St Petersburg February 21, M and 4Q 2018 IFRS FINANCIAL AND OPERATING RESULTS

Transcription

1 St Petersburg February 21, M and 4Q 2018 IFRS FINANCIAL AND OPERATING RESULTS

2 Agenda Highlights, Financials Alexey Yankevich Member of the Management Board, CFO Upstream Alexander Mikheev Head of Economics and Investment Department, Upstream Downstream Vladimir Konstantinov Head of Economics and Investment Department, Downstream 2

3 Disclaimer This presentation contains forward-looking statements concerning the financial condition, results of operations and businesses of and its consolidated subsidiaries. All statements other than statements of historical facts are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management s current expectations and assumptions and involve known and unknown risks and uncertainties that may cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of to market risks and statements expressing management s expectations, beliefs, estimates, forecasts, projections and assumptions. These forwardlooking statements are identified by their use of terms and phrases such as anticipate, believe, could, estimate, expect, intend, may, plan, objectives, outlook, probably, project, will, seek, target, risks, goals, should and similar terms and phrases. There are a number of factors that can affect the future operations of and can cause those results to differ materially from those expressed in the forward-looking statements included in this presentation, including (without limitation): (a) price fluctuations in crude oil and oil products (b) changes in demand for the Company s products (c) currency fluctuations (d) drilling and production results (e) reserve estimates (f) loss of market and industry competition (g) environmental and physical risks (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions (i) economic and financial market conditions in various countries and regions (j) political risks, project delays or advancements, approvals and cost estimates (k) changes in trading conditions All forward-looking statements contained in this presentation are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on these forward-looking statements. Each forward-looking statement speaks only as of the date of this presentation. Neither nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. 3

4 2018 Highlights HSE performance LTIFR: (-3.0% y-o-y) APG utilisation*: +2.2% y-o-y Financial performance Revenue: RUB billion (+28.7% y-o-y) EBITDA**: RUB 800 billion (+45.1% y-o-y) Net income: RUB 377 billion (+48.7% y-o-y) Operational progress Hydrocarbon production up 3.5% y-o-y Refining volumes up 7.0% y-o-y Average throughput per filling station in Russia increased by 3.3% y-o-y (up to 20.7 tpd) * Subsidiaries in Russia ** Including GPN share in EBITDA of associates and joint ventures 4

5 Key events in 2018 Upstream Increased share in Arcticgas from 46.67% to 50%, Mubadala Petroleum and Russian Direct Investment Fund completed the deal for joint exploration of fields in West Siberia Discovered the second hydrocarbon field «Triton» at the Sea of Okhotsk shelf Confirmed by the Federal Reserves Commission total geological reserves of the hydrocarbon field «Neptune» at the Sea of Okhotsk shelf equaled to 416 mtoe Established GPN-GEO (the center of project management for geological exploration) and Tech Center Bazhen Created unique digital regional model of the Achimov Deposit Launched icebreakers Alexander Sannikov and Andrey Vilkitsky Downstream Continued modernization program at refineries and implementation of ecological projects fuels and lubricants included in Russia s 100 Best Products Acquired a high-tech production and logistics terminal in Salsk, Rostov Oblast 5

6 Exploration and production Continuing production growth at Greenfields 6

7 Resource base development* in 2018 Access to 20 license blocks +4 since early 2019 Implementation of 2018 access strategy New prospect areas: Presence regions the Yamal Peninsula, the Orenburg Oblast and the KhMAO New regions the North-East Gydan, the Sea of Okhotsk shelf Prospecting zones in Yamal and Gydan +300 mtoe Yuzhno-Novoportovsky and Surovy (received for exploration) Leskinsky and Puhutsyayakhsky (auctions) A prospecting cluster in the KhMAO 6 Karabashsky blocks (auctions) Karabashsky 10 (M&A) +40 mtoe A new prospecting cluster in Orenburg** +30 mtoe Nadezhdinsky, Kornavarinsky, Zapadno-Rubezhinsky (auctions) Solnechny (M&A) * Indicated additions in geological reserves ** Indicated production potential The Russian Far East a new, strategically important region +500 mtoe Reserves at the Neptune and Triton fields confirmed by the Federal Reserves Commission 7

8 Successful exploration ensures reserve replacement Change in PRMS (SPE) 1P reserves*, mtoe Exploration and revisions, mtoe 144% reserves replacement ratio 1, , YE2017 Group production Purchases of minerals in place Exploration& Revisions YE2018 Yamal Arcticgas GPN- Khantos JV and JO** Other Total *Data do not include NIS reserves and production volumes ** JV and joint operations includes Tomskneft, Slavneft, SPD, Northgas, Messoyakha 8

9 Steady hydrocarbon production growth Hydrocarbon production, mtoe 3-year CAGR 3.5% +6% Brownfields* Joint Joint Greenfields operations** ventures*** * NNG, Khantos, Vostok, NIS, ** Joint operations: proportionally consolidated companies (Tomskneft, SPD) *** Joint ventures: equity-participation entities (Slavneft, Arcticgas, Northgas and Messoyakhaneftegas)

10 Cost optimization at brownfields and increased production at greenfields key factors of decreased OPEX OPEX: 2018 vs 2017, RUB/toe -2,3% Brownfields* Greenfields** Joint operations*** International assets 2018 * NNG, MN, Khantos, Vostok ** Novoportovskoye, Prirazlomnoye, Orenburg *** Joint operations: proportionally consolidated companies (Tomskneft, SPD) 10

11 s key projects: production growth drivers Novy Port Prirazlomnoye Messoyakha The Andrey Vilkitsky and Alexander Sannikov join the icebreaker fleet, ensuring year-round transportation of Arctic crude The Novoportovskoye field switched to the new Excess Profit Tax (EPT) regime Three wells commissioned Re-equipping of offshore rig completed Equipment installed to ensure sootless flaring of APG Helipad site preparation completed 137 exploratory wells drilled (27 cluster pads) Pilot ASP flooding completed (technological viability is proven) The second train of the preliminary gas discharge unit launched Crude oil production, mt Crude oil production, mt Crude oil production*, mt F F F2019 * 100% share in project 11

12 Exploration projects allow to maintain production in mid-term Development and monetisation of uniquely large hydrocarbon reserves in a strategically important region for the company Tazovskoye Reserves: 185 mtoe Start-up: 2017 Peak production: 7.0 mtoe by 2021 Severo- Samburgskoye Reserves: 112 mtoe Start-up: 2018 Peak production: 2.3 mtoe by 2023 Uniquely large hydrocarbon reserves Regional dominance being secured Considerable technological challenges in developing the Achimovsky and oil-rim deposits Oil-rim deposits at oil and gas condensate fields Pestsovoye Reserves: 73 mtoe Start-up: 2019 Peak production: 5.3 mtoe by 2023 En-Yakhinskoye Reserves: 144 mtoe Start-up: 2018 Peak production: 0.3 mtoe by 2022 Key results in 2018 Choosing the optimal field development conception for Pestsovoye, En-Yakhinskoye and Severo-Samburgskoye Started test production at the Pestsovoye field Initiated construction and installation works and long-lead equipment procurement for Tazovsky project Confirmed the viability of building multilateral wells at Tazovsky project, a dual-leg production well drilled (the most sophisticated in the Group) Указаны извлекаемые запасы 12

13 Finding the technological key to new types of reserves Unconventional resources The Palyanovsky technological test-site BAZHEN Developing unconventional reserves through developing a range of domestic technologies and equipment DOMANIC PALAEOZOIC A Ministry of Energy national project The first new-technology test site in the Russian Federation JVs and cooperation agreements with Russian scientific organisations, equipment producers and oilfield service companies Recoverable reserves, mt Bazhen Domanic Palaeozoic EVALUATION (R&D) SEARCH SEARCH Key results in 2018 Technology Drilling times cut from 47 to 35 days A two-fold reduction in fracking time Resource base Two licenses acquired for Domanic reserves Well productivity Commercial inflows achieved at all wells at the Palyanovsky project, KhMAO Commercial oil-bearing capacity confirmed at the Bazhen Formation, YaNAO 13

14 Technological strategy implementation 2018 PORTFOLIO PORTFOLIO 105 active projects 18 completed successfully 180 active projects 80+ intellectual property assets 40 technology partners 100+ technology partners INTEGRATED EOR PROGRAM ASP-POLYMER FLOODING» 6 technology projects on chemical EOR from basic research to the development of new reagents» Upstream Division EOR development strategy approved 200 mtoe additional production once scaled up SIDE-TRACKING WHILE MAINTAINING THE MOTHERBORE (TAML-4)» Using side-tracks to increase drainage-zone coverage while using ESP units for potential production through both boreholes 9 mt additional production once scaled up ROBUST AGGREGATION OF ELECTRIC AND SEISMIC EXPLORATION» Unique software for aggregating electrical and seismic prospecting in building geological models» Patent request pending 235 Rub mln cost reductions at GPN facilities 14

15 Downstream Total refining throughput increased due to completion of program of planned capital repairs at Group s refineries in

16 Deterioration of macro environment was mitigated by refining efficiency in 4Q18 Crude price and average netbacks Crude mix, mt $/bbl Rub 000/bbl +0.8% % Brent Refining netback Indicator: Brent x ex rate, % % % 2 20 Crude export netback % Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q International market Crude export Crude to CIS Crude to Russia Refining 16

17 Increased refining volumes and improved technological efficiency in 2018 Refining throughput, MMTonnes Conversion ratio in Russia*, % Other NIS % +6.3% Yaroslavl Moscow Yaroslavl % Omsk Moscow % Light product yield in Russia*, % Omsk % 21.0 Yaroslavl Moscow Omsk * At the Group s Refinery

18 Implementation of projects to enhance efficiency and ecological safety The Omsk Refinery Construction of the technical condensate purification unit The plant s environmental programme project directed at reducing concentrations of harmful substances in discharges from process units Reconstruction of the delayed-coking unit (DCU) (21-10/3M) Phase 1 replacement of coke drums completed Operational safety and reliability ensured Developing rail-road facilities Increasing the business s capacity for shipping oil products by rail Reconstruction of the aromatics production complex Phase 1 completed Fulfilled Rostechnadzor requirements to process heaters at the aromatic hydrocarbons production complex The Moscow Refinery Construction of an overhead road-transport loading rack for light oil products Decreased non-recoverable losses of petroleum products and negative impact on environment Reconstruction of the integrated security system for the external perimeter and grounds Compliance with state regulatory requirements on the safety and security of fuel and energy facilities 18

19 Maintaining an upward trend in retail sales Retail achievements in 2018: Average throughput per filling station in Russia increased by 3.3% y-o-y (up to 20.7 tpd) Acquired 11 stations, built 4 stations and 1 tank farm, reconstructed 10 stations Domestic non-oil sales revenue increased by 9,8% (y-o-y) Motor fuel sales Filling stations 11.3 mt Tank farms 9.1 mt The new-generation G-Drive 100 fuel became a Gold winner at the Russia s 100 best products competition New AZS.GO app from allows direct payments (without leaving a car) at filling stations G-Drive Racing three-times European closed-circuit endurance champions 19

20 B2B businesses continues to see growth Aero Bunkering Lubricants Bitumen Premium sales in % y-o-y 3.1 mt +7.7% y-o-y 2.9 mt +6.9% y-o-y 0.3 mt +20.7% y-o-y 0.4 mt Market share in Russia 26,3% 15,8% 22,0% Leading * the domestic bitumen market Key events Presence at 260 airports Presented the concept for a robotized fuelloading system for airfield refuelling tankers The company s position as the leading supplier of oil products in the North-West Russian market strengthened, with a market share of 29% Expanded sales geography and increased market share in ecological marine fuel sales Lubricants produced by have been awarded by the Russia s 100 best products Introduced G-Energy Synthetic motor oil product range Acquired a high-tech production and logistics terminal in Salsk, Rostov Oblast An agreements were signed with the Government of the Amur Oblast, the Moscow, the Leningrad and the Rostov Regions, Saint-Petersburg, Krasnodar Krai and Primorski Krai on collaboration in supplying innovative bitumens, import substitution in lubricants * Доля на рынке фасованных масел и смазок РФ 20

21 The construction of the Omsk catalyst plant is now endorsed by the Government of the Russian Federation Investment contract signed on developing the production of high-tech catalysts for key oil-refining processes Participants:, the Russian Ministry of Industry and Trade, and the Omsk Oblast government Design production capacity 15 тыс. т Cat-cracking catalysts 6 тыс. т Hydrocracking and hydrotreatment catalysts A Ministry of Energy national project Collaboration on joint developments with leading domestic R&D organizations Commercial testing of 2021 Introducing own cat-cracking catalysts throughout Company refineries has increased gasoline yield Project and detailed design documentation developed All catalysts and the production technologies are protected by 35 patents 100% of all main equipment procured hydro-treatment catalysts Construction and installation works (CIW) Production launch 21

22 Financials Better macro environment drove financials up y-o-y 22

23 Solid financial performance in 2018 Revenue RUB bn +26% -4% , % 2,489 Higher oil and petroleum product prices and increase in petroleum product sales resulted in revenue growth by 28.7% y-o-y Revenue decreased by 4.0% q-o-q due to downturn in oil prices and seasonal decrease of petroleum products sales 4Q 17 1Q 18 2Q 18 3Q 18 4Q Adj. EBITDA* RUB bn % -25% Q 17 1Q 18 2Q 18 3Q 18 4Q % Higher oil price, and greater production at major projects (Novy Port, Prirazlomnoye and Messoyakha) assured substantial growth of EBITDA (+45.1% y-o-y) Adjusted EBITDA decreased by 24.9% q-o-q due to lower oil price and reduction in volumes of refining throughput and seasonal decrease of petroleum products sales Net income RUB bn % -41% % 377 Y-o-y growth of net income, supported by growth of EBITDA, was partially constrained by FX loss for Y2018 Net income decreased q-o-q mainly due to decrease in EBITDA and share of profit of associates and joint ventures due to lower oil price 4Q 17 1Q 18 2Q 18 3Q 18 4Q *Including GPN share in EBITDA of associates and joint ventures 23

24 Adjusted EBITDA* reconciliation 2018 vs. 2017, RUB bn Internal factors = Group share in JV s EBITDA Price factor Upstream Downstream, other factors 2018 *Including GPN share in EBITDA of associates and joint ventures 24

25 Adjusted EBITDA* reconciliation 4Q 2018 vs. 3Q 2018, RUB bn 246 Group share in JV s EBITDA Q 18 Price factor Greenfield volume Seasonal change 4Q 18 *Including GPN share in EBITDA of associates and joint ventures 25

26 Solid operational cash flow delivered substantial positive free cash flow 2018 Cash flow reconciliation, RUB bn Operating cash flow Investments* Free cash flow Messoyakha Divestments Dividends Other Net cash flow investments recovery * Includes changes in the amount of prepayments and materials for capital construction 26

27 IFRS CAPEX IFRS CAPEX Ongoing refinery modernization led to greater investment 5.1% y-o-y increase in Investments Upstream CAPEX increased by 2% due to: launch of hi-tech icebreakers acquisitions of license blocks 12 Investment, RUB bln Refining CAPEX increased by 16% as a result of the ongoing modernization of refineries : construction of CDU/VDU unit and deep processing unit at Omsk Refinery construction of delayed coking unit at NIS Refinery Advances issued Others Marketing and distribution Refinig Greenfields Brownfields 27

28 Further improvement of creditworthiness Credit ratings Net debt/ebitda dynamics AAA 1.60 AA-/Aa3 bank loans USD bank loans USD 1.19 BBB/Baa2 BBB-/Baa3 bonds Investment grade bonds 0.73 BB+/Ba1 BB/Ba2 LPN BB-/Ba In February 2018 international rating agency Standard&Poor s upgraded credit rating of to BBB- with stable outlook In February 2019 Moody s upgraded Company s rating to Baa2, outlook changed to stable 28