Gazprom Neft · RUS:SIBN
Gazprom Neft — Q2 2012 Earnings Presentation
26 slides from Gazprom Neft's earnings presentation, Aug 13, 2012
Slide 1: IFRS Financial and Operating Results for Second Quarter 2012
IFRS FINANCIAL AND OPERATING RESULTS FOR SECOND QUARTER 2012 August 13, 2012, Saint-Petersburg
Slide 2: Agenda
AGENDA IFRS FINANCIAL AND OPERATING RESULTS FOR SECOND QUARTER 2012 2
Slide 3: Disclaimer
DISCLAIMER This presentation contains forward-looking statements concerning the financial condition, results of operations and businesses of Gazprom Neft and its consolidated subsidiaries. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements
Slide 4: Strong financial performance while advancing on strategic goals
STRONG FINANCIAL PERFORMANCE WHILE ADVANCING ON STRATEGIC GOALS 1H 2012 Financial performance: • Revenue: RUB 579 bln (+19% Y-o-Y) • EBITDA*: RUB 149 bln (+7% Y-o-Y) • Net Income: RUB 79 bln (+0.4% Y-o-Y) Continued operational progress: • Production up 5% Y-o-Y • Refining volumes up 8% Y-o-Y • P
Slide 5: Macro Environment
Macro Environment Strong domestic demand, stable product prices, lower crude prices, appreciating ruble IFRS FINANCIAL AND OPERATING RESULTS FOR SECOND QUARTER 2012 5
Slide 6: Lower crude prices; taxes favor downstream margins
LOWER CRUDE PRICES; TAXES FAVOR DOWNSTREAM MARGINS Crude & Product Prices, USD/bbl Netbacks, $/bbl Ruble appreciation had negative effect on Net …Substantially squeezed upstream margins Income Domestic product prices remained steady Lower global crude prices combined with Refining netback
Slide 7: Upstream
Upstream New assets and improved technologies offset base decline IFRS FINANCIAL AND OPERATING RESULTS FOR SECOND QUARTER 2012 7
Slide 8: Output growth from SeverEnergia, Orenburg and improved technologies offsets base decline
OUTPUT GROWTH FROM SEVERENERGIA, ORENBURG AND IMPROVED TECHNOLOGIES OFFSETS BASE DECLINE Group hydrocarbon production 2Q12 vs 2Q11 reconciliation Increased hydrocarbon production 5% Y-o-Y: Growth partially offset by: • Started gas production from SeverEnergia’s • Lower production at mature GPN a
Slide 9: Efficiency and optimization efforts deliver industry-leading cost control
EFFICIENCY AND OPTIMIZATION EFFORTS DELIVER INDUSTRY-LEADING COST CONTROL % change OPEX/boe 1H12 Y-o-Y * Rosneft and TNK-BP IFRS FINANCIAL AND OPERATING RESULTS FOR SECOND QUARTER 2012 9
Slide 10: Increasing production with horizontal wells and state of the art technology
INCREASING PRODUCTION WITH HORIZONTAL WELLS AND STATE OF THE ART TECHNOLOGY Completed 20 horizontal wells in 1H12 (+25%) with average initial flow of 102.1 tonnes/day (+40% Y-o-Y). Improved initial flow rates by lengthening horizontals, increasing drilling power, and improving formation drilling q
Slide 11: Hard-to-recover reserves development program started in 1H12
HARD-TO-RECOVER RESERVES DEVELOPMENT PROGRAM STARTED IN 1H12 • Completed 53 drilling/workover operations in 1H12 in fields classified by company experts as ‘hard-to-recover’ • As a result 3.2 mln tonnes of oil from these challenging assets are under development; this will grow to 8 mln tonnes by FY1
Slide 12: New project developments proceeding as planned
NEW PROJECT DEVELOPMENTS PROCEEDING AS PLANNED Russian International Projects Projects Novoport: Drilling four pilot production wells, selected contractors and started construction of Eastern Europe: Increased production at NIS in Serbia (+10% Y-o-Y); awaiting completion of CPF license transfer
Slide 13: Downstream
Downstream Product quality continues to improve as investment program accelerates, driving diverse premium sales IFRS FINANCIAL AND OPERATING RESULTS FOR SECOND QUARTER 2012 13
Slide 14: Refinery modernization continues while premium sales see sustained growth
REFINERY MODERNIZATION CONTINUES WHILE PREMIUM SALES SEE SUSTAINED GROWTH 1H12 Key events: 2012 Major goals: Refining Increased Refining volumes 8% 1H12 over 1H11 Stream FCC diesel hydrotreater at Omsk, increasing high-quality diesel production Launched FCC gasoline hydrotreater at Omsk Reco
Slide 15: Refining continues to grow on strong demand
REFINING CONTINUES TO GROW ON STRONG DEMAND Gazprom Neft crude mix Gazprom Neft average netbacks (MMTonnes) $/bbl Crude to CIS & Russia Crude Exports Refining High refining margins as netbacks stay fairly stable and crude export profitability declines IFRS FINANCIAL AND OPERATING RESULTS FOR SECON
Slide 16: Refining throughputs continue to increase, with greater share of higher-value product
REFINING THROUGHPUTS CONTINUE TO INCREASE, WITH GREATER SHARE OF HIGHER-VALUE PRODUCT Gazprom Neft refining throughput Gazprom Neft gasoline and diesel Gasoline excise 1H12 (MMTonnes) yields (MMTonnes) (RUB/Tonne) 7,725 7,382 2Q11 2Q12 6,822 Gasoline Other Class 3 Class 4 & 5 NIS Slavneft 2.1 2.3 =
Slide 17: Domestic and international premium channels deliver continued growth
4 DOMESTIC AND INTERNATIONAL PREMIUM CHANNELS DELIVER CONTINUED GROWTH Opened 4 new Expanded aviation 1H11 vs. 1H12 premium Market share ∆ stations in Ukraine refueling operations in RF sales growth 1H11 v. 1H12 10% 13.6% Noviy Urengoi Retail Ulyanovsk Entered Ukraine petroleum retail market via fra
Slide 18: Polymer bitumen becoming a more competitive, integrated industrial segment
POLYMER BITUMEN BECOMING A MORE COMPETITIVE, INTEGRATED INDUSTRIAL SEGMENT Polymer bitumen is used as an innovative The use of polymer bitumen can improve the alternative to road operational performance of complex bitumen, as a binder in mixtures of asphalt concrete (strength, the production of resi
Slide 19: Financials
Financials 6.6% EBITDA Increase Y-o-Y IFRS FINANCIAL AND OPERATING RESULTS FOR SECOND QUARTER 2012 19
Slide 20: Lower crude prices and exchange rate volatility affect financial results
LOWER CRUDE PRICES AND EXCHANGE RATE VOLATILITY AFFECT FINANCIAL RESULTS 8.4% revenue increase Q-o-Q on higher sales volumes, partially offset by lower crude and petroleum Revenues products prices RUB bln Revenue rose 18.8% Y-o-Y on higher crude and petroleum products prices and increased sales
Slide 21: EBITDA Reconciliation 1H12 vs. 1H11
EBITDA RECONCILIATION 1H12 VS.1H11 IFRS FINANCIAL AND OPERATING RESULTS FOR SECOND QUARTER 2012 21
Slide 22: EBITDA Reconciliation 2Q12 vs. 1Q12
EBITDA RECONCILIATION 2Q12 VS.1Q12 IFRS FINANCIAL AND OPERATING RESULTS FOR SECOND QUARTER 2012 22
Slide 23: US$1.7 billion free cash flow generated in first six months of 2012
US$ 1.7** BILLION FREE CASH FLOW GENERATED IN FIRST SIX MONTHS OF 2012 RUB million Cash flow reconciliation 1H12 Bank deposits * Includes changes in investments in associated companies and proceeds from such investments ** At 30.64 RUB/US$ 1H12 average exchange rate IFRS FINANCIAL AND OPERATING RESU
Slide 24: Higher investment reflects greenfield project developments, refinery upgrades and rebranding
HIGHER INVESTMENT REFLECTS GREENFIELD PROJECT DEVELOPMENTS, REFINERY UPGRADES AND REBRANDING Investments in new upstream projects, refinery upgrades and 1H12 vs 1H11 CAPEX (RUB mln) premium products outlets increased total capex (excl. M&A) 24.1% vs. 2011 Marketing and distribution capex increased 7
Slide 25: Continued improvements in balance sheet and debt portfolio
CONTINUED IMPROVEMENTS IN BALANCE SHEET AND DEBT PORTFOLIO Net debt/EBITDA 0.6x vs. target <1.5x Reduced average interest rate to 3.19% Y-o-Y Exercising commitment received for 10-year export credit financing will extend debt maturity profile IFRS FINANCIAL AND OPERATING RESULTS FOR SECOND QUA
Slide 26: Questions & Answers
Questions & Answers IFRS FINANCIAL AND OPERATING RESULTS FOR SECOND QUARTER 2012 26