas products 18

20 Nizhny Novgorod Refinery Delayed Coker Complex Key advantages Replicating Perm s delayed coker complex (minimization of costs, time and risks) Substantial improvement of the refining depth and light product yield Optimization of utilization rate, including synergy with existing secondary conversion processes 9M 2017 results FEED, FID, start contracts signing on long lead items Influence of the project on refinery indicators Without project 76% With project 65% Feedstock and production balance of the delayed coker (capacity 2.1 mln t per annum) Asphalt; 5% Gas; 8% Naphtha; 12% Diesel fuel; 30% Light products yield 42% 21% Tar; 95% VGO; 23% For further processing at catalytic cracker 4% Coke; 27% Fuel oil and VGO yield Light products yield Feedstock Production 19

21 Downstream European Refineries Refinery throughput, mln t Refining depth Light product yield Total % 84.4% 90.4% 72.5% 75.8% 77.4% Refinery throughput (+7% q-o-q) Increasing capacity utilization due to high 99% 99% 99% 81% 80% 83% refining margins in Europe Ploiești Refining depth (+6 p.p. q-o-q) and light product yield (+1.6 p.p. q-o-q) Zeeland % 78% 83% 77% 71% 75% Optimizing feedstock basket One-off factors at Burgas refinery Reaching design parameters after maintenance Burgas % 89% 88% 72% 82% 78% works at Ploiesti and ISAB refineries ISAB ,6 89% 81% 93% 69% 73% 76% 3q16 2q17 3q17 3q16 2q17 3q17 3q16 2q17 3q17 20

22 Downstream High-Priority Channels (9M17 vs. 9M16) Filling stations Lubricants +3% sales volumes growth of premium motor and industrial oils Jet +4% into-plane sales volumes growth Motor fuels sales volumes growth +4% EKTO fuels sales volumes - Russia +16% - Abroad +10% Non-fuel goods and services gross margin - Russia +12% - Abroad +8% Bunkering Increase by 35% mainly due to the increase in market share in the Baltic region and Novorossyisk port 21

23 Financial Results 22

24 Revenue RUB bln 3 1, , (25) (19) Выручка Revenue 2 2q17 кв. 17 Нефть Oil (Russia) (РФ) Нефть Oil (International) (за рубежом) Refined Нефтепродукты products (Russia) (РФ) Нефтепродукты Refined products (за (International) рубежом) Прочее Other Выручка Revenue 3 3q17 кв. 17 Фактор Volume объема factor Фактор Price and цены structure и структуры factor 23

25 EBITDA RUB bln 12 (4) (15) EBITDA 2q17 in Russia outside Russia in Russia outside Russia Corporate and other Elimination EBITDA 3q17 Exploration and production Refining, marketing and distribution segment 24

26 Operating Expenses Operating expenses, RUB bln Lifting costs in Russia, RUB per boe Other Прочее Petrochemical Предприятия нефтехимии Power Предприятия generation энергетики and distribution Crude Транспортировка oil transportation нефтиto до refineries НПЗ Refining Переработка at the на third сторонних party refineries НПЗ 1.9 3q16 4q16 1q17 2q17 3q Refining Переработка at the на Group s НПЗ Группы refineries 3q Average 245 RUB per barrel Hydrocarbon Добыча углеводородов production (ex. (безw.qurna-2) З.Курна) кв. 2q кв. 3q LUKOIL - Nizhnevolzhskneft LUKOIL - Perm LUKOIL - West Siberia LUKOIL - Komi 25

27 2 кв Расходы на оплату труда Прочие Изменение обязательств по программе вознаграждения Изменение резерва по сомнительным долгам 3 кв SG&A and Transportation Expenses SG&A Transportation expenses RUB bln RUB bln (0) (2) (4) q16 Labor costs Other SG&A Share-based remuneration program Provision for doubtful debts 2 кв Нефть Нефтепродукты 3q17 2q16 Oil Refined products Прочее 3 кв Other 3q17 26

28 Profit RUB bln 42 (37) 139 (48) 10 (9) 0 97 Effect of sale of diamonds business 2q17 EBITDA FX Finance income / costs and other Effect of sale of diamonds business Income tax Others DD&A 3q17 27

29 Capital Expenditures RUB bln (1) (6) (1) (3) (0) 2 0 (1) 119 2q17 Caspian (projects in Russia) West Siberia (Yamal) Russia (ex. Caspian and Yamal) WQ-2 Uzbekistan Abroad (ex. WQ-2 and Uzbekistan) Russia Abroad Other 3q17 Upstream Downstream 28

30 Cash Flows RUB bln Free cash flow before changes in working capital, RUB bln FCF ex. WC, AGD 2q17 Capex OCF ex. WC, AGD FCF ex. WC 3q17 (119) (85) (5) (2) (6) Cash and cash equivalents at the beginning of 3q17 OCF before working capital Working capital change Capex Dividends Debt and interest Other financial cash flow Other Cash and cash equivalents at the end of 3q17 29

31 Financial Position Debt, RUB bln Debt maturity profile, RUB bln 860 Cash and cash equivalents Total debt Net debt Credit lines * Cash Net debt/ EBITDA М As of q and further *Stand-by revolving committed credit lines. Debt structure as of Credit ratings USD / EUR / Other debt 89% 8% 3% S&P BBB- BBB Secured / Unsecured debt Fixed / Variable rate 11% 57% 89% 43% Fitch BBB- BBB+ Eurobonds (all in $) / Other debt 55% 45% Moody s Ba1 Ba1 30

32 Finance Downstream Upstream 2017 Outlook Update Growth in hydrocarbon production by ~2.5% driven by gas production ramp-up Increase in the share of high-margin barrels Filanovsky, Pyakyahinskoe, Yaregskoe, gas production in Uzbekistan and others Growth of drilling volumes in West Siberia by >15% to decelerate decline rates in the mid-term New opportunities Completion of FEED on new projects in the Caspian Sea; FID on projects in the Baltic Sea; new exploration regions Increasing refinery throughput in Russia by ~3-4% Increase in light products yield in Russia to ~70%; further optimization of cross-supplies among the Group s refineries New opportunities FID on delayed coker complex at Nizhniy Novgorod refinery Development of priority marketing channels Capex <550 bln RUB excluding West Qurna-2 Upstream - >85%; Downstream - <15% Russia - ~70%; Abroad- ~30% 31

33 Q&A 32

34 Financial Results RUB bln 1,309 1,401 1,432 1,359 1, % y-o-y Revenue EBITDA % y-o-y Profit excluding FX effect and sale of diamonds business % y-o-y 3q16 4q16 1q17 2q17 3q17 33

35 Revenue RUB bln 4, , (52) 4 5 Revenue 9M16 Нефть Oil (Russia) (РФ) Нефть Oil (International) (за рубежом) Refined Нефтепродукты products (Russia) (РФ) Нефтепродукты Refined products (за (International) рубежом) Прочее Other Revenue 9M17 Фактор Volume объема factor Фактор Price and цены structure и структуры factor 34

36 EBITDA RUB bln 40 (1) 6 (1) (2) EBITDA 9M16 in Russia outside Russia in Russia outside Russia Corporate and other Elimination EBITDA 9M17 Exploration and production Refining, marketing and distribution segment 35

37 SG&A and Transportation Expenses SG&A Transportation Expenses RUB bln RUB bln 146 (7) (5) (12) (4) (4) (27) (1) 204 9М M16 Расходы Labor на оплату труда costs Прочие Other SG&A Share-based Изменение обязательств remuneration по программе вознаграждения program Provision Изменение резерва for doubtful по сомнительным debts долгам 9М М 2016 Нефть Нефтепродукты 9M17 9M16 Oil Refined products Прочее 9М 2017 Other 9M17 36

38 Profit RUB bln (10) (18) (17) Effect of sale of diamonds business 9M16 Finance income / costs and other EBITDA FX Effect of sale of diamonds business Income tax Others DD&A 9M17 37

39 Consolidated Statement of Profit or Loss (in USD mln, at the average exchange rate for the period) 3q17 2q17 9M17 9M16 Revenue 25,144 23,803 Sales (including excise and export tariffs) 73,315 55,937 Costs and other deductions (2,044) (1,936) Operating expenses (5,809) (4,957) (13,270) (12,280) Cost of purchased crude oil, gas and products (38,194) (27,338) (1,067) (1,182) Transportation expenses (3,503) (3,443) (727) (687) Selling, general and administrative expenses (2,031) (2,131) (1,422) (1,474) Depreciation, depletion and amortization (4,269) (3,373) (2,293) (2,551) Taxes other than income taxes (7,454) (4,744) (1,980) (2,020) Excise and export tariffs (5,859) (5,237) (14) (12) Exploration expenses (39) (82) 2,326 1,662 Profit from operating activities 6,157 4, Finance income (100) (119) Finance costs (380) (489) Equity share in income of affiliates (160) 487 Foreign exchange gain (loss) (431) (1,236) (12) 838 Other income (expenses) 765 (68) 2,176 2,991 Profit before income taxes 6,477 3,087 (511) (564) Current income taxes (1,288) (688) (7) 3 Deferred income taxes (56) (49) (518) (560) Total income tax expense (1,344) (737) 1,657 2,431 Profit for the period 5,133 2,350 (8) (3) Profit for the period attributable to non-controlling interests (17) (8) 1,650 2,428 Profit for the period attributable to PJSC LUKOIL shareholders 5,117 2,342 38

40 Always moving forward