Rosneft · RUS:ROSN
Rosneft — Rosneft Oil Company — FY2016 Earnings Presentation
41 slides from Rosneft's earnings presentation, Feb 27, 2017
Slide 1: Rosneft Oil Company IFRS Results Q4 and 12M 2016
Rosneft Oil Company IFRS Results Q4 and 12M 2016 February 27, 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: Macroeconomic Environment
Macroeconomic Environment Indicator 2016 2015 % Q4 16 Q3 16 % Urals, $/bbl 42.1 51.4 (18.2)% 48.3 44.0 9.7% Urals, ‘000 RUB/bbl 2.82 3.14 (10.0)% 3.05 2.85 7.0% Naphtha, ‘000 RUB/ton 24.95 26.86 (7.1)% 26.91 23.93 12.5% Gasoil 0.1%, ‘000 RUB/ton 26.22 29.64 (11.5)% 28.30 26.01 8.8% Fuel oil 3.5%, ‘0
Slide 4: Overview of Key Developments
Overview of Key Developments Seismic activity jumped by over 50% while the license obligations were exceeded more than two times Exploration 13 fields and 127 new deposits were discovered with АВ1С1+В2С2 reserves of 207 mmtoe1. Exploration AB1C1 reserves additions of 322 mmtoe1 Hydrocarbon pro
Slide 5: Overview of Key Developments
Overview of Key Developments Fuel oil output at Russian refineries cut by 14.9% while Euro-5 motor fuels production increased by 55.6% Refining Light product yield rose by 1.3 p.p. to 56.6%, refining depth improved by 5.5 p.p. to 72% Commerce Increase of oil supplies eastwards by 8.6% to 43.1
Slide 6: Successful Completion of the Integrated Privatization Deal
Successful Completion of the Integrated Privatization Deal 1 The largest privatization deal in the Russia’s modern history – the total effect for the government exceeding $17 bn >$17 bn1 2 Sale of a 19.5% stake at premium multiples Diversified shareholder structure with 2 new top-class strategic inv
Slide 7: Bashneft Integration
Bashneft Integration Assets operating highlights1 Expected synergies3,4 Indicator Value 4 $ bn Proved PRMS reserves2 2.3 bn bbl 3 Oil production 19.9 mmt 0.5 Refining throughput 19.1 mmt 2 1.4 Nelson index 9.1 3.0 1 Light product yield 68% 0.8 Number of retail sites 744 0 0.3 Exploration and Refinin
Slide 8: Acquisition of 49% in Essar Oil
Acquisition of 49% in Essar Oil Asset location Rosneft signed the Sale and Purchase Agreement for a 49% stake Arabian Sea in Essar Oil Limited (EOL). 100% of EOL’s business was valued at Sea Airport $12.9 bn1 tank farm Reliance Jamnagar Current owners will sell 98% stake to Rosneft and an outsid
Slide 9: Acquisition of up to 35% in the Zohr Gas Field Concession
Acquisition of up to 35% in the Concession Agreement for the Development of the Zohr Gas Field Location Cyprus Rosneft signed a binding agreement to acquire a 30% Mediterranean stake in the concession for the development of the Zohr Sea gas field, an option to increase the share up to 35% was gran
Slide 10: Upstream Portfolio Optimization
Upstream Portfolio Optimization Attracting partners in the current projects: Vankor VCNG Taas-Yuryakh Partner: ONGC (26%), pool of Indian investors Partners: Beijing Enterprises (20%) Partners: BP (20%), consortium of Indian Vankor (23.9%) investors (29.9%) - closed the deals on the sale of 26% st
Slide 11: Key Operating Highlights
Key Operating Highlights Indicator 2016 2015 % Comment SEC proven hydrocarbon Stable reserve replacement. Reserve replacement ratio at reserves 37,772 34,465 +9.6% 148%1,2 mmboe Hydrocarbon production, incl 5,369 5,159 +4.1% Record high average daily hydrocarbon production kboed Bashneft integration
Slide 12: Key Financial Highlights
Key Financial Highlights Indicator 2016 2015 % Q4 16 Q3 16 % EBITDA, RUB bn 1,278 1,245 2.7% 365 292 25.0% Net income, RUB bn 181 355 (49.0)% 52 26 100.0% Attributable to Rosneft shareholders Adjusted net income1, RUB bn 448 479 (6.5)% 113 93 21.5% Attributable to Rosneft shareholders Adjusted opera
Slide 13: Operating Results
Operating Results
Slide 14: Exploration & Reserves
Exploration & Reserves Reserves1 Key achievements for 2016 mmboe 2D and 3D seismic works increased by over >58% vs. 2015. Offshore works exceeded license obligations by more than 2 908 times 1,741 79% - onshore exploration drilling success rate 13 fields and 127 new deposits were discovered wi
Slide 15: Development Drilling
Development Drilling Development drilling footage Key achievements for 2016 th. m Development drilling footage rose by 35% with in-house service share exceeding 50% of the total workscope +35% Commissioning of new wells increased by 43%, the number of new completed horizontal wells was up by 52%
Slide 16: Hydrocarbon Production
Hydrocarbon Production kboed +4.1% 113 71 7 11 2 16 (31) (20) 10 22 7 (6) 8 5,369 5,159 2015 Orenburg Samotlor Purneftegaz Samara Severnaya Yugansk North Chaivo Messoyakha Uvat Vankor Other Gas Bashneft 2016 Neft projects production Production growth at greenfields and reduction in natural decline
Slide 17: Commissioning new projects on schedule (Suzun, E. Messoyakha)
Commissioning new projects on schedule (Suzun, 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 operati
Slide 18: Gas Business: organic production growth and efficient monetization
Gas Business: organic production growth and efficient monetization Key achievements for 2016 Gas production Production growth by 7% following the commissioning bcm +4.56 of gas treatment facilities in Rospan and Purneftegaz, (+7%) 67.10 the commissioning of 3 wells at the northern tip of the 62.54
Slide 19: Refining: modernization program progress
Refining: modernization program progress Refining and production of motor fuels Key achievements for 2016 at Russian refineries Light product yield improvement from 55.3% to 56.6%, Объем переработки Refining throughput вinРФ, млн mmt Russia, т refining depth – from 66.5% to 72% (2016 vs. 2015) Дол
Slide 20: Crude Oil and Petroleum Product Sales
Crude Oil and Petroleum Product Sales Netbacks of the main oil monetization channels Oil monetization structure (Q4 2016)¹ Refining throughput Переработка нефти на НПЗ Domestic market Внутренний рынок Экспорт Exports Коэффициент использования мощностей НПЗ Capacity utilization 87% 89% 88% 88% 87% 90
Slide 21: Financial Results
Financial Results
Slide 22: Revenues
Revenues 2016 vs 2015 RUB bn External factors: Company controlled factors: RUB -403 bn; -8% RUB +73 bn; +1% 382 (766) (26)1 2 168 11 (47) 17 97 5,150 4,988 2015 Exchange rate Crude oil price Number of days Exchange rate Share in profits Change in volumes One-off Other Bashneft 2016 in the period eff
Slide 23: Operating Costs Dynamics
Operating Costs Dynamics Lifting costs Refining costs in Russia RUB/boe RUB/bbl 200 Bashneft effect Rosneft Costs 60% 180 Bashneft effect Rosneft Costs 172 60% Average LTM % YoY 180 Average LTM % YoY 166 150 165 164 164 170 153 150 151 150 40% 40% 155 141 120 129 24.0% 100 20% 15.9% 20% 12.7% 3.8% 5
Slide 24: EBITDA and Net Income
EBITDA and Net Income EBITDA 2016 vs 2015 RUB bn External factors: Company controlled factors: RUB -26 bn; -2% RUB +30 bn; +2% 184 (115) (213) 183 (50) 9 (14) 5 29 17 (32) 26 4 1,245 1,278 2015 Exchange rate Crude oil price Share in profits of Export duty lag Tax maneuver Change in other tax Transpo
Slide 25: CAPEX
CAPEX CAPEX and production RUB bn kboed Further enhancement of the investment program in 2016, 1,200 6,000 overall CAPEX growth at +19%, Upstream spending increase at +33% (in line with the target), driven by: 900 start of an active development phase at major oil and 709 4,000 gas greenfields (S
Slide 26: Sources & Uses of Cash
Sources & Uses of Cash Q4 2016 12M 2016 RUB bn RUB bn Funds available for debt management Asset disposal 258 409 Operating cash flow 357 Prepayments under LT crude oil and 303 petroleum product supply contracts 125 Asset acquisition 143 120 Dividends 257 314 890 Interest 231 719 35 CAPEX and license
Slide 27: Financial Stability
Financial Stability Debt and net debt dynamics $ bn1 Cash, cash equivalents, ST financial assets and other Net debt increased by $5.1 bn in Q4 2016 due to the 70 8.0 acquisition of the controlling stake in Bashneft Net debt 60 Net debt/EBITDA 59.1 Gross debt 7.0 Sustaining significant amount of
Slide 28: Dividend Policy
Dividend Policy Dividend per share State controlled companies payout ratio (2015) CAGR >25% 14 12.9 12 3.7 10 8 6 9.21 35% 11,8 28% 4 8.1 8.2 24% 7.5 20% 2 9,21 2.8 9% 1.3 1.6 1.9 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Company Minimum payout2 Rosneft 35% IFRS DPS CAGR since the IPO >2
Slide 29: Plans for 2017
Plans for 2017 Exploration & Reserve replacement at above 100% Production Oil and gas production growth Refining, Marketing Further optimization and efficiency improvement and Sales Efficiency Maintaining the controlled cost growth below the inflation rates improvement Efficient business d
Slide 30: Appendix
Appendix
Slide 31: Key Indicators (excl. Bashneft)
Key Indicators (excl. Bashneft) Indicator 2016 2015 % SEC proven hydrocarbon reserves 35,425 34,465 +2.8% mmboe Hydrocarbon production, incl 5,256 5,159 +1.9% kboed Crude oil and NGL, 4,142 4,116 +0.6% kbpd Gas, 1,114 1,043 +6.8% kboed Refining throughput, 95.44 96.90 (1.5)% mmt Refining depth 71.3%
Slide 32: Revenues
Revenues Q4 2016 vs. Q3 2016 RUB bn External factors: RUB 59 bn; +5% 168 (7) 9 35 (29) 86 1,485 1,223 Q3 2016 Exchange rate Crude oil price Exchange rate effect Share in profits of Change in volumes Bashneft Q4 2016 from prepayments associates and JVs Crude oil price growth by 7% in RUB terms Cr
Slide 33: Operating Cost Dynamic 2016 vs 2015
Operating Cost Dynamic 2016 vs 2015 Lifting costs RUB bn 12 (4) 6 11 Power supply costs increase (increase in tariffs and watercut) and overall OPEX growth due to higher HC 303 production was partially offset by reduction of 278 wellworks and power equipment maintenance costs 2015 Reduction of wel
Slide 34: EBITDA and Net Income
EBITDA and Net Income EBITDA Q4 vs Q3 2016 RUB bn External factors: Company controlled and seasonal factors: RUB +39 bn; +13% RUB +5 bn; +2% 10 (4) (10) 29 (4) 10 (1) 26 9 (10) 18 365 292 Q3 2016 Exchange rate Crude oil price Share in profits of Export duty lag Property and other Change in volumes C
Slide 35: FX Risk Hedge
FX Risk Hedge 2016, RUB bn 2015, RUB bn Net of income Net of income Before tax Profit tax Before tax Profit tax tax tax Recognized within other funds and (590) 118 (472) (498) 100 (398) reserves as of the start of the period Foreign exchange risk management 8 (2) 6 (215) 43 (172) instruments gains/(
Slide 36: Adjusted Operating Cash Flow Calculation
Adjusted Operating Cash Flow Calculation Profit and loss statement Cash flow statement # Indicator 2016, $bn 2016, $bn Indicator # 1 Revenue, incl. 77.2 3.0 Net income 1 Adjustments to reconcile net income 12.6 2 to cash flow from operations Prepayments reimbursed 4.4 Changes in operating assets and
Slide 37: Adjusted Operating Cash Flow
Adjusted Operating Cash Flow Prepayments for crude oil supplies reimbursed (average FX rate) RUB 288 bn (4) 95 125 163 (709) 1,011 632 302 Net cash provided Prepayments for FX rate change Prepayments for Operations with Adjusted operating CAPEX Free cash flow by operating crude oil supplies effect c
Slide 38: Export Duty Lag
Export Duty Lag RUB bn (43) 23 (62) (31) (14) 52 (2) 22 362 351 359 348 328 336 319 309 314 297 287 273 296 294 292 278 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Normalized EBITDA (excl. Bashneft) Actual EBITDA (excl. Bashneft) Note: The effect of the time lag in the establishment of import du
Slide 39: Financial Costs, RUB bn
Financial Costs, RUB bn Indicator 2016 2015 % Q4 16 Q3 16 % 1. Interest accrued1 144 139 3.6% 40 34 17.6% 2. Interest paid 143 137 4.4% 35 37 (5.4)% 3. Change of interest payable (1-2) 1 2 (50.0)% 5 (3) – 4. Change of interest payable2 64 48 33.3% 20 15 33.3% Net (income)/loss from operations 5. – 1
Slide 40: EBITDA and Net Income Sensitivity
EBITDA and Net Income Sensitivity Urals price change Exchange rate change RUB bn -12 $/bbl +12 $/bbl RUB bn -7 RUB/$ +7 RUB/$ EBITDA EBITDA (243) 243 (237) 237 Net income Net income (195) 195 (190) 190 Average Urals price in 2016 was 42 $/bbl. If the average price had increased by $12 to the level
Slide 41: Questions & Answers
Questions & Answers