Rosneft · RUS:ROSN
Rosneft — Rosneft Oil Company — FY2017 Earnings Presentation
45 slides from Rosneft's earnings presentation, Mar 19, 2018
Slide 1: Rosneft Oil Company IFRS Results Q4 and 12M 2017
Rosneft Oil Company IFRS Results Q4 and 12M 2017 March 19, 2018
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 2017 2016 % Q4 17 Q3 17 % Urals, $/bbl 53.1 42.1 26.2% 60.5 50.8 19.0% Urals, ‘000 RUB/bbl 3.10 2.82 9.9% 3.53 3.00 17.8% Naphtha, ‘000 RUB/ton 27.56 24.95 10.4% 31.71 26.65 19.0% Gasoil 0.1%, ‘000 RUB/ton 28.24 26.22 7.7% 31.68 27.85 13.7% Fuel oil 3.5%, ‘000 RUB
Slide 4: Overview of Key Operational Developments
Overview of Key Operational Developments Seismic activity increase by more than 30% 86% success rate in on-shore exploration drilling Exploration 162 new deposits and 31 new fields were discovered with АВ1С1+B2С2 reserves of about 233 mmtoe, АВ1С1 reserves, additions from exploration amounted
Slide 5: Overview of Key Developments
Overview of Key Developments Oil refining throughput amounted to 112.8 mmt (total) and 100.6 mmt (Russia) Euro-5 motor fuels production increase by 23% to 38.2 mmt at Refining Russia refineries Light product yield improvement by 1.8 p.p. to 58.4% and refining depth - by 3.2 p.p. to 75.2% at th
Slide 6: Major International Projects
Major International Projects Germany India Share of global oil 0.9% <0.1% Share of global oil production1 production1 0.9 mmbpd Share of global refining 2.1% Share of global refining capacities1 4.7% capacities1 2.0 mmbpd 4.6 mmbpd Capacities of 3 refineries Oil refining capacities of Vadinar 0.4 mm
Slide 7: Completion of a 49% Stake Acquisition in Essar
Completion of a 49% Stake Acquisition in Essar Location Arabian Sea Rosneft closed the deal to acquire a 49% stake in Essar Oil Limited (EOL) INDIA 100% of EOL business is estimated at $12.9 bn Payment for the stake in several tranches in 2017 ($3.9 bn – 230 bn RUB) Deal rationale: Rosneft o
Slide 8: Completion of a 30% Stake Acquisition in Zohr Project
Completion of a 30% Stake Acquisition in Zohr Project Location Rosneft closed a deal to acquire a 30% share in the License areas with Eni’s participation concession agreement for the development of the Zohr field from the Italian Eni Zohr Gas fields discovered in 2015 The acquisition cost was at
Slide 9: Cooperation with Venezuela
Cooperation with Venezuela Assets location Prepayments made in 2014 RUB bn Offshore gas Patao, Mejillones Balance sheet item based on accounting method PetroPerijá as of 2017 end Boquerón Orinoco oil belt Balance sheet item based on accounting Balance sheet item based on accounting method before Dec
Slide 10: Key Operational Highlights
Key Operational Highlights Indicator 2017 2016 % Comment SEC proven hydrocarbon Sustainable reserve replacement, reserves replacement ratio reserves 39,907 37,772 +5.7% at 184%1 mmboe Hydrocarbon production, incl. 5,718 5,369 +6.5% Bashneft consolidation, organic growth kboed Acquisition of Bashneft
Slide 11: Key Financial Highlights
Key Financial Highlights Indicator 2017 2016 % Q4 17 Q3 17 % EBITDA, RUB bn 1,403 1,278 9.8% 393 371 5.9% Net Income, RUB bn 222 174 27.6% 100 47 >100% attributable to Rosneft shareholders Adjusted net income1, RUB bn 383 418 (8.4)% 102 114 (10.5)% attributable to Rosneft shareholders Adjusted opera
Slide 12: Operating Results
Operating Results
Slide 13: Exploration and Reserves
Exploration and Reserves Reserves1 Key achievements in 2017 mmboe 2D and 3D seismic works increased by >30% vs. 2016 86% - onshore exploration drilling success rate 2,199 31 fields and 162 new deposits were discovered with АВ1С1+В2С2 reserves at 233 mmtoe2 (2,087) 1,621 404 mmtoe АВ1С1 reser
Slide 14: Development Drilling
Development Drilling Development drilling footage Key achievements in 2017 th. m 12.1 mln m – a new record in the development drilling +29.5% (+29.5%) with ~60% in-house service share Commissioning of new wells up by 28% to 3.4 th. wells with an additional production of 19.5 mmt, increase in the
Slide 15: Hydrocarbon Production
Hydrocarbon Production kboepd +6.5% 308 62 (9) (17) (18) 24 (36) 10 25 5,718 +41 kboed (+0.8%) 5,369 12M 2016 YuganskNG SamotlorNG OrenburgNG Offshore projects Other Intl. projects MessoyakhaNG Gas production Bashneft 12M 2017 Daily hydrocarbon production growth on the back of the new projects dev
Slide 16: Progress in Key Projects
Progress in Key Projects Indicator Yurubcheno-Tokhomskoye field Kondinskoye field 3Р reserves (PRMS) 282 mmtoe / 2,156 mmboe1 143 mmtoe / 1,036 mmboe Commissioning year 2017 2017 Production in 2017 0.7 mmt 0.2 mmt Oil production plateau ~5 mmtpa >2 mmtpa Target plateau year 2019 2019 Oil treatment
Slide 17: Progress in Key Projects: Tagul Field
Progress in Key Projects: Tagul Field Indicator Value Krasnoyarsk Krai Yamalo-Nenets Krasnoyarsk Autonomous Region Krai 3Р reserves (PRMS) 447 mmtoe / 3,180 mmboe Tagul Field Commissioning year 2018 Oil production plateau >4.5 mmtpa Target plateau year 2022+ Novy Urengoy Oil & Gas fields Pipelines U
Slide 18: Progress in Key Projects: Taas-Yuryakh
Progress in Key Projects: Taas-Yuryakh (Srednebotuobinskoye field, Stage 2) Indicator Value Mirny Sakha Republic (Yakutia) 3Р reserves (PRMS) 286 mmtoe / 2,096 mmboe Commissioning year 2018 Srednebotuobinskoye Irkutsk field Oblast Oil production plateau ~5 mmtpa Target plateau year 2022+ Sakha Repub
Slide 19: Progress in Key Projects: Russkoe Field
Progress in Key Projects: Russkoe Field Indicator Value YaNAO 3Р reserves (PRMS) 426 mmtoe / 2,874 mmboe Krasnoyarsk Commissioning year 2018 Krai Oil production plateau >6.5 mmtpa Yamalo-Nenets Autonomous Region Russkoe Field Target plateau year 2022+ Novy Urengoy Oil & Gas fields Urengoy Pipelines
Slide 20: Progress in Key Projects: Kuyumba field
Progress in Key Projects: Kuyumba field1 Indicator Value Krasnoyarsk Krai 3Р reserves (PRMS) 282 mmtoe / 2,154 mmboe Krasnoyarsk Krai Commissioning year2 2018 Kuyumba field Oil production plateau2 ~3 mmtpa Target plateau year2 2021+ Oil & Gas fields Pipelines During the comprehensive technological
Slide 21: Gas Business: Organic Production Growth and Efficient Monetization
Gas Business: Organic Production Growth and Efficient Monetization Key achievements in 2017 Gas production 2% gas production growth on the back of: bcm +1.31 (+2%) Bashneft acquisition in Q4 2016 67.10 68.41 Commissioning of new wells at Varyoganneftegaz and increase of gas delivery through Ty
Slide 22: Progress in Key Projects: Rospan
Progress in Key Projects: Rospan The project accounts for the largest production growth in the Company till 2020. Indicator Value 0.9 tcm of gas 3Р reserves (PRMS) 191 mmt of gas condensate, LPG 6,22 6,45 and oil 4,24 Potential: Production, > 19 bcm of gas 1,27 1,36 0,83 p.a. > 5 mmt of liquids 2015
Slide 23: Brownfields and Greenfields development: Sibneftegaz
Brownfields and Greenfields development: Sibneftegaz Company's largest asset in terms of gas production in 2017: 12.58 bcm Indicator Value 3Р reserves (PRMS), gas 514 bcm 2007 (Beregovoy LA) Commissioning 2009 (Pyreyny LA) 2014 (Khadyryakhinsky LA) Gas production plateau > 16 bcm Production plateau
Slide 24: Refining: Efficiency Improvement via Operations Optimization
Refining: Efficiency Improvement via Operations Optimization and Further Modernization Key refining highlights in Russia Key achievements in 2017 Gasoline production, mmt Diesel production, mmt Improvmenet in light product yield from 56.6% to 58.4% 20, 0 Refining throughput, mmt 35, 0 and refining
Slide 25: Profit Maximization from Crude Oil Marketing
Profit Maximization from Crude Oil Marketing Netbacks of the main crude oil marketing channels Oil marketing structure Refinery capacity utilization Export netback mmt Refining netback Domestic market netback 53.3 57.9 58.3 Export netback (Primorsk) 320 0,8 8 290 0,8 6 Export to West 28% 32% 30% 260
Slide 26: Premium Marketing Channels
Premium Marketing Channels Aviation Bunker fuel Lubes Bitumen Sales volume and growth in 2017 Jet fuel +10% Bunker fuel +46% Lubes +36% Bitumen +23% 3.3 mmt YoY 2.9 mmt YoY 1.1 mmt YoY 2.6 mmt YoY Key achievements in 2017 Growth in sales at the A long-term contract was An agreement was made Increase
Slide 27: Premium Marketing Channels: Retail
Premium Marketing Channels: Retail Retail development Development of the associated business at filling station Revenue growth from related products and Growth in motor fuel sales services by 4% YoY via filling stations by 7% YoY Revenue growth from coffee-rooms at retail sites by 12% YoY Key achiev
Slide 28: Financial Results
Financial Results
Slide 29: Revenue
Revenue 2017 vs 2016 RUB bn 1 470 110 (59) 34 (15) 1,208 (723) 6,014 4,988 2016 Exchange rate Pricing Tax maneuver Exchange rate Share in profits of Days in the period Volumes Other 2017 effect from associates and prepayments JVs Positive price dynamics on the market – Urals oil prices increase by
Slide 30: Operating Costs Dynamics
Operating Costs Dynamics Lifting costs Refining costs in Russia RUB / boe Bashneft effect Rosneft costs RUB / bbl Bashneft effect Rosneft costs Rosneft average, LTM % YoY, Rosneft Rosneft average, LTM % YoY, Rosneft 199 180 212 180 185 189 195 168 177 172 189 167 188 177 179 160 170 172 163 149 141
Slide 31: EBITDA and Net Income
EBITDA and Net Income EBITDA 2017 vs. 2016 RUB bn 34 (19) 82 36 (28) (67) (21) (13) (15) 313 (273) 158 (25) (37) Internal and seasonal factors: 1,403 1,278 +8 bln RUB (+0.6%) External factors: +117 bln RUB (+9.2%) 2016 Exchange rate Export duty delay Excise Tax maneuver Pricing Share in profits of E
Slide 32: CAPEX
CAPEX CapEx and Production RUB bn kboed 30% CapEx increase YoY 1, 200 6,000 The growth is in line with the Company's strategic goals 922 and is mainly related to: 900 709 4, 000 Development drilling expansion for meeting the strategic targets in hydrocarbons production growth 595 600 533 Fur
Slide 33: Dividend Policy
Dividend Policy Dividend payments and oil prices State-controlled companies dividend payout ratios3 DPS, RUB as a % of IFRS net income 20 111.3 108.7 120,00 119,50 119,00 118,50 118,00 117,50 Brent, $/bbl 117,00 116,50 116,00 115,50 115,00 114,50 114,00 113,50 113,00 112,50 112,00 111,50 111,00 110,
Slide 34: Main Goals for 2018
Main Goals for 2018 Reserves replacement above 100% Upstream Hydrocarbon production growth Commissioning of the key projects on schedule Efficiency and profitability improvement Downstream Expansion and diversification of marketing channels Products portfolio adjustment in line with the
Slide 35: Appendix
Appendix
Slide 36: Revenue
Revenue Q4 2017 vs. Q3 2017 RUB bn External factors: Internal factors: +194 bn RUB (+13.0%) +19 bn RUB (+1.2%) 17 2 8 202 (16) 1,709 1,496 Q3 2017 Exchange rate Pricing Share in profits of Volumes Other Q4 2017 associates and JVs Positive price dynamics on the market – Urals oil prices increase by
Slide 37: Costs in 2017 vs. 2016
Costs in 2017 vs. 2016 Lifting costs RUB bn 4 32 12 8 2017 lifting costs organic growth was mainly driven by higher electricity, transport, infrastructure facilities 359 maintenance and equipment costs 303 The increase in refining costs was mainly due to the Bashneft assets acquisition in Octobe
Slide 38: EBITDA and Net Income
EBITDA and Net Income EBITDA Q4 vs. Q3 2017 RUB bn External factors: +39 RUB bn (+10.5%) 7 (9) 4 (1) (2) 12 (16) 8 28 (9) 393 371 Internal and seasonal factors: -17 RUB bn (-4.6%) Q3 2017 Exchange rate Pricing Share in profits of Export duty lag Volumes Intragroup balances OPEX G&A expenses Explorat
Slide 39: FX Risk Hedge
FX Risk Hedge 2017, RUB bn 2016, RUB bn Net of income Net of income Before tax Income tax Before tax Income tax tax tax Recognized within other funds and (435) 87 (348) (590) 118 (472) reserves as of the start of the period Foreign exchange effects recognized (1) - (1) 8 (2) 6 during the period Fore
Slide 40: Calculation of Adjusted Operating Cash Flow
Calculation of Adjusted Operating Cash Flow Profit and Loss Statement Cash Flow Statement 2017 2017 # Indicator Indicator # $ bn $ bn 5.1 Net profit 1 1 Revenue, incl. 106.4 Adjustments to reconcile net income to 12.2 2 cash flow from operations Prepayment reimbursement 9.3 Changes in operating asse
Slide 41: Operating Cash Flow Adjustment
Operating Cash Flow Adjustment RUB bn Reimbursement of crude oil supplies prepayments (average FX rate) RUB 542 bn 207 81 193 (922) 94 1,167 255 337 245 Net cash provided Prepayments for Other financial FX rate change Interest on Future Adjusted operating CAPEX Free cash flow by operating crude oil
Slide 42: Export Duty Lag
Export Duty Lag RUB bn (14) 52 (2) 24 6 (7) 15 26 393 348 341 365 356 371 367 327 333 313 306 287 273 296 294 292 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Normalized EBITDA Actual EBITDA Note: The effect of the time lag in export duties on the Company's EBITDA is separated on this sli
Slide 43: Financial Expenses, RUB bn
Financial Expenses, RUB bn Indicator 2017 2016 % Q4 17 Q3 17 % 1. Interest accrued1 230 144 59.7% 68 56 21.4% 2. Interest paid2 219 143 53.1% 65 57 14.0% 3. Change in interest payable (1-2) 11 1 >100% 3 (1) – 4. Interest capitalized3 117 64 82.8% 39 28 39.3% Increase in provision due to the 5. 17 15
Slide 44: EBITDA and Net Income Sensitivity
EBITDA and Net Income Sensitivity Urals price change RUB/$ FX rate change RUB bn -5.3 $/bbl +5.3 $/bbl RUB bn -5.8 RUB/$ +5.8 RUB/$ EBITDA EBITDA (126) 126 (190) 190 Net Income Net Income (101) 101 (152) 152 Average Urals price in 2017 was 53.1 $/bbl. If the average price for the year had been 10%
Slide 45: Questions and Answers
Questions and Answers