Rosneft · RUS:ROSN

Rosneft — Rosneft Oil Company — Q1 2017 Earnings Presentation

34 slides from Rosneft's earnings presentation, May 10, 2017

  1. Slide 1: Rosneft Oil Company IFRS Results Q1 2017

    Rosneft Oil Company IFRS Results Q1 2017 May 10, 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 Q1 2017 Q4 2016 % Q1 2017 Q1 2016 % Urals, $/bbl 52.3 48.3 8.2% 52.3 32.2 62.4% Urals, ‘000 RUB/bbl 3.07 3.05 0.9% 3.07 2.40 28.1% Naphtha, ‘000 RUB/ton 27.8 26.9 3.1% 27.8 22.8 21.9% Gasoil 0.1%, ‘000 RUB/ton 28.1 28.3 (0.9)% 28.1 22

  4. Slide 4: Key Operating Highlights

    Key Operating Highlights Indicator Q1 2017 Q4 2016 % Q1 2017 Q1 2016 % Hydrocarbon production, incl. 5,785 5,831 (0.8)% 5,785 5,208 11.1% kboed Crude oil and NGL, 4,620 4,655 (0.8)% 4,620 4,089 13.0% kboed Gas, 1,165 1,176 (0.9)% 1,165 1,119 4.1% kboed Hydrocarbon production1, 5,785 5,831 (0.8)% 5,7

  5. Slide 5: Key Financial Highlights

    Key Financial Highlights Indicator Q1 2017 Q4 2016 % Q1 2017 Q1 2016 % EBITDA, RUB bn 333 365 (8.8)% 333 273 22.0% Net income, RUB bn 13 52 (75.0)% 13 12 8.3% Attributable to Rosneft shareholders Adjusted net income1, RUB bn 112 113 (0.9)% 112 94 19.1% Attributable to Rosneft shareholders Adjusted o

  6. Slide 6: Acquisition of a 100% stake in Kondaneft

    Acquisition of a 100% stake in Kondaneft  On April 17 a 100% stake was acquired in the Kondaneft project, which is developing the Kondinsky, Zapadno- Erginsky, Chaprovsky and Novo-Endyrsky license areas in the Khanty-Mansiysk Autonomous District  Stake value – RUB 40 bn Erginsky Deal rationale: 

  7. Slide 7: Operating Results

    Operating Results

  8. Slide 8: Development Drilling

    Development Drilling Development drilling footage Key achievements in Q1 2017 th. m  9% growth in development drilling footage  In-house service share c. 60% of total works  Commissioning of new wells increased by 23%, including a 40% y-o-y increase in horizontal wells completion +9%  Commission

  9. Slide 9: Hydrocarbon Production

    Hydrocarbon Production kboed +11.1% 456 44 34 9 8 (20) (11) 28 35 (5) (5) 4 5,785 5,208 +121 kboed (+2.3%) Q1 2016 Yugansk Samara Samotlor Orenburg Purneftegaz Slavneft Other Messoyakha International Vankor cluster Gas production Bashneft Q1 2017 projects  Growth of average daily hydrocarbon produc

  10. Slide 10: 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

  11. Slide 11: Progress in Key Projects: Yurubcheno-Tokhomskoe field

    Progress in Key Projects: Yurubcheno-Tokhomskoe field Indicator Value 3Р reserves (PRMS) 272 mmtoe / 2,078 mmboe Commissioning year 2017 Production plateau c. 5 mmtpa Plateau to be achieved in 2019 Current status and near-term plans  The 1st mmt of oil produced since the development start  In Q4 2

  12. Slide 12: 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 1.1 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

  13. Slide 13: Gas Business: organic production growth and efficient monetization

    Gas Business: organic production growth and efficient monetization Key achievements in Q1 2017 Gas production  2.9% production growth following: bcm +0.49 (+2.9%)  Commissioning of 2 new wells at the Northern tip of 16.72 17.21 the Chayvo field (Sakhalin island) in 2016 37% of total  Rospan’s Nov

  14. Slide 14: Refining: enhancement of efficiency through operating optimization and further modernization

    Refining: enhancement of efficiency through operating optimization and further modernization Refining and production of high-quality motor fuels Key achievements in Q1 2017 Объем переработки Refining throughput in Russia, mmt  Q1 2017 light product yield way up to 58.7%, refining Доля Euroпроизводс

  15. Slide 15: Crude Oil and Petroleum Product Sales

    Crude Oil and Petroleum Product Sales Netbacks of the main oil marketing channels Oil marketing structure (Q1 2017)¹ Переработка нефти на НПЗ Refining throughput Внутренний Domestic marketрынок Экспорт Exports Коэффициент Capacity utilizationиспользования мощностей НПЗ Export netback via marginal ch

  16. Slide 16: Financial Results

    Financial Results

  17. Slide 17: Revenue

    Revenue Q1 2017 vs Q4 2016 RUB bn External factors: Internal factors: RUB -21 bn; -1.4% RUB -54 bn; -3.6% ( 11) 17 ( 1) ( 29) ( 94) 97 ( 52) ( 2) 1,485 1,410 Q4 2016 Exchange rate Crude oil price FX effect from Tax maneuver Share in profits of Number of days in the Change in volumes Other Q1 2017 pr

  18. Slide 18: Operating Costs Dynamics

    Operating Costs Dynamics Lifting costs Refining costs in Russia RUB/boe Bashneft effect Costs (Rosneft) RUB/boe Bashneft effect Costs (Rosneft) LTM average (Rosneft) % y-o-y (Rosneft) LTM average (Rosneft) % y-o-y (Rosneft) 172 167 180 165 168 170 138 164 164 150 151 155 160 141 24% 129 131 13% 04%

  19. Slide 19: EBITDA and Net Income

    EBITDA and Net Income EBITDA Q1 2017 vs Q4 2016 RUB bn Internal and seasonal factors: RUB +10 bn; +2.7% (35) (5) 1 26 (17) (6) (6) 2 1 (9) 10 (1) 7 365 External factors: 333 RUB -42 bn; -11.5% Q4 2016 Exchange rate Delay in Tax maneuver Crude oil price Export duty lag Transport tariffs Number of day

  20. Slide 20: CAPEX

    CAPEX CAPEX and production  Q1 2017 CAPEX increase at 25% y-o-y was consistent RUB bn kboed with the strategic goals and mainly was driven by: 1,200 6,000  ongoing development of long-term major oil and gas production projects 900 709 4,000  growth in development drilling to maintain HC 595 produ

  21. Slide 21: Sources and Uses of Cash

    Sources and Uses of Cash Q1 2017 RUB bn Funds available for debt management (decrease) 68 Assets disposal 146 67 Operating cash flow 9 44 Prepayments under crude oil and petroleum product supply contracts Assets acquisition 231 207 Interest CAPEX and licenses Sources Uses 21

  22. Slide 22: Free Cash Flow

    Free Cash Flow Free cash flow RUB bn  Free cash flow grew q-o-q by 3,5х times on the back of lower impact from working capital changes due to FY 3M crude oil prices stabilization and seasonally lower CAPEX 302  Sustainably positive free cash flow ($2.7 per boe in Q1 2017)  Rosneft maintains a com

  23. Slide 23: Financial Stability

    Financial Stability Debt and net debt dynamics Debt profile by currency $ bn1 1.8 1.9 1.8 1.6 1.6 1.5 1.5 Foreign currency 1.4 1.3 Rubles 1.1 1.0 72.9 0.7 0.7 38% Total debt 15.5 60.5 59.1 59.6 Cash, cash equivalents and liquid financial assets Net debt 16.7 45.6 62% 27.9 24.8 Net debt/EBITDA 32.6 2

  24. Slide 24: Appendix

    Appendix

  25. Slide 25: Revenue

    Revenue Q1 2017 vs. Q1 2016 RUB bn External factors: RUB +268 bn; +25.6% 93 1 3 14 (15) 6 (13) 578 (305) 1,410 1,048 Q1 2016 Exchange rate Crude oil price Export duty lag Tax maneuver Exchange rate Share in profits Number of days Change in Other Q1 2017 effect from of associates in the period volume

  26. Slide 26: Operating costs 2017 vs. 2016

    Operating costs 2017 vs. 2016 Lifting costs RUB bn 10  Lifting costs increase in Q1 2017 was mainly driven 2 1 by the acquisition of Bashneft assets in October 2016 81 68  Growth in the refining costs due to the natural monopolies tariffs and salaries indexation, as well Q1 2016 Power supply and P

  27. Slide 27: EBITDA and Net Income

    EBITDA and Net Income EBITDA Q1 2017 vs. Q1 2016 RUB bn External factors: Company controlled and seasonal factors: RUB +69 bn; +25.3% RUB -9 bn; -3.3% (5) (3) 18 (6) (12) 6 15 (3) (6) 162 (106) 333 273 24 (14) (10) Q1 2016 Exchange rate Delay in Excise taxes Tax maneuver Crude oil price Share in pro

  28. Slide 28: FX Risk Hedge

    FX Risk Hedge Q1 2017, RUB bn Before tax Profit tax Net of income tax Recognized within other funds and reserves as of the start of (435) 87 (348) the period Foreign exchange risk management instruments gains/(losses) 1 - 1 for the period Exchange rate differences materialized for foreign exchange r

  29. Slide 29: Calculation of Adjusted Operating Cash Flow

    Calculation of Adjusted Operating Cash Flow Profit and loss statement Cash flow statement Q1 2017, Q1 2017, # Indicator Indicator # $ bn $ bn 1 Revenue, incl. 24.8 0.3 Net income 1 Adjustments to reconcile net income to Prepayments reimbursed 2.0 4.0 2 cash flow from operations Changes in operating

  30. Slide 30: Adjusted Operating Cash Flow

    Adjusted Operating Cash Flow Reimbursement of crude oil supplies prepayments (average FX rate) RUB 118 bn 50 68 (192) 281 163 89 Net cash provided by Prepayments for crude FX rate change effect Adjusted operating cash CAPEX Free cash flow operating activities oil supplies reimbursed flow (historical

  31. Slide 31: Export Duty Lag

    Export Duty Lag RUB bn (14) 52 (2) 24 6 365 348 341 333 327 287 296 294 292 273 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Normalized EBITDA Actual EBITDA Note: The effect of the time lag in the establishment of import duties on the Company's EBITDA stands apart on this slide, i.e. (unlike the factor analysis) i

  32. Slide 32: Finance Expenses, RUB bn

    Finance Expenses, RUB bn Indicator Q1 2017 Q4 2016 % Q1 2017 Q1 2016 % 1. Interest accrued1 52 40 30.0% 52 36 44.4% 2. Interest paid 44 35 25.7% 44 42 4.8% 3. Change in interest payable (1-2) 8 5 60.0% 8 (6) – 4. Interest capitalized2 23 20 15.0% 23 15 53.3% Net (income)/loss from operations 5. – –

  33. Slide 33: EBITDA and Net Income Sensitivity

    EBITDA and Net Income Sensitivity Urals price change Exchange rate change RUB bn -3.3 $/bbl +3.3 $/bbl RUB bn -1.8 RUB/$ +1.8 RUB/$ EBITDA EBITDA (22) 22 (15) 15 Net income Net income (17) 17 (12) 12  In Q1 2017 average Urals price was at $52.3 per bbl. If Q1 2017 average price in was at $49 per bb

  34. Slide 34: Questions and Answers

    Questions and Answers

Rosneft Oil Company — Q1 2017 Earnings Presentation on 6ix