2Q 2018 IFRS FINANCIAL RESULTS. August 30, 2018

Transcription

1 2Q 2018 IFRS FINANCIAL RESULTS August 30, 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 Operating results Hydrocarbon production ex. West Qurna-2, Kboepd Throughput at own refineries Kbpd Growing share of highmargin barrels Gas +3.2% +0.1% 2,217 2,287 2,286 2, % +2.7% 1,320 1,330 1,312 1,348 Rapid growth of gas production in Uzbekistan Progress with the Caspian sea projects Liquids 1,781 1,763 1,763 1,763 Higher throughput volumes High margin barrels 1H17 1H18 19% 25% 1Q18 2Q18 24% 25% Light product yield 1H17 1H18 71% 71% 1Q18 2Q18 71% 71% 3

4 Macro environment Higher oil prices Urals $ per bbl Average exchange rate, RUB per USD Weaker ruble Lower benchmark margins in Russia Recovering benchmark margins in Europe 1H17 1H18 1Q18 2Q18 Benchmark refining margin in Russia, $ 5.0 1H17 1H18 1Q18 2Q18 Benchmark refining margin in Europe, $ H17 1H18 1Q18 2Q18 1H17 1H18 1Q18 2Q18 4

5 Financial results Record high EBITDA and FCF Strong operating results Higher hydrocarbon prices Weaker ruble Export duty lag Inventory effect Cost control 2Q18 1Q18 % RUB bln 1H18 1H17 % 2,056 1, Sales 3,687 2, EBITDA Upstream Downstream (10.9) Profit to shareholders (12.6) CAPEX (11.0) Free cash flow (FCF) Adjusted FCF* (35.0) Net debt (41.9) * Free cash flow before working capital changes, West Qurna-2 project and income tax on sale of JSC Arkhangelskgeoldobycha. 5

6 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 Quarterly LTM rolling sum Strong business fundamentals Structural improvements Balanced investment programm Better macro environment Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 6

7 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 RUB per share +10% y-o-y in RUB +7% y-o-y in USD (FX rates as of announcement dates) 7% 4% 2% 0% International O&G Russian O&G 7

8 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 8

9 UPSTREAM Growing share of high-margin barrels Rapid growth of gas production internationally Better macro environment 9

10 Key operating results Hydrocarbon production Kboepd H18 / 1H17 2Q18 / 1Q18 Production dynamics WQ-2 Total Gas in Russia 34 2, , ,286 2, % 0.1% (0.5%) (2.0%) Growing share of high margin barrels Development of gas projects Mature fields 1,528 1, ,463 1, (4.5%) (0.5%) External limitations on liquids production in Russia (OPEC+) Hard-to-recover New projects H H Q18 2Q % 38.3% (1.3%) 4.0% High-margin barrels 19% 25% 24% 25% +6 p.p. +1 p.p. 10

11 Price and tax environment Higher net oil price Higher international price Weaker ruble Substantial positive export duty lag effect Urals net price $ per bbl Urals Export duty Mineral extraction tax $50 $12 $18 $69 $16 $27 $65 $16 $25 $72 $17 $29 1H18 / 1H17 2Q18 / 1Q % 11.2% 39.3% 3.1% 51.8% 13.8% Net price in RUB $21 1,205 $26 $24 1,526 1,371 $27 1, % 26.6% 13.8% 23.6% 1H17 1H18 1Q18 2Q18 Export duty lag effect -$0.2 $0.9 $0.0 $ RUB / $ average exchange rate % 2% 11

12 Upstream EBITDA RUB bln Russia Q-o-Q and Y-o-Y: higher oil price (+), weaker ruble (+), export duty lag effect (+), increased share of high-margin barrels (+) 1Q18 Russia International 2Q18 International Q-o-Q and Y-o-Y: growth of gas production volumes in Uzbekistan (+), higher oil and gas prices (+), higher EBITDA from WQ-2 project (+), weaker ruble (+) H17 Russia International 1H18 12

13 Filanovsky field 2 nd stage Net price in 2018 Under $50/bbl, RUB 60/USD Export duty MET Net price 42% Standard taxation 85% Filanovsky Production Kboepd Oil Gas Q17 3Q17 4Q17 1Q18 2Q18 Advantages High-margin barrels Short transportation leg, low lifting costs, high oil quality 1H18 results Two production wells and one injector drilled from the second platform; the field has reached the designed production plateau Completed construction of the third platform s substructure at the shipyard, topside >65% complete Plans for 2H18 2 nd stage: to drill two wells (one multilateral production well and one injector) 3 rd stage: construction of the topside of the third platform 13

14 Rakushechnoe field Field facilities Project profile 39 mln t Initial recoverable oil reserves Ice-resistant fixed platform Living quarter platform 2023 Start of commercial production Net price in 2018 Under $50/bbl, RUB 60/USD 1.2 mln t Oil production plateau Export duty MET Net price 42% Standard taxation 85% Rakushechnoe Advantages High-margin barrels Synergy with existing infrastructure Short transportation leg 14

15 Hard-to-recover: heavy crude oil Oil production Kbpd Usinskoe Permian deposit Yaregskoe Advantages High-margin barrels Substantial production growth potential Net price in 2018 Under $50/bbl, RUB 60/USD H18 results Yaregskoe: 5 SAGD wells, 81 underground wells, steam generation capacity of 125 tons per hour Usinskoe: 28 production wells, steam generation capacity of 20 tons per hour Export duty MET Net price 42% Standard taxation 62% Usinskoe* 96% Yaregskoe 2Q17 3Q17 4Q17 1Q18 2Q18 Plans for 2H18 Yaregskoe: steam generation capacity of 50 tons per hour; produced water utilization facilities Usinskoe: steam generation capacity of 40 tons per hour *Permian deposit 15

16 Hard-to-recover: low permeability Net price in 2018 Under $50/bbl, RUB 60/USD Export duty MET Oil production Kbpd Imilorskoe Vinogradov Advantages High-margin barrels Substantial production growth potential 1H18 results Imilorskoe: 32 production wells Vinogradov: 6 horizontal production wells Plans for 2H18 Imilorskoe: 43 production wells Vinogradov: 12 production wells Net price 42% 58% Standard taxation Imilorskoe*, Vinogradov 2Q17 3Q17 4Q17 1Q18 2Q18 * MET benefits applicable since

17 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) 1H18 results Launch of Kandym gas processing complex Plans for 2H18 Reaching daily production plateau in Uzbekistan 2Q17 3Q17 4Q17 1Q18 2Q18 17

18 DOWNSTREAM Higher refinery throughput Positive input inventory effect Growth in premium sales channels 18

19 Price Environment Europe Recovering margins in Europe amid seasonally stronger demand for refined products Russia Lower margins due to domestic prices lagging export netbacks Benchmark refining margins, $ per bbl Europe MED/NWE average Russia Prices Europe, $ / t Q17 3Q17 4Q17 1Q18 2Q18 Gasoline Diesel fuel Fuel oil Russia, th. RUB / t Premium gasoline Diesel fuel Fuel oil

20 Key operating results Throughput volumes at own refineries Kbpd 1H18 / 1H17 2Q18 / 1Q18 1,320 1,330 1,312 1, % 2.7% Higher refinery throughput Europe (1.0%) 9.9% Q-o-Q scheduled maintenance at refineries in Bulgaria and Italy in 1Q18 Russia % (1.0%) Y-o-Y higher utilization rates at refinery in Volgograd 1H17 1H18 1Q18 2Q18 Light product yield Russia 68% 70% 71% 70% 2 p.p. -1 p.p. Europe 75% 72% 69% 72% -3 p.p. +3 p.p. 20

21 Premium sales channels 1H18 / 1H17 Filling stations +5% motor fuels sales volumes ECTO fuels sales volumes: +6% in Russia +8% internationally Non-fuel profit: +23% in Russia +19% internationally Lubricants +3% growth in premium motor and industrial lubricants Aircraft refueling +6% into-plane sales volumes growth Completed construction of a refueling complex in Sheremetyevo airport Bunkering +6% sales volumes growth 21

22 Efficient allocation of Russian oil Prices $/bbl Brent Volumes mln t Sales in Russia Flat integrated margin q-o-q (amid lower benchmark refining margin and retail margin) due to high quality of product slate and growth in premium sales channels Delivery to own refineries in Russia Lower integrated margin y-o-y due to lower benchmark refining margin and retail margin Oil netback for refining in Russia* Oil export netback** 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 Exports Q17 1Q18 2Q18 Other Reduced export duty * Including retail margin of refined products produced at the refineries across all marketing channels ** West Siberian oil, standard taxation 22

23 Downstream EBITDA RUB bln 72 Russia Q-o-Q: lower benchmark refining margins (-), positive inventory effect (+), strong bunkering, air refueling and lubricants results (+), weaker retail (-) Y-o-Y: lower benchmark refining margins (-), positive input inventory effect (+), better product slate (+), strong petchem results (+), weaker marketing (-) Q18 Russia International 2Q18 International Q-o-Q : higher benchmark refining margins (+), positive input inventory effect (+), stronger marketing (+) Y-o-Y: positive input inventory effect (+), lower benchmark refining margins (-), maintenance works (-), weaker trading results (-), one-off accounting factors related to trading (-) (15.9) 118 1H17 Russia International 1H18 23

24 FINANCE Record high results on the back of better macroeconomic environment 24

25 Revenue 2Q18 / 1Q18 RUB bln 4 2,056 Higher hydrocarbon prices (56) 184 Higher crude oil trading volumes 124 Lower international wholesale petroleum products sales due to higher domestic sales and lower refined products trading volumes 1,631 (5) Q18 1К18 Нефть Oil (Russia) (Россия) Нефть Oil (International) (за рубежом) Refined Нефтепродукты products (Россия) (Russia) Нефтепродукты Refined products (за (International) рубежом) Прочее Other 2Q18 2К18 Volume factor Price and structure factor 25

26 OPEX Operating expenses RUB bln Lifting costs in Russia RUB per boe Other Power Petrochemical Crude oil transportation to refineries Refining at the third party refineries Own refining expenses К17 3К17 4К17 1К18 2К18 Breakdown of lifting costs by key subsidiaries (2Q18) RUB per boe Hydrocarbon extraction expenses (ex. WQ-2) L-Nizhnevolzhskneft L-Perm L-West Siberia L-Komi Average 1H17 1H18 1Q18 2Q18 ЛУКОЙЛ- L-Nizhne volzhskneft Нижневол жскнефть ЛУКОЙЛ- L-Perm ЛУКОЙЛ- L-West Пермь Западная Siberia Сибирь ЛУКОЙЛ- L-Komi Коми Среднее Average in Russia по России 26

27 EBITDA 2Q18 / 1Q18 RUB bln Higher hydrocarbon prices Weaker ruble (296.5) Positive export duty lag effect (43.5) (3.6) (2.2) (3.7) (0.3) 295 Positive inventory effect in downstream

28 Profit 2Q18 / 1Q18 RUB bln Higher DD&A due to the launch of new production facilities and inventory effect (9.9) (10.5) 23.8 (20.8) Positive FX effect due to ruble devaluation 109 1Q18 EBITDA DD&A Finance income / costs and other FX Income tax 2Q18 28

29 CAPEX RUB bln 255 (34.6) Q-o-Q: CAPEX decrease in accordance with the payment schedule to suppliers and contractors Y-o-Y: lower capital expenditures in the gas projects in Uzbekistan due to the launch of main production facilities (5.5) 1Q18 Caspian West Siberia Russia (4.0) Timan Pechora (0.9) (3.1) (0.8) International 1H17 Uzbekistan Other 1H (6.0) (1.3) Other Uzbekistan WQ-2 Other Russia Abroad Corporate & other Q18 Upstream Downstream 29

30 Cash flows 2Q18 / 1Q18 RUB bln Adjusted free cash flow (20.0) (105.8) 1Q18 CAPEX ex. WQ- 2 OCF ex. WC & WQ-2 2Q (116.8) 22.2 (0.1) 339 Cash and cash equivalents at the beginning of 2Q18 OCF before working capital Working capital CAPEX Debt, interest, financial assets FX Other Cash and cash equivalents at the end of 2Q18 30

31 Financial position (as of ) RUB bln Credit lines * 155 Total debt RUB 542 billion Net debt 203 Debt maturity schedule Net debt / EBITDA 0.2 Cash and cash equivalents H and further Debt structure Credit ratings USD / EUR / USD / EUR / Other Other debt Secured / Secured / unsecured Unsecured debt 13% 93% 87% 5%2% Moody s Baa3 Fixed / Fixed / variablevariable rate 54% 46% S&P BBB Eurobonds (all in $) / Eurobonds ($) / other Other debt 53% 47% Fitch BBB+ * Stand-by revolving committed credit lines. 31

32 2018 Outlook Upstream Launch of the 2 nd train of Kandym gas processing plant Launch of the 2 nd Phase at Korchagin field FID on Rakushechnoe field Production drilling at D41 Full development stage at Imilorskoe field 2 nd Phase drilling program at Filanovsky field Production growth by 3% (ex. WQ-2 project) Refining Completion of polyethylene line upgrade at Stavrolen Maintenance at Burgas, ISAB and Nizhny Novgorod refineries Maintaining refining volumes and light product yield at 2017 level Finance ~RUB 500 bln CAPEX (ex. WQ-2 project): Upstream / Downstream: 85% / 15% Russia / International: 80% / 20% 32

33 Q&A 33

34 Appendix 34

35 Price and Tax Environment Upstream 2Q18 1Q18 % Prices and FX rate 1H18 1H17 % Brent, USD / bbl Urals, USD / bbl RUB / USD x53 Export duty lag effect, RUB / bbl 52-8 (750) Net price, USD / bbl Net price, th. RUB / bbl Taxes in Russia Export duty USD / bbl th. RUB / t MET , USD / bbl , th. RUB / t

36 Price and Tax Environment Downstream 2Q18 1Q18 % Prices 1H18 1H17 % Russia, th. RUB per t Diesel fuel Fuel oil Premium gasoline Europe, USD per t Diesel fuel Fuel oil Gasoline Taxes in Russia Export duty, th. RUB per t Diesel fuel Fuel oil Excise, th. RUB per t (8.8) Gasoline (Euro-5) (8.6) Diesel fuel

37 Financial results RUB bln Revenue 1,359 1,483 1,662 1,631 2, % y-o-y 2Q17 3Q17 4Q17 1Q18 2Q18 EBITDA % y-o-y 2Q17 3Q17 4Q17 1Q18 2Q18 Profit * % y-o-y 2Q17 3Q17 4Q17 1Q18 2Q18 2Q17 3Q17 4Q17 1Q18 2Q18 * Excluding FX, net impairments and sale of diamonds business 37

38 Revenue 1H18 / 1H17 RUB bln 27 3, (126) 356 2,791 (1) H17 Oil (Russia) Oil (International) Refined products (Russia) Refined products (International) Other 1H18 Volume factor Price and structure factor 38

39 EBITDA 1H18 / 1H17 RUB bln (635.6) (135.1) (2.8) 7.0 (1.6) EBITDA 1H17 Revenue Purchases Taxes and duties OPEX Transportation SG&A Exploration EBITDA 1H18 39

40 Profit 1H18 / 1H17 RUB bln (20.3) (49.7) (19.2) (47.6) Sale of JSC Arkhangelskgeoldobycha Profit 1H17 EBITDA DD&A Finance income / costs and other FX Income tax Profit 1H18 40

41 CAPEX 1H18 / 1H17 RUB bln Upstream Downstream (7.1) (1.4) 1.9 (34.6) (2.8) 7.3 Russia International 1H17 West Siberia (Yamal) Caspian Other WQ-2 Uzbekistan Other Russia International Corporate and other 1H18 41

42 Statement of Profit or Loss (in USD mln, at the average exchange rate for the period) 2Q18 1Q18 1H18 1H17 Revenue 33,270 28,660 Sales (including excise and export tariffs) 62,067 48,117 Costs and other deductions (1,816) (1,909) Operating expenses (3,718) (3,760) (19,221) (15,667) Cost of purchased crude oil, gas and products (35,005) (24,892) (1,104) (1,161) Transportation expenses (2,260) (2,435) (654) (646) Selling, general and administrative expenses (1,299) (1,302) (1,579) (1,541) Depreciation, depletion and amortization (3,119) (2,844) (3,462) (3,281) Taxes other than income taxes (6,745) (5,161) (2,233) (2,130) Excise and export tariffs (4,353) (3,875) (13) (8) Exploration expenses (22) (25) 3,197 2,317 Profit from operating activities 5,545 3, Finance income (134) (129) Finance costs (263) (280) Equity share in income of affiliates (25) Foreign exchange gain (loss) 353 (271) (171) 12 Other income (expenses) (166) 782 3,428 2,329 Profit before income taxes 5,798 4,297 (646) (321) Current income taxes (980) (775) (63) (86) Deferred income taxes (148) (49) (710) (406) Total income tax expense (1,128) (823) 2,718 1,923 Profit for the period 4,670 3,474 (11) (6) Profit for the period attributable to non-controlling interests (18) (9) 2,707 1,917 Profit for the period attributable to PJSC LUKOIL shareholders 4,653 3,465 42