Rosneft · RUS:ROSN

Rosneft — Rosneft Oil Company — H1 2017 Earnings Presentation

37 slides from Rosneft's earnings presentation, Aug 8, 2017

  1. Slide 1: Rosneft Oil Company IFRS Results Q2 and H1 2017

    Rosneft Oil Company IFRS Results Q2 and H1 2017 August 8, 2017

  2. 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

  3. Slide 3: Overview of Key Developments

    Overview of Key Developments Macroeconomic environment1 Indicator Q2 2017 Q1 2017 % H1 2017 H1 2016 % Urals, $/bbl 48.8 52.3 (6.5)% 50.5 38.0 33.0% Urals, ‘000 RUB/bbl 2.79 3.07 (9.2)% 2.93 2.67 9.8% Naphtha, ‘000 RUB/ton 24.1 27.8 (13.0)% 25.9 24.3 6.7% Gasoil 0.1%, ‘000 RUB/ton 25.4 28.1 (9.6)% 26

  4. Slide 4: Key Operating Highlights

    Key Operating Highlights Indicator Q2 2017 Q1 2017 % H1 2017 H1 2016 % Hydrocarbon production, incl. 5,703 5,785 (1.4)% 5,744 5,212 10.2% kboed Crude oil and NGL, 4,566 4,620 (1.2)% 4,593 4,100 12.0% kboed Gas, 1,137 1,165 (2.4)% 1,151 1,112 3.5% kboed Hydrocarbon production1, 5,703 5,785 (1.4)% 5,7

  5. Slide 5: Key Financial Highlights

    Key Financial Highlights Indicator Q2 2017 Q1 2017 % H1 2017 H1 2016 % EBITDA, RUB bn 306 333 (8.1)% 639 621 2.9% Net income, RUB bn 68 13 >100% 81 101 (19.8)% Attributable to Rosneft shareholders Adjusted net income1, RUB bn 95 112 (15.2)% 207 242 (14.5)% Attributable to Rosneft shareholders Adjust

  6. Slide 6: High Potential of the East Arctic Offshore

    High Potential of the East Arctic Offshore ARCTIC OCEAN Chukchi  9 Company’s license blocks are located on the East Severo-Vrangelevsky-2 Sea Arctic shelf East Siberian  9.5 bln t of crude oil and 8.7 tcm of gas – resource Anisinsko-Novosibirsky Sea potential of the blocks Pritaymyrsky Yuzhno-Chuk

  7. Slide 7: The Erginsky Block

    The Erginsky Block  On July 12, 2017 Rosneft won the license on the Erginsky block – the largest license area from the unallocated fund in Russia Erginsky  The acquisition price amounted to RUB 20.1 bn  С1+С2 reserves are estimated at 103 mmt Zapadno-Erginsky  Location in the Khanty-Mansiysk Aut

  8. Slide 8: Signing Long-Term Contracts on Supplies of Pipe Products

    Signing Long-Term Contracts on Supplies of Pipe Products On June 2, 2017 at the XXI St. Petersburg International Economic Forum Rosneft signed long-term contracts with TMK and ChelPipe on pipes supplies  Timely and robust supplies of high quality products  Transparent pricing  A formula based pri

  9. Slide 9: Operating Results

    Operating Results

  10. Slide 10: Development Drilling

    Development Drilling Development drilling footage Key achievements in H1 2017 th. m  22% growth in development drilling footage (in H1 2017 y- o-y) with in-house service share at c. 60%  Commissioning of new wells increased by >15%, including +22% a >33% y-o-y increase in horizontal wells completi

  11. Slide 11: Hydrocarbon Production

    Hydrocarbon Production kboed +10.2% 450 8 (17) 30 27 29 (13) (5) (17) (13) 24 29 5,744 5,212 +82 kboed (+1.6%) H1 2016 Yugansk Samara Samotlor Orenburg Slavneft Offshore projects Other International Messoyakha Vancor projects Gas production Bashneft H1 2017 projects  Growth in average daily hydroca

  12. Slide 12: Greenfields Development Status: Suzun and E. Messoyakha

    Greenfields Development Status: Suzun and E. Messoyakha Suzunskoye field East Messoyakhskoe field1  In September 2016 the Company started the  On September 21, 2016 the northernmost onshore comprehensive testing of the oil production, treatment field in Russia was put into commercial operation and

  13. Slide 13: Progress in Key Projects: Tagul

    Progress in Key Projects: Tagul Indicator Value 3Р reserves (PRMS) 435 mmtoe / 3,102 mmboe Commissioning year 2018 Production plateau >4.5 mmtpa Target plateau year 2022+  As part of a pilot the first startup complex of the oil treatment facility (OTF) with capacity of 2.3 mmtpa was initiated  OTF

  14. Slide 14: Progress in Key Projects: Yurubcheno-Tokhomskoe field

    Progress in Key Projects: Yurubcheno-Tokhomskoe field Indicator Value 3Р reserves (PRMS)1 272 mmtoe / 2,078 mmboe Commissioning year 2017 Production plateau ~5 mmtpa Target plateau year 2019  As part of a pilot the 1st mmt of oil produced since the development start  In Q4 2016 early supplies star

  15. Slide 15: Progress in Key Projects: Rospan

    Progress in Key Projects: Rospan The project provides the major contribution to the Company production growth by 2020 Indicator Value 0.9 tcm of gas +47% 3Р reserves (PRMS) 160 mmt of oil and 6.22 condensate 4.24 in perspective: 3.98 >19 bcm of gas Annual production 1.27 > 5 mmt of liquids 0.79 0.84

  16. Slide 16: Gas Business: organic production growth and efficient monetization

    Gas Business: organic production growth and efficient monetization Key achievements in H1 2017 Gas production  2.9% production growth on the back of: bcm +0.97 (+2.9%)  Commissioning 2 new wells at the Northern tip of the 33.23 34.20 Chayvo field (Sakhalin island) in 2016  Rospan’s Novo-Urengoy g

  17. Slide 17: Refining: efficiency improvement via further operating optimization and modernization

    Refining: efficiency improvement via further operating optimization and modernization Refining and high-quality motor fuels throughput Key achievements in Q2 2017 Refining throughput in Russia Share of gasoline production in compliance with TR of CU, %  Q2 2017 light product yield amounted to 58.0%

  18. Slide 18: Crude Oil and Petroleum Product Marketing

    Crude Oil and Petroleum Product Marketing Netbacks of the main crude oil marketing channels Oil marketing structure (Q2 2017)¹ Переработка нефти на НПЗ Refining throughput Внутренний рынок Domestic market Экспорт Exports Коэффициент Capacity utilizationиспользования мощностей НПЗ 3% Export netback v

  19. Slide 19: Financial Results

    Financial Results

  20. Slide 20: Revenue

    Revenue Q2 2017 vs. Q1 2017 RUB bn External factors: Company controlled factors: RUB -99 bn; -7.0% RUB +88 bn; +6.2% (37) (1) 33 (84) 56 4 14 4 1,410 1,399 Q1 2017 Exchange rate Crude oil price Exchange rate effect Share in profits of Number of days in the Change in volumes Change in domestic Others

  21. Slide 21: Operating Costs Dynamics

    Operating Costs Dynamics Lifting costs Refining costs in Russia RUB/boe Bashneft effect Rosneft RUB/bbl Bashneft effect Rosneft LTM average % y-o-y LTM average % y-o-y 185 172 180 180 167 168 168 177 138 164 164 170 163 151 149 141 129 131 12.7% 7.9% 3.8% 5.1% 3.0% 5.2% -3.0% -1.3% -7.8% -12.7% Q2 2

  22. Slide 22: EBITDA and Net Income

    EBITDA and Net Income EBITDA Q2 2017 vs. Q1 2017 RUB bn Company controlled and seasonal factors: RUB +16 bn; +4.8% (19) (12) (12) 1 (4) 4 (14) 32 (3) 15 (16) 1 333 External factors: 306 RUB -43 bn; -12.9% Q1 2017 Exchange rate Crude oil price Share in profits of Export duty lag Property tax and Numb

  23. Slide 23: CAPEX

    CAPEX CAPEX and production  H1 2017 CAPEX increase at 32% y-o-y consistent with RUB bn kboed the strategic goals, it was mainly driven by: 1,200 6,000  ongoing development of the major long-term oil and gas production projects 900 709 4,000  development drilling growth (+22%) to maintain HC produ

  24. Slide 24: Sources and Uses of Cash

    Sources and Uses of Cash H1 2017 RUB bn Funds available for debt management (decrease) 235 Assets disposal 367 Operating cash flow 114 71 97 Prepayments under crude oil and petroleum product supply contracts Assets acquisition Interest 439 431 CAPEX and licenses Sources Uses 24

  25. Slide 25: Free Cash Flow

    Free Cash Flow Free cash flow RUB bn  Rosneft sustains positive free cash flow generation ($2.0 per boe in H1 2017) despite CAPEX growth FY 6M (+32% in H1 2017 y-o-y) and crude oil price fluctuations 302  Rosneft maintains a comfortable level of financial leverage compared to a substantial debt bu

  26. Slide 26: Financial Stability

    Financial Stability Debt and net debt dynamics Debt profile by currency $ bn1 1.8 1.9 1.8 1.6 1.7 1.6 Foreign currency 1.5 1.5 1.4 1.3 Rubles 1.1 1.0 72.9 0.7 0.7 Total debt 15.5 60.5 41% 59.1 59.6 58.2 Cash & cash equivalents and other liquid financial assets 16.7 45.6 59% Net debt 20.7 27.9 24.8 Ч

  27. Slide 27: Appendix

    Appendix

  28. Slide 28: Revenue

    Revenue H1 2017 vs. H1 2016 RUB bn External factors: RUB +246 bn; +10.8% (1) 284 (14) 34 (33) 7 (14) 744 (478) 2,809 2,280 H1 2016 Exchange rate Crude oil price Export duty lag Tax maneuver Exchange rate Share in profits Number of days Change in Others H1 2017 effect from of associates in the period

  29. Slide 29: Operating costs 2017 vs. 2016

    Operating costs 2017 vs. 2016 Lifting costs RUB bn 20,1 5,5 2,6 1,5  Lifting costs increase in H1 2017 was mainly driven by the acquisition of Bashneft assets in October 170.3 2016, growth in electricity costs (increase in tariffs 140.6 and watercut), wells overhauls and equipment maintenance H1 20

  30. Slide 30: EBITDA and Net Income

    EBITDA and Net Income EBITDA H1 2017 vs. H1 2016 RUB bn External factors: Company controlled and seasonal factors: RUB -2 bn; -0.3% RUB +20 bn; +3.2% 7 (45) 62 1 (15) (28) (6) (8) 224 (195) 50 (13) (16) 621 639 H1 2016 Exchange rate Delay in Excise taxes Tax maneuver Crude oil price Share in profits

  31. Slide 31: FX Risk Hedge

    FX Risk Hedge Q2 2017, RUB bn H1 2017, RUB bn Net of income Net of income Before tax Profit tax Before tax Profit tax tax tax Recognized within other funds and (398) 80 (318) (435) 87 (348) reserves as of the start of the period Foreign exchange risk management (3) - (3) (2) - (2) instruments gains/

  32. Slide 32: Calculation of Adjusted Operating Cash Flow

    Calculation of Adjusted Operating Cash Flow Profit and loss statement Cash flow statement H1 2017, H1 2017, # Indicator Indicator # $ bn $ bn 1 Revenue, incl. 50.1 1.7 Net income 1 Adjustments to reconcile net income to Prepayments reimbursed 4.4 7.0 2 cash flow from operations Changes in operating

  33. Slide 33: Operating Cash Flow Adjustment

    Operating Cash Flow Adjustment Reimbursement of crude oil supplies prepayments (average FX rate) RUB bn RUB 258 bn 73 96 (407) 162 535 204 128 Net cash provided by Prepayments for FX rate change effect Prepayments against Adjusted operating CAPEX Free cash flow operating activities crude oil supplie

  34. Slide 34: Export Duty Lag

    Export Duty Lag RUB bn (14) 52 (2) 24 6 (7) 365 348 341 333 327 313 296 294 292 306 287 273 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Normalized EBITDA Actual EBITDA Note: The effect of the time lag in export duties on the Company's EBITDA is separated on this slide, i.e. it is calculated for

  35. Slide 35: Financial Expenses, RUB bn

    Financial Expenses, RUB bn Indicator Q2 2017 Q1 2017 % H1 2017 H1 2016 % 1. Interest accrued1 54 52 3.8% 106 70 51.4% 2. Interest paid 53 44 20.5% 97 71 36.6% 3. Change in interest payable (1-2) 1 8 (87.5)% 9 (1) – 4. Interest capitalized2 27 23 17.4% 50 29 72.4% Increase in provision due to the 5.

  36. Slide 36: EBITDA and Net Income Sensitivity

    EBITDA and Net Income Sensitivity Urals price change RUB/$ exchange rate change RUB bn -5 $/bbl +5 $/bbl RUB bn -2 RUB/$ +2 RUB/$ EBITDA EBITDA (40) 40 (15) 15 Net Income Net Income (32) 32 (12) 12  Average Urals price in Q2 2017 was $48.8 per bbl. In case the average price for the period was $5 pe

  37. Slide 37: Questions and Answers

    Questions and Answers

Rosneft Oil Company — H1 2017 Earnings Presentation on 6ix