Rosneft · RUS:ROSN
Rosneft — Rosneft Oil Company — FY2018 Earnings Presentation
47 slides from Rosneft's earnings presentation, Feb 5, 2019
Slide 1: IFRS Results 12M and Q4 2018
Rosneft Oil Company IFRS Results 12M and Q4 2018 February 5, 2019
Slide 2: Important Notice
Important Notice Information herein has been prepared by the Company. The presented conclusions are based on the general information collected as of the date hereof and can be amended without any additional notice. The Company relies on the information obtained from the sources which it deems credib
Slide 3: Macroeconomic Environment
Macroeconomic Environment Indicator 2018 2017 % Q4’18 Q3’18 % Urals, $/bbl 69.8 53.1 31.4% 67.3 74.2 (9.3)% Urals, ‘000 Rub/bbl 4.38 3.10 41.2% 4.48 4.86 (8.0)% Naphtha, ‘000 Rub/ton 36.88 27.56 33.8% 35.10 42.06 (16.5)% Gasoil 0.1%, ‘000 Rub/ton 39.53 28.24 40.0% 41.46 43.44 (4.6)% Fuel oil 3.5%, ‘
Slide 4: Crude Oil Price and Gross Upstream Margin
Crude Oil Price and Gross Upstream Margin Brent price Gross upstream margin1 Rub/bbl Rub/bbl FY average FY average 6,000 2,000 5,000 1,500 4,000 1,000 3,000 500 2,000 0 Jan-18 Apr-18 Jul-18 Oct-18 Jan-18 Apr-18 Jul-18 Oct-18 Note: (1) Calculated as Urals price less MET, export customs duty and trans
Slide 5: Key Achievements: Upstream
Key Achievements: Upstream 84% – success rate in on-shore exploration drilling 454 mmtoe – АВ1С1 reserves additions from exploration, 23 new fields and 230 deposits were discovered with АВ1С1+B2С2 reserves of about 250 mmtoe 173% - Proven SEC hydrocarbon reserves replacement ratio 1 > 12 mln m – hig
Slide 6: Key Achievements: Downstream
Key Achievements: Downstream 115 mmt – refining throughput, including 103.3 mmt processed at Russian refineries Commercial production of high octane gasolines Euro-6 and Pulsar 100 started Laboratories and control rooms of the Production control center were fitted with advanced digital equipment +24
Slide 7: Key Operational Highlights
Key Operational Highlights Indicator 2018 2017 % Comment SEC proven hydrocarbon Successful exploration, commencement of new field areas, as reserves 41,431 39,907 +3.9% well as development performance improvement mmboe Hydrocarbon production, incl. 5,795 5,718 +1.3% kboed Efficient production recove
Slide 8: Key Financial Highlights
Key Financial Highlights Indicator 2018 2017 % Q4’18 Q3’18 % EBITDA, Rub bn 2,081 1,400 48.6% 488 643 (24.1)% Net Income, Rub bn 549 222 >100% 109 142 (23.2)% attributable to Rosneft shareholders Adjusted net income1, Rub bn 828 383 >100% 185 267 (30.7)% attributable to Rosneft shareholders Adjusted
Slide 9: Regulatory changes in the O&G industry
Regulatory changes in the O&G industry Initiative Effect Introduction of PBT for new production regions and pilot projects in West Siberia Extension of an existing MET rate component for 2021 Introduction of an additional MET rate component starting 2019 Upstream Completion of the Big tax maneuver:
Slide 10: Production Restrictions under OPEC+ Agreement
Production Restrictions under OPEC+ Agreement Liquids production in Russia kbpd Russia total, RHS 4,900 Rosneft, LHS 11,550 Entry level for the production cut by the Company (~90)2 11,350 4,704 4,700 (~120)1 11,150 4,601 10,950 4,500 10,750 4,300 10,550 Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Au
Slide 11: Rosneft Liquids Production with OPEC+ Restrictions Implied
Rosneft Liquids Production with OPEC+ Restrictions Implied mmt +3-4.5% +2.1% 225.5 230.2 2017 2018 2019 2018 liquids production increased by 2.1% YoY due to record high output at Yugansk, the Company largest asset, launch of large greenfields as well as efficient management of the existing fields
Slide 12: Rosneft Assets in Venezuela
Rosneft Assets in Venezuela Reimbursement of prepayments in 20181 Car ibbean Sea $ bn Patao Mejillones Principal Petroperija Boqueron amount Petromonagas 2.3 reduced by 2 times Carabobo-2/4 Junin-6 4.6 VENEZUELA Oil projects GUYANA 2.3 Gas projects Orinoco Petroleum Belt BRAZIL 0 150 km Dec 31, 2017
Slide 13: Operating Results
Operating Results
Slide 14: Exploration and Reserves
Exploration and Reserves Reserves1 Key achievements in 2018 mmboe Maintaining high levels of 2D and 3D seismic works (onshore) 1,569 84% - exploration drilling success rate (onshore Russia) 454 mmtoe АВ1С1 reserves additions by exploration -2,115 2,070 23 new fields and 230 deposits were dis
Slide 15: Development drilling
Development drilling Development drilling footage Key achievements in 2018 ‘000 m Development drilling footage flat YOY – >12 mln m with -0.6% >50% share of in-house service. Number of multilateral wells commissioned doubled 3.5% increase in new wells commissioning to >3.4 th. wells with increme
Slide 16: Hydrocarbon Production
Hydrocarbon Production kboed +1.3% 44 (22) 50 (29) 30 (31) (23) (19) 3 74 +117 kboed (+2.0%) average daily liquids production growth 5,718 in West and East Siberia 5,795 2017 Yugansk Greenfields in Other mature fields Greenfields in East Mature fields in Far East Brownfields of Timano-Pechora Gas pr
Slide 17: Progress in Key Projects
Progress in Key Projects Indicator Yurubcheno-Tokhomskoe field Kondinskoe field 3Р reserves (PRMS) 309 mmtoe / 2,368mmboe1 142 mmtoe / 1,034 mmboe Commissioning year 2017 2017 Production in 2018 2.3 mmt 1.6 mmt Production plateau (year) c. 5 mmtpa (2019) >2 mmtpa (2019) In 2017-2018, oil treatment
Slide 18: Progress in Key Greenfields: Taas-Yuryakh
Progress in Key Greenfields: Taas-Yuryakh (Srednebotuobinskoye Field, Stage 2) Indicator Value 3Р reserves (PRMS) 281 mmtoe / 2,053 mmboe Commissioning Q4 2018 2018 production 2.9 mmt Plateau production (year) c. 5 mmtpa (2021+) Second stage facilities were launched (oil pipeline, central processi
Slide 19: Progress in Key Greenfields: Tagul Field
Progress in Key Greenfields: Tagul Field Indicator Value 3Р reserves (PRMS) 456 mmtoe / 3,251mmboe Commissioning year Q4 2018 2018 production 1.3 mmt Plateau production (year) >4.5 mmtpa (2022+) Test production period completed The field was put on stream, 2018 production accounted for 1.3 mmt (
Slide 20: Progress in Key Greenfields: Russkoe Field
Progress in Key Greenfields: Russkoe Field Indicator Value 3Р reserves (PRMS) 416 mmtoe / 2,799 mmboe Commissioning year Q4 2018 2018 production 0.3 mmt Plateau production (year) >6.5 mmtpa (2022+) The field was put on stream, 2018 production accounted for 0.3 mmt (using mobile oil treatment plant
Slide 21: Progress in Key Greenfields: Kuyumba Field
Progress in Key Greenfields: Kuyumba Field1 Indicator Value 3Р reserves (PRMS) 285 mmtoe / 2,176 mmboe Commissioning year2 Q4 2018 2018 production 0.5 mmt Plateau production (year)2 >3 mmtpa (2021+) The field was put on stream, the central production facility (CPF) was launched. 2018 production ac
Slide 22: Gas Business
Gas Business Key achievements for 2018 Gas production Gas revenues increased by 8.8% in 2018 mainly driven by bcm production growth at the Zohr field (offshore Egypt). Field -1.15 development goes ahead of schedule. Gas production exceeded (-1.7%) 57 mcm per day1 for less than a year since the pro
Slide 23: Progress Key Projects: Rospan
Progress Key Projects: Rospan The project provides the major contribution to the Company near-term production growth Indicator Value 852 bcm of gas, 195 mmt of 3Р reserves (PRMS) 6.22 6.45 6.63 gas condensate, LPG and oil Potential: > 19 bcm of gas Annual production > 5 mmt of liquids 1.27 1.36 1.39
Slide 24: Brownfields Development: Development Projects at Sibneftegaz
Brownfields Development: Development Projects at Sibneftegaz The Company's largest asset in terms of gas production. In 2018 production stood at 11.96 bcm Indicator Value 3Р PRMS reserves (gas) 543 bcm 12.6 12.1 12.0 2007 (Beregovoy LA) Commissioning year 2009 (Pyreyny LA) 2017 2018 2016 2014 (Khady
Slide 25: Greenfields Development: Kharampur
Greenfields Development: Kharampur The most significant (after Rospan) project of the Company in terms of gas production growth1 Indicator Value 3Р reserves (PRMS), 650 bcm2 gas Gas production plateau: c. 11 bcmpa3 Phase 1 (Senomanian) Commissioning year 2020 Development strategy: Phase 1 (Senoman
Slide 26: Refining: Further Efficiency Improvement via Units Optimization
Refining: Further Efficiency Improvement via Units Optimization Key refining highlights in Russia Key achievements in 2018 Gasoline production, mmt Diesel production, mmt Improved product slate at Russian refineries taking into Refining throughput, mmt account market demands: 20. 0 35. 0 18. 0 H
Slide 27: Profit Maximization from Crude Oil Marketing
Profit Maximization from Crude Oil Marketing Netbacks for the main crude oil marketing channels Oil marketing breakdown Refining capacity utilization Export netback mmt Refining netback Domestic market netback 58.3 59.1 61.1 Export netback (Primorsk) 400 1.0 0 0.9 5 Export, West 22% 24% 360 0.9 0 28
Slide 28: Premium Marketing Channels Development
Premium Marketing Channels Development Avia Bunker fuel Lubes Bitumen Key achievements In 2018 jet fuel sales increased In 2018 bunker fuel sales grew As of the year end Company Sales of the new innovative by +6.1% YOY by +10.7% YOY produced lubes packed in product, polymer-bitumen oilcans with new
Slide 29: Progress in Development of the Retail Channel
Progress in Development of the Retail Channel Retail By-product sales 16% - increase of motor fuel sales 1 6% - by-product and services revenues growth 1 36% - increase of hot beverages sales vs 2017 14% - «cafe» category revenues growth 1 55% - increase of hot beverages sales vs 2016 Key achievemen
Slide 30: Financial Results
Financial Results
Slide 31: Revenue
Revenue 2018 vs 2017 Rub bn 31 25 180 3 1,399 589 8,238 6,011 2017 Exchange rate Prices Exchange rate effect Share in profits of Volumes Other 2018 from prepayments associates and JVs Positive price environment – Urals price grew by 41% in Rub terms Increase of crude oil and petroleum products e
Slide 32: Operating Costs Dynamics
Operating Costs Dynamics Lifting costs Refining costs in Russia Rub/boe Quarter 12M Average % YOY Rub/bbl Quarter 12M Average % YOY 194 184 215 205 192 199 192 193 180 185 168 172 11.2% 10.1% 3.8% 2.1% 3.0% 0.6% 11.6% -4.4% 12.0% 0.0% Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Trans
Slide 33: EBITDA and Net Income
EBITDA and Net Income EBITDA 2018 vs 2017 Rub bn 25 (58) 132 (2) 5 (19) (21) (11) 334 20 (9) 285 Internal and seasonal factors: 2,081 1,400 External factors: Rub +116 bn; +8.3% Rub +565 bn; +40.3% 2017 Exchange rate Excise taxes Tax maneuver Prices Share in profits Export duty lag Transport tariffs
Slide 34: CAPEX
CAPEX CAPEX and production CAPEX almost flat YOY (+1.5% in Rub terms). Investments Rub bn mmboed were in line with the Company strategy and focused on: 1,500 6.5 development drilling and hydrofracturing at mature 1,200 5.2 assets to maintain production levels taking into account 922 936 the OPEC
Slide 35: Free Cash Flow and Reimbursement of Prepayments
Free Cash Flow and Reimbursement of Prepayments Free cash flow Free cash flow growth by over 4x times to Rub 1.1 trln Rub bn $ bn ($17.9 bn) 1,133 17.9 Industry-leading free cash flow, timely debt service Organic free cash flow and reduction of debt burden are the Company strategic priorities
Slide 36: Dividend Policy
Dividend Policy Payout ratios Dividend payments and oil prices of the largest state controlled companies3 DPS, Rub per share as % of IFRS net income 111.3 108.7 21.22 117.50 120.00 119.50 119.00 118.50 118.00 Brent, $/bbl 117.00 116.50 116.00 115.50 115.00 114.50 114.00 113.50 113.00 20 112.50 112.0
Slide 37: Appendix
Appendix
Slide 38: Revenue Q4 vs Q3 2018
Revenue Q4 vs Q3 2018 Rub bn 25 (169) 22 2 (6) 5 2,286 2,165 Q3 2018 Exchange rate Prices Exchange rate Share in profits of Volumes Other Q4 2018 effect from associates and prepayments JVs Negative price environment – Urals price down by 8% in Rub terms Increase in exports of crude and reduction
Slide 39: Costs in 2018 vs. 2017
Costs in 2018 vs. 2017 Lifting costs Rub bn 12.8 7.3 2.1 2018 lifting costs growth was mainly driven by tariffs indexation of natural monopolies, growth of repair and 359.0 381.2 maintenance costs of growing well stock and other oilfield services, as well as associated costs on materials and trans
Slide 40: EBITDA and Net Income Q4 vs Q3
EBITDA and Net Income EBITDA Q4 2018 vs Q3 2018 Rub bn External factors: Rub -98 bn; -15.2% 8 (43) 2 (64) (1) (9) (13) (19) (16) 643 488 Internal and seasonal factors: Rub -57 bn; -8.9% Q3 2018 Exchange rate Prices Share in profits of Export duty lag Other taxes Volumes Intragroup balances G&A costs
Slide 41: FX Risk Hedge
FX Risk Hedge 2018, Rub bn 2017, Rub bn Net of income Net of income Before tax Income tax Before tax Income tax tax tax Recognized within other funds and (290) 58 (232) (435) 87 (348) reserves as of the start of the period Foreign exchange effects recognized - - - (1) - (1) during the period Foreign
Slide 42: Calculation of Adjusted Operating Cash Flow
Calculation of Adjusted Operating Cash Flow Profit and Loss Statement Cash Flow Statement 2018, 2018, № Indicator Indicator № $ bn $ bn 10.5 Net income 1 1 Revenue, incl. 133.7 Adjustments to reconcile net income to 15.3 2 Reimbursement of prepayments and cash flow from operations, incl. 9.6 other f
Slide 43: Calculation of Adjusted Operating Cash Flow, FY2018
Calculation of Adjusted Operating Cash Flow, FY2018 Rub bn 72 91 (205) 162 164 283 (936) 2,069 1,502 Reimbursement of crude oil supplies prepayments 1,133 (average FX rate) Rub 609 bn Net cash provided Reimbursement of FX rate change Reimbursement of Interest on Prepayments for Reimbursement of Adju
Slide 44: Export Duty Lag
Export Duty Lag Rub bn Normalized EBITDA Actual EBITDA +7 Export duty lag effect +32 -57 +1 +15 +26 +6 -7 636 643 565 545 533 488 356 371 364 390 384 385 327 333 313 306 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Note: The effect of the time lag in export duties on the Company's EBITDA is separ
Slide 45: Finance Expenses, Rub bn
Finance Expenses, Rub bn Indicator 2018 2017 % Q4’18 Q3’18 % 1. Interest accrued1 280 230 21.7% 73 72 1.4% 2. Interest paid2 284 219 29.7% 82 78 5.1% 3. Change in interest payable (1-2) (4) 11 – (9) (6) 50.0% 4. Interest capitalized3 147 117 25.6% 39 38 2.6% Net loss from operations with financial 5
Slide 46: EBITDA and Net Income Sensitivity
EBITDA and Net Income Sensitivity Urals price change Rub/$ exchange rate change Rub bn -7 $/bbl +7 $/bbl Rub bn -6.3 Rub/$ +6.3 Rub/$ EBITDA EBITDA (183) 183 (246) 246 Net income Net income (146) 146 (197) 197 Average Urals price in 2018 stood at 69.8 $/bbl. If the average price for the period had
Slide 47: Questions and Answers
Questions and Answers