1Q 2018 IFRS FINANCIAL RESULTS. May 29, 2018

Transcription

1 1Q 2018 IFRS FINANCIAL RESULTS May 29, 2018

2 Forward-looking statements Certain statements in this presentation are not historical facts but are forward-looking. Examples of such forward-looking statements include, but are not limited to: projections or forecasts 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 and services statements of future economic performance and statements of assumptions underlying such statements. Words such as believes, expects, assumes, projects, intends and plans and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements By nature, forward-looking statements imply certain inherent risks and unclear points, both general and specific, and there is a risk that plans, expectations, forecasts and other forward-looking statements will not be realized. You should be aware that a number of important factors could cause actual results to differ significantly from the plans, objectives, expectations, estimates and intentions expressed in such forwardlooking 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 forward-looking statements will be achieved 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. 2

3 Operational results Hydrocarbon production ex. West Qurna-2, Kboepd Throughput at own refineries Kbpd 2,213 2,286 2,286 1,319 1,378 1,312 Continued structural improvements in core businesses Gas Rapid production growth in Uzbekistan Liquids 1,791 1,762 1,763 Progress with the Caspian sea projects 1Q17 4Q17 1Q18 1Q17 4Q17 1Q18 High margin barrels 19% 23% 24% Light product 65% 69% 71% yield 3

4 Financial results 1Q18 4Q17 % RUB bln 1Q18 1Q17 % 1,631 1,662 (1.9) Revenue 1,631 1, Record free cash flow before changes in working capital Stringent cost control Lower CAPEX (1.9) EBITDA (0.6) Upstream (4.4) Downstream (33.6) (9.5) Profit to shareholders (12.1) CAPEX (7.0) (37.3) Free cash flow (FCF) 46 1 x Adjusted FCF* Net debt (32.9) * Free cash flow before working capital changes, West Qurna-2 project 4

5 Growing free cash flow Adjusted free cash flow (before changes in working capital, West Qurna-2 project and income tax on sale of diamond business) RUB bln Strong business fundamentals Structural improvements High cost discipline Quarterly basis LTM rolling sum Balanced investment 100 programm Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 5

6 Progressive dividend policy 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 dividends by not less than the ruble inflation rate Cash distribution priorities Dividend yield DPS 2017 to average share price in % 6% Scrip M&A Investments Dividends Financial stability Total dividend for 2017 BoD recommendation 215 RUB per share +10% y-o-y in RUB +7% y-o-y in USD (FX rates as of announcement dates) Key dates: AGM June 21 Record date July 11 7% 4% 2% 0% International O&G Russian O&G 6

7 Balanced distribution of additional free cash flow to shareholders $80 bln for 10 years Progressive dividend policy: guaranteed annual dividend growth at least at ruble inflation rate Policy of balanced distribution of additional cash flow (for example, at >$50/bbl oil price) Distribution to shareholders Share buyback 50:50 (on strategy horizon) Operating cash flow Investments at $50/bbl Free cash flow Guaranteed dividend Excess cash flow Reinvestment Organic growth projects - priority Carefully selected M&A with a conservative approach to risks 7

8 UPSTREAM Growing share of high-margin barrels 8

9 Key operating results Hydrocarbon production Kboepd WQ Q-o-Q Y-o-Y Total 2,213 2,222 2,219 2,286 2,286 0% 3% Production dynamics Gas in Russia % 4% Growing share of highmargin barrels Development of gas Mature fields 1,549 1,508 1,476 1,470 1,463 0% (6%) projects in Russia and Uzbekistan External limitations on Hard-to-recover New projects % 28% 1% 42% liquids production in 1Q17 2Q17 3Q17 4Q17 1Q18 Russia (OPEC+) High-margin barrels 19% 20% 21% 23% 24% +1 p.p. +5 p.p. 9

10 Price and tax environment $61 $65 Q-o-Q Y-o-Y 7% 25% 1Q18 / 1Q17 Increase in net oil price despite stronger ruble 1Q18 / 4Q17 Urals Export duty Mineral extraction tax $52 $12 $19 $48 $12 $17 $51 $11 $18 $13 $16 $23 $25 21% 35% 10% 35% Decrease in net oil price due to lower positive export duty lag Net price RUB $22 $20 $22 $25 $24 1,268 1,144 1,305 1,446 1,371 (3%) (5%) 12% 8% effect 1Q17 2Q17 3Q17 4Q17 1Q18 Export duty lag effect $0.2 -$0.5 $0.9 $1.5 $0.0 (98%) (85%) RUB/$ average exchange rate (3%) (3%) 10

11 Upstream EBITDA 173 (5.2) Russia Q-o-Q: lower positive export duty lag effect (-), stronger ruble (-), higher oil price (+), lower lifting costs (+) Y-o-Y: increased share of high-margin barrels (+), higher net oil price (+), stronger ruble (-) 4Q17 Russia International 1Q18 International 172 Q-o-Q and Y-o-Y: growth in gas production volumes in Uzbekistan (+), higher oil and gas prices (+), higher EBITDA from WQ-2 project (+), stronger ruble (-) Q17 Russia International 1Q18 11

12 Filanovsky field 2 nd stage Production Kboepd Oil Gas Advantages High-margin barrels Production growth Short transportation leg, low lifting costs, high oil quality Net price in 2018 Under $50/bbl, RUB 60/USD Q18 results One production well and one injector drilled from the second platform Substructure for the third platform >90% complete, topside 50% complete Export duty MET Net price 42% Standard taxation 85% Filanovsky 1Q17 2Q17 3Q17 4Q17 1Q18 Plans for 2Q18 4Q18 2 nd stage: to drill three wells (two multilateral production wells and one injector) 3 rd stage: to install the substructure for the third platform 12

13 Hard-to-recover: heavy crude oil Net price in 2018 Under $50/bbl, RUB 60/USD Export duty MET Net price 42% 62% 96% Oil production Kbpd Usinskoe Permian deposit Yaregskoe Advantages High-margin barrels Production growth potential 1Q18 results Yaregskoe: one SAGD well, 31 underground wells, steam generation capacity of 125 tons per hour Usinskoe: 13 production wells Plans for 2Q18 4Q18 Yaregskoe: steam generation capacity of 50 tons per hour; produced water utilization facilities Usinskoe: steam generation capacity of 60 tons per hour Standard taxation Usinksoe (Permian deposit) Yaregskoe 1Q17 2Q17 3Q17 4Q17 1Q18 13

14 Hard-to-recover: low permeability Oil production Kbpd Imilorskoe Vinogradov Advantages High-margin barrels Production growth potential Net price in 2018 Under $50/bbl, RUB 60/USD Export duty MET Q18 results Imilorskoe: 16 production wells Vinogradov: two horizontal production wells Plans for 2Q18 4Q18 Imilorskoe: 59 production wells Vinogradov: 16 production wells Net price 42% 58% Standard taxation Imilorskoe*, Vinogradov 1Q17 2Q17 3Q17 4Q17 1Q18 * MET benefits applicable since

15 Gas projects in Uzbekistan Gas production (LUKOIL share) Kboepd Kandym Gissar Advantages Proven track record in the region Production growth potential International prices (export to China) 1Q18 results Final construction works at the second train of Kandym gas processing complex with subsequent launch in April 2018 Plans for 2Q18 4Q18 Reaching production plateau in Uzbekistan 1Q17 2Q17 3Q17 4Q17 1Q18 15

16 DOWNSTREAM Better light product yield Optimized maintenance works schedule at refineries Growth in premium sales channels 16

17 Price Environment Benchmark refining margins $ per bbl Europe MED/NWE average Europe Slowly recovering margins supported by cold weather Russia Higher excise rates, domestic prices lagging export netbacks Russia Prices Europe, USD/t 1Q17 2Q17 3Q17 4Q17 1Q18 Premium gasoline Diesel fuel Fuel oil Russia, th. RUB/t Premium gasoline Diesel fuel Fuel oil

18 Key operating results Throughput volumes at own refineries Kbpd Q-o-Q Y-o-Y 1,319 1,321 1,383 1,378 1,312 (5%) (1%) Lower throughput volumes due to maintenance Europe (9%) (4%) Higher light product yield in Russia Russia (2%) 1% 1Q17 2Q17 3Q17 4Q17 1Q18 Light product yield in Russia 65% 71% 71% 69% 71% 2 p.p. 6 p.p. 18

19 Premium sales channels 1Q18 / 1Q17 Filling stations +2% motor fuels sales volumes ECTO fuels sales volumes: +10% in Russia +9% internationally Non-fuel profit: +25% in Russia +19% internationally Lubricants +1% growth in premium motor and industrial lubricants Aircraft refuelling +7% into-plane sales volumes growth Bunkering +1% sales volumes growth 19

20 Efficient allocation of Russian oil Prices $/bbl Brent Volumes mln t Sales in Russia Enhanced integrated margin driven by strong performance in premium sales channels Delivery to own refineries in Russia Oil netback for refining in Russia* Oil export netback** 1Q17 2Q17 3Q17 4Q17 1Q18 Exports Q17 4Q17 1Q18 Other Reduced export duty * Including retail margin of refined products produced at the refineries across all marketing channels ** West Siberian oil, standard taxation 20

21 Downstream EBITDA Russia Q-o-Q: lower benchmark refining margins (-), negative inventory effect (-), better product slate (+), strong petchem results (+), seasonally strong power generation (+), stronger marketing (+) Y-o-Y: lower benchmark refining margins (-), lower negative inventory effect (+), better product slate (+), strong petchem results (+) International Q-o-Q : lower benchmark refining margins (-), maintenance works (-), lower positive inventory effect (-) Y-o-Y : lower benchmark refining margins (-), maintenance works (-), weaker trading results (-), one-off accounting factors related to trading (-) (5.2) 4Q17 Russia International 1Q (28.1) 1Q17 Russia International 1Q

22 FINANCE Robust results 22

23 Revenue 1Q18 / 4Q17 RUB bln 1, Lower crude oil trading volumes Inventory build-up Lower refinery throughput (54) 21 (29) ,631 Seasonally lower sales in Russia 4Q17 Oil (Russia) Oil (International) Refined products (Russia) Refined products (International) Other 1Q18 Volume factor Price and structure factor 23

24 OPEX 1Q18 / 4Q17 Operating expenses RUB bln 118 Lifting costs in Russia RUB per boe Lower lifting costs Lower refining expenses Other Power Petrochemical Crude oil transportation to refineries Refining at the third party refineries Own refining expenses 1Q17 2Q17 3Q17 4Q17 1Q18 Breakdown of lifting costs by key subsidiaries (1Q18) RUB per boe Hydrocarbon extraction expenses (ex. WQ-2) Q17 4Q17 1Q18 L-Nizhnevolzhskneft L-Perm L-West Siberia L-Komi Average L-Nizhne volzhskneft L-Perm L-West Siberia L-Komi Average in Russia 24

25 EBITDA 1Q18 / 4Q17 RUB bln Lower operating expenses, SG&A, exploration and transport costs 224 (31.7) Taxes offset higher oil price 11.8 (16.0) EBITDA 4Q17 Revenue Purchases Taxes and duties OPEX Transportation SG&A Exploration EBITDA 1Q18 25

26 Profit 1Q18 / 4Q17 RUB bln 121 Higher DD&A due to 4Q17 one-offs and launching new production facilities (4.2) (11.5) (6.6) Lower FX effect due to intragroup capital structure optimization and lower FX rate volatility Net impairment loss in 4Q17 Profit 4Q17 EBITDA DD&A Finance income / costs and other FX Income tax Profit 1Q18 26

27 CAPEX 1Q18 / 4Q17 RUB bln Upstream Downstream Lower international upstream capex due to completion of key construction works in Uzbekistan (7.3) (4.8) Seasonally lower capex in the Caspian Sea Seasonally lower capex in the Russian retail (2.6) (7.0) Russia International CAPEX 4Q17 West Siberia (Yamal) Caspian Other WQ-2 Uzbekistan Other Russia International Corporate and other CAPEX 1Q18 27

28 Cash flows 1Q18 / 4Q17 RUB bln Adjusted free cash flow 77 (2.1) (47.9) 4Q17 CAPEX ex. WQ-2 OCF ex. WC and WQ-2 1Q (121.1) 330 (60.9) (8.6) (10.1) 297 Cash and cash equivalents at the beginning of 1Q18 OCF before Working capital working capital change, inc. payment on LT incentives plan CAPEX Dividends Debt and interest Other Cash and cash equivalents at the end of 1Q18 28

29 Financial position (as of ) Credit lines* Total debt RUB 609 bln Net debt Debt maturity schedule 0.4 Net debt / EBITDA Cash and cash equivalents and further Debt structure Credit ratings USD / EUR / USD / EUR / Other Other debt Secured / Secured / Unsecured unsecureddebt 11% 89% 89% 9% 2% Moody s Baa3 Fixed / Fixed / variable Variable rate 59% 41% S&P BBB Eurobonds (all in $) / Eurobonds ($) / other Other debt 57% 43% Fitch BBB+ * Stand-by revolving committed credit lines. 29

30 2018 Outlook Upstream Production growth by 1-2% (ex. WQ-2 project) Development of growth projects in Russia: Launch of the 2 nd stage at Korchagin field 2 nd stage drilling program at Filanovsky field Start of production drilling at D41 Moving to full development stage at Imilorskoe field FID on Rakushechnoe field Reaching daily production plateau level in Uzbekistan post completion of gas treatment facilities Refining Maintaining refining volumes and light products yield at 2017 level Maintenance works at the refineries Completion of polyethylene line upgrade at Stavrolen Finance ~$8 bln CAPEX (ex. WQ-2 project): Upstream / Downstream: 85% / 15% Russia / International: 80% / 20% 30

31 Q&A 31

32 Appendix 32

33 Price and Tax Environment Upstream 1Q18 4Q17 % Prices and FX rate 1Q18 1Q17 % Brent, USD / bbl Urals, USD / bbl (3) RUB / USD (3) 2 89 (98) Export duty lag effect, RUB / bbl 2 14 (86) (3) Net price, USD / bbl (5) Net price, th. RUB / bbl Taxes in Russia Export duty USD / bbl th. RUB / t MET USD / bbl th. RUB / t

34 Price and Tax Environment Downstream 1Q18 4Q17 % Prices 1Q18 1Q17 % Russia, th. rubles per t Diesel fuel (2) Fuel oil (4) Premium gasoline Europe, dollars per t Diesel fuel Fuel oil Gasoline Taxes in Russia Export duty, th. rubles per t Diesel fuel Fuel oil Excise, th. rubles per t Gasoline (Euro-5) Diesel fuel

35 Financial results Revenue 1,432 1,359 1,483 1,662 1, % y-o-y 1Q17 2Q17 3Q17 4Q17 1Q % y-o-y EBITDA 1Q17 2Q17 3Q17 4Q17 1Q % y-o-y Profit * 1Q17 2Q17 3Q17 4Q17 1Q18 1Q17 2Q17 3Q17 4Q17 1Q18 * Excluding FX, net impairments and sale of diamonds business 35

36 Revenue 1Q18 / 1Q17 RUB bln 9 1, (48) 127 1, (3) 84 1Q17 Oil (Russia) Oil (International) Refined products (Russia) Refined products (International) Other 1Q18 Volume factor Price and structure factor 36

37 EBITDA 1Q18 / 1Q17 RUB bln (148.9) 208 (44.7) (1.1) 7.7 (0.5) Q17 Revenue Purchases Taxes and duties OPEX Transportation SG&A Exploration 1Q18 37

38 Profit 1Q18 / 1Q17 RUB bln (7.4) (6.9) 7.1 1Q17 EBITDA DD&A Finance income / costs and other FX Income tax 1Q18 38

39 CAPEX 1Q18 / 1Q17 RUB bln Upstream Downstream (5.0) (19.3) (2.6) 6.9 Russia International 1Q17 West Siberia (Yamal) Caspian Other WQ-2 Uzbekistan Other Russia International Corporate and other 1Q18 39

40 Statement of Profit or Loss (in USD mln, at the average exchange rate for the period) 1Q18 1Q17 1Q18 4Q17 Revenue 28,660 24,347 Sales (including excise and export tariffs) 28,660 28,467 Costs and other deductions (1,909) (1,828) Operating expenses (1,909) (2,022) (15,667) (12,629) Cost of purchased crude oil, gas and products (15,667) (15,465) (1,161) (1,254) Transportation expenses (1,161) (1,174) (646) (617) Selling, general and administrative expenses (646) (804) (1,541) (1,374) Depreciation, depletion and amortization (1,541) (1,305) (3,281) (2,614) Taxes other than income taxes (3,281) (2,944) (2,130) (1,861) Excise and export tariffs (2,130) (2,054) (8) (13) Exploration expenses (8) (173) 2,317 2,158 Profit from operating activities 2,317 2, Finance income (129) (161) Finance costs (129) (89) Equity share in income of affiliates (25) (740) Foreign exchange gain (loss) (25) (42) Other income (expenses) 12 (200) 2,329 1,334 Profit before income taxes 2,329 2,510 (321) (217) Current income taxes (321) (426) (86) (51) Deferred income taxes (86) (9) (406) (268) Total income tax expense (406) (435) 1,923 1,066 Profit for the period 1,923 2,075 (6) (6) Profit for the period attributable to non-controlling interests (6) (11) 1,917 1,060 Profit for the period attributable to PJSC LUKOIL shareholders 1,917 2,064 40