Rosneft · RUS:ROSN
Rosneft — Rosneft Oil Company — Q3 2017 Earnings Presentation
35 slides from Rosneft's earnings presentation, Nov 14, 2017
Slide 1: Rosneft Oil Company IFRS Results Q3 and 9M 2017
Rosneft Oil Company IFRS Results Q3 and 9M 2017 November 14, 2017
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: Overview of Key Developments
Overview of Key Developments Macroeconomic environment1 Indicator Q3 2017 Q2 2017 % 9M 2017 9M 2016 % Urals, $/bbl 50.8 48.8 4.1% 50.6 40.0 26.5% Urals, ‘000 RUB/bbl 3.00 2.79 7.5% 2.95 2.74 8.0% Naphtha, ‘000 RUB/ton 26.6 24.1 10.4% 26.2 24.2 8.1% Gasoil 0.1%, ‘000 RUB/ton 27.9 25.4 9.8% 27.1 25.4
Slide 4: Key Operating Highlights
Key Operating Highlights Indicator Q3 2017 Q2 2017 % 9M 2017 9M 2016 % Hydrocarbon production, incl. 5,674 5,703 (0.5)% 5,720 5,213 9.7% kboed Crude oil and NGL, 4,571 4,566 0.1% 4,585 4,117 11.4% kboed Gas, 1,103 1,137 (3.0)% 1,135 1,096 3.6% kboed Hydrocarbon production1, 5,674 5,703 (0.5)% 5,720
Slide 5: Key Financial Highlights
Key Financial Highlights Indicator Q3 2017 Q2 2017 % 9M 2017 9M 2016 % EBITDA, RUB bn 371 306 21.2% 1,010 913 10.6% Net income, RUB bn 47 64 (26.6)% 122 127 (3.9)% Attributable to Rosneft shareholders Adjusted net income1, RUB bn 132 92 43.5% 334 336 (0.6)% Attributable to Rosneft shareholders Adjus
Slide 6: Completion of a 49% Stake in Essar Acquisition
Completion of a 49% Stake in Essar Acquisition Asset location Arabian Sea Rosneft successfully completed acquisition of a 49% stake in Essar Oil Limited (EOL). 100% of EOL’s business was valued at $12.9 bn Deal rationale: INDIA Rosneft gets a significant share in the second largest Indian refi
Slide 7: Completion of a 30% Stake in Zohr Project Acquisition
Completion of a 30% Stake in Zohr Project Acquisition Asset location License areas Rosneft closed the deal to acquire a 30% stake in the with Eni’s participation concession for the development of the Zohr gas field from Zohr Italian company Eni. An option to increase the share up to Gas fields dis
Slide 8: Strategic Cooperation with CEFC China
Strategic Cooperation with CEFC China In September, 2017 Rosneft and CEFC China signed The largest private Chinese company a Strategic cooperation agreement and a long term in the energy sector crude oil supply contract at the 9th BRICS summit Founded in 2002. The Company workforce accounts for
Slide 9: Tax Incentives for the Samotlor Field Development
Tax Incentives for the Samotlor Field Development In October investment incentives for the Samotlor field and their estimated effect were successfully confirmed The approval of formal procedures for annual tax breaks in the amount at RUB 35 bn for 10 years is expected by the year end The measures to
Slide 10: Operating Results
Operating Results
Slide 11: Development Drilling
Development Drilling Development drilling footage Key achievements for 9M 2017 th. m 26% growth in development drilling footage y-o-y with in- house service share at c. 60% +26% Commissioning of new wells rose by 19%, including a 34% y-o-y increase in horizontal wells completion Commissioning
Slide 12: Hydrocarbon Production
Hydrocarbon Production kboed +9.7% 440 46 (16) (14) 21 27 (15) (28) 17 29 5,720 5,213 +67 kboed (+1.3%) 9M 2016 Yugansk Orenburg Samotlor Offshore projects Other International projects Messoyakha Vankor projects Gas production Bashneft 9M 2017 Growth in average daily hydrocarbon production through
Slide 13: 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 c. 5 mmtpa Target plateau year 2019 Comprehensive testing of oil treatment and transportation units started in September 2017 In Q4 2016 ea
Slide 14: Progress in Key Projects: Kondinskoe field
Progress in Key Projects: Kondinskoe field Indicator Value Central production facility construction (CPF) 3Р reserves (PRMS) 135 mmtoe / 977 mmboe Commissioning year 2017 Production plateau under review Target plateau year 2019 As a part of the 1st development phase drilling at 7 well pads was com
Slide 15: 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 a part of a pilot the first startup complex of the oil treatment facility (OTF) with capacity of 2.3 mmtpa was initiated O
Slide 16: Gas Business: Organic Production Growth and Efficient Monetization
Gas Business: Organic Production Growth and Efficient Monetization Key achievements for 9M 2017 Gas production bcm +1.53 3.1% production growth on the back of: (+3.1%) 50.86 Bashneft acquisition in Q4 2016 49.33 commissioning of new wells at Varyoganneftegaz in 2017 and increase of gas deliver
Slide 17: Refining: Efficiency Improvement via Further Operating Optimization and Modernization
Refining: Efficiency Improvement via Further Operating Optimization and Modernization Key refining highlights (Russia) Key achievements in Q3 2017 Gasoline production, mmt Diesel production, mmt Q3 2017 light product yield reached 58.4%, refining 20. 0 Refining throughput, mmt 35. 0 depth – 77.1%
Slide 18: Profit Maximization from Crude Oil Marketing
Profit Maximization from Crude Oil Marketing Netbacks of the main crude oil marketing channels Oil marketing structure Refining capacity utilization Export netback mmt Refining netback Domestic market netback Export netback (Primorsk) 49.8 58.3 57.9 280 0.8 8 0.8 6 Export (West) 0.8 4 30% 30% 30% 22
Slide 19: Premium Marketing Channels
Premium Marketing Channels Lubes Bitumen Company market share reached 38% Growth of lubes sales for +38% 9M 2017 y-o-y 9M 2017 bitumen +26% sales growth y-o-y Avia Bunker fuel 9M jet fuel sales growth 9M bunker fuel sales +4% +50% y-o-y growth y-o-y 19 Note: Bashneft consolidation starting October 1
Slide 20: Financial Results
Financial Results
Slide 21: Revenue
Revenue Q3 2017 vs. Q2 2017 RUB bn External factors: Company controlled factors: RUB +116 bn; +8.3% RUB -19 bn; -1.4% (4) 2 16 (21) 2 56 46 1,496 1,399 Q2 2017 Exchange rate Crude oil price Exchange rate effect from Share in profit of Larger number of days in Change in volumes Other Q3 2017 prepayme
Slide 22: Operating Costs Dynamics
Operating Costs Dynamics Lifting costs Refining costs in Russia RUB/boe Bashneft effect Rosneft RUB/bbl Bashneft effect Rosneft Average LTM % y-o-y Average LTM % y-o-y 185 189 180 195 180 168 172 172 167 177 179 170 148 172 164 163 149 141 129 131 33.3% 7.9% 9.1% 5.1% 3.0% 5.2% -3.0% -1.3% -7.8% -12
Slide 23: EBITDA and Net Income
EBITDA and Net Income EBITDA Q3 2017 vs. Q2 2017 RUB bn 10 (3) 1 1 3 (1) 24 8 2 20 Company controlled and seasonal factors: RUB +7 bn; +2.3% 371 306 External factors: RUB +58 bn; +18.9% Q2 2017 Exchange rate Crude oil price Share in profits of Export duty lag Other taxes Larger number of days in Cha
Slide 24: CAPEX
CAPEX CAPEX and production 9M 2017 CAPEX increase at 33% y-o-y consistent with RUB bn kboed the strategic goals: 1,200 6,000 development of the major long-term oil and gas production projects 900 709 4,000 extension of the development drilling program to 595 630 maintain hydrocarbon production
Slide 25: Appendix
Appendix
Slide 26: Revenues
Revenues 9M 2017 vs. 9M 2016 RUB bn External factors: RUB +336 bn; +9.6% 466 74 (50) 21 (14) 895 (590) 4,305 3,503 9M 2016 Exchange rate Crude oil prices Tax maneuver Exchange rate effect Share in profits of Larger number of Change in volumes 9M 2017 from prepayments associates and JVs days in 2016
Slide 27: Operating costs 2017 vs. 2016
Operating costs 2017 vs. 2016 Lifting costs RUB bn 9 6 2 32 Lifting costs increase for 9M 2017 was mainly driven by the acquisition of Bashneft assets in October 2016, 262 growth in electricity costs (increase in tariffs and 213 watercut), wells overhauls, equipment and infrastructure facilities m
Slide 28: EBITDA and Net Income
EBITDA and Net Income EBITDA 9M 2017 vs. 9M 2016 RUB bn 21 (24) (53) 21 (24) (15) (13) 90 (5) 267 (224) (20) (30) 106 Company controlled and seasonal factors: RUB +29 bn; +3.2% 913 1,010 External factors: RUB +68 bn; +7.4% 9M 2016 Exchange rate Delay in Excise taxes Tax maneuver Crude oil price Shar
Slide 29: FX Risk Hedge
FX Risk Hedge Q3 2017, RUB bn 9M 2017, RUB bn Net of income Net of income Before tax Income tax Before tax Income tax tax tax Recognized within other funds and (364) 73 (291) (435) 87 (348) reserves as of the start of the period Foreign exchange effects recognized 2 - 2 - - - during the period Forei
Slide 30: Calculation of Adjusted Operating Cash Flow
Calculation of Adjusted Operating Cash Flow Profit and loss statement Cash flow statement 9M 2017, 9M 2017, # Indicator Indicator # $ bn $ bn 2.5 Net income 1 1 Revenue, incl. 76.3 Adjustments to reconcile net income to 11.4 2 Prepayments reimbursed 6.9 cash flow from operations Changes in operating
Slide 31: Operating Cash Flow Adjustment
Operating Cash Flow Adjustment Reimbursement of crude oil supplies prepayments (average FX rate) RUB 402 bn RUB bn 156 61 145 (630) 815 257 196 185 Net cash provided Prepayments for FX rate change Interest on Prepayments Adjusted operating CAPEX Free cash flow by operating crude oil supplies effect
Slide 32: Export Duty Lag
Export Duty Lag RUB bn (14) 52 (2) 24 6 (7) 15 365 356 371 348 341 333 327 313 296 294 292 306 287 273 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 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
Slide 33: Financial Expenses, RUB bn
Financial Expenses, RUB bn Indicator Q3 17 Q2 17 % 9M 17 9M 16 % 1. Interest accrued1 56 54 3.7% 162 104 55.8% 2. Interest paid2 57 53 7.5% 154 108 42.6% 3. Change in interest payable (1-2) (1) 1 – 8 (4) – 4. Interest capitalized3 28 27 3.7% 78 44 77.3% Increase in provision due to the 5. 5 4 25.0%
Slide 34: EBITDA and Net Income Sensitivity
EBITDA and Net Income Sensitivity Urals price change RUB/$ exchange rate change RUB bn -6 $/bbl +6 $/bbl RUB bn -2 RUB/$ +2 RUB/$ EBITDA EBITDA (41) 41 (19) 19 Net income Net income (33) 33 (15) 15 Average Urals price in Q3 2017 was $50.9 per bbl. In case the average price for the period was $6 pe
Slide 35: Questions and Answers
Questions and Answers