Presentation for investors and shareholders for February, 24 th 2016 Belgrade Investor Relations

Transcription

1 Presentation for investors and shareholders for February, 24 th 2016 Belgrade Investor Relations

2 Disclaimer This presentation has been prepared by NIS a.d. Novi Sad (the Company ), and comprises the slides for a presentation to investors concerning the Company. Presentation does not constitute or form part of any offer or invitation, or any solicitation of any offer to sell or purchase or subscribe for, any shares or other securities representing shares in the Company, nor shall it or any part of it nor the fact of its presentation or distribution form the basis of, or be relied on in connection with, any contract or investment decision. Any viewer of this presentation considering a purchase of such securities is hereby reminded that any such sale or purchase should be made solely on the basis of the information contained in other publicly available documents and will be subject to the restrictions set out therein. No reliance may be placed for any purposes whatsoever on the information contained in this presentation, or any other material discussed at any presentation or on its completeness, accuracy or fairness. The information in this presentation should not be treated as giving investment advice or recommendation. All reasonable measures are taken to ensure that the facts stated in this presentation are accurate, and that the opinions expressed are fair and reasonable. However, the contents of this presentation have not been adopted by the corporate body s of Company. Accordingly, no representation or warranty, express or implied, is made or given by or on behalf of the Company or any of its members, directors, officers or employees or any other person as to the accuracy, completeness or fairness of the information or opinions contained in or discussed at this presentation. None of the Company or any of their respective members, directors, officers or employees nor any other person accepts any liability whatsoever for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection therewith. The information in this presentation includes forward-looking statements. These forward-looking statements include all matters that are not historical facts, statements regarding the Company s intentions, beliefs or current expectations concerning, among other things, the Company s results of operations, financial condition, liquidity, prospects, growth, strategies, and the industry in which the Company operates. By their nature, forward-looking statements involve risks and uncertainties, including, without limitation, the risks and uncertainties to be set in other publicly available documents, because they relate to events and depend on circumstances that may or may not occur in the future. The Company cautions you that forward looking statements are not guarantees of future performance and that its actual results of operations, financial condition and liquidity and the development of the industry in which the Company operates may differ materially from those made in or suggested by the forward-looking statements contained in this presentation. In addition, even if the Company s results of operations, financial condition and liquidity and the development of the industry in which the Company operates are consistent with the forward-looking statements contained in this presentation, those results or developments may not be indicative of results or developments in future periods. The information and opinions contained in this presentation are provided as at the date of this presentation and are subject to change without notice. No person is under any obligation to update or keep current the information contained herein. By attending the presentation you confirm that you have read and understood foregoing limitations. 2

3 : HSE indicators All targets were met other than LTIF, which was significantly improved, but still not as planned Transparency index increase LTIF RAR Major accidents Serious incidents -47% 50% 38% 1,215 Minor incidents 1,186 Potentionally 7,742 hazardous 17,873 situation % Plan Plan LTIF Exploration and production LTIF Services LTIF Refining LTIF Sales LTIF Energy One injury Plan 2014 Plan 2014 Plan 2014 Plan 2014 Plan 3 LTIF - Lost time injury frequency rates (relation between the number of injured during accidents at work and the total working hours, multiplied by 1 million Total NIS j.s.c. Novi Sad with leasing employees and subsidiaries (Services) RAR the ratio of road accidents and the mileage in km, multiplied by 1 million

4 NIS in Exploration and production. Key Tasks Accomplishments Preservation and expansion of the resource base Continuation of geological exploration programme Start of the test exploitation stage in Romania, Hungary and Bosnia-Herzegovina Introduction of new technologies to producing wells etc. Drilled five exploration wells (thre are operational, while two are in test phase) Hydro-carbon reserves were increasedе by 8% At Kiskunhalas exploration block in Hungary a test exploitation was completed at RAG Kiha-003 well, while the test exploitation of Obudovac-2 well at the exploration block in B&H is under way The first stage of seismic operations in blocks Ex-7 and Ex-8 is complete 3D seismic survey has been conducted at Turija exploration area For the first time in Pannonian Basin, at Turija oilfield, a multi-stage fracturing method has been successfully applied Four new fracturing technologies were tested Main priorities and initiatives for 2016 Increased production and technological efficiency Accomplishment of the planned hydro-carbons production Geological explorations efficiency improvement Completion of geological explorations projects concerning tight reserves and unconventional resources 4

5 NIS in Refining. Key Tasks Accomplishments Unimpeded running and streamlining of the production activity Production development Increasing efficiency The bitumen plants, FCC complex and SARU plant were overhauled 16 pumps at С-2200 Vacuum distillation were reconstructed The Diesel Deparaffinization Unit was started up Procurement of a new crude oil demulsifier and improved operation of the desalting and dewatering section Atmospheric and vacuum distillation processes were optimised The first regular audit of the supervisory management system were successfully conducted Main priorities and initiatives for 2016 Increasing operational efficiency Deep Conversion Construction works Turnaround

6 NIS in Sales. Key Tasks Accomplishments Increasing the efficiency of retail network Development of wholesale channels, logistics and product lines Increase the share in the Serbian retail market Introduction of new products comprerssed natural gas and G-Drive NIS Petrol trade mark was introduced at NIS retail points Loyalty programme for farmers was developed NIS share in Serbia s jet fuel market increased by 98% NIS started selling jet fuel at the market of Bosnia- Herzegovina New Bunkering Depot was opened in Belgrade Negotiatins with Serbia s government yielded agreement to reduce fees for statutory stock of jet fuel Main priorities and initiatives for 2016 Improvement of retail network efficiency Further development of wholesale channels, logistics and product areas 6

7 NIS in Energy. Key Tasks Accomplishments business development The improvement of achieving maximum operating performance Bradarac (0,3 MW), Velebit 3 (2 MW), Turija (1 MW) and Sirakovo 2 (2 MW) small power plants began their commercial operation in. Approval was gained for the completion of the construction project for Мајdan small power plant (2,4 MW) and Novo Miloševo (9,8 MW) The compressed natural gas filling facility аt Novi Sad 10 refuelling station started its commercial operation The construction project is under way of the compressed natural gas filling facilities аt refuelling station Čačak 1 Serbskaya Generaciya and CHPP Pančevo companies have been incorporated to complete the CHPP Pančevo project The Plandište wind farm project gained a status of preferential power generator. Main priorities and initiatives for The start of construction and equipment (140 MW) manufacturing for CHPP Pančevo is expectd in 2016, its commissioning scheduled for 2018 Plandište wind farm project - electricity sales contract will be signed (Power Purchase Agreement) by preferential tariffs (feed in), the allocation of project funds, ordering of equipment, start of construction Construction and commissioning of two power plants at Majdan field (9.6 million m3 of gas a year, 2.4 MW) Construction and commissioning of the CNG production plant Ostrovo, and construction and commissioning of the CNG module at the petrol station Čačak 1

8 Macroeconomic indicators USD/RSD Exchange rate trends * +23% Crude oil Brent** type trends, in $/bbl -47% Average USD/RSD exchange rate in is higher by RSD , i.e. 23% of the 2014 average In, the USD/RSD exchange rate grew by RSD , i.e.12% In 2014, the USD/RSD exchange rate grew by RSD , i.e. 20%. Average Brent oil price in is lower by $/bbl, i.e. 47% of the 2014 average price In, Brent oil price is lower by $/bbl, i.e. -34% In 2014, Brent oil price is lower by $/bbl, i.e. -49% 8 *Source: NBS **Data for Europe Brent Spot Price FOB;Sourceр: U.S. Energy Information Administration (

9 Oil and Gas Industry Trends Implemented measures % of analysed companies ( 16) Average change (2016 estimate against 2014) by company, % CAPEX cuts 89% 34% OPEX cuts 100% 43% Headcount cuts 89% 11% % of CAPEX* cuts BP; 24% Shell; 28% Chevron; 34% Exxon; 40% OMV; 42% NIS; 52% Of all the benchmarked companies, Hellenic Petroleum is the only one not to reduce CAPEX this company improved on its performance, yet it operates only in the downstream business (refining and sales and distribution) and not in production. % of OPEX cuts TRENDS: Marginal fields and expensive upstream projects are postponed or abandoned globally Focus is on projects with short-term and mid-term return Growing pressure on suppliers in order to push down prices and to cut costs, especially for Oilfield Services Headcount reduction is one of the measures introduced by nearly all companies Divestiture (selling of assets) increased Companies with optimised segments (refining and sales and distribution) have short-term benefits from low oil price and high refining and sales margins Some companies (such as MOL) view diversification as a way to reduce exposure to impacts from lower oil price OMV Petrom; ELPE; 24% 29% NIS*; 29% MOL; 40% % of headcount cuts Shell; NIS**; 8% 8% Chevron; 41% Exxon; 43% OMV ; 52% MOL; 8% OMV; ELPE; Chevron; BP; 9% 10% 12% 13% BP; 53% INA; 14% Shell; 58% OMV Petrom; 17% 9 CAPEX 2016 estimate Crisis 1; *OPEX 2016 estimate not available, for Crisis Scenario 1 - realisation used ** NIS headcount not available, the figures are for 3Q against 3Q2014 (total headcount without leasing)

10 Oil and Gas Industry Trends Most companies resorted to CAPEX, OPEX and headcount cuts CAPEX ($bn.) OPEX ($bn.) EBIT ($bn.) Measures -18% -8% e -35% -28% e -69% % e CAPEX down by 18% Negotiations planned for 40% of suppliers to operations and 60% of suppliers to OFS $10bn. disinvested - 5% of fixed assets as at 31 December -30% 0% e -44% -13% e -74% % e Headcount down by 9% Number of PSs fell (262) $158 million disinvested in 9М 1% of fixed assets as at 31 December 2014 Selling of 49% share in Gas Connect Austria in % +15% e -34% -8% e +89% -3% e Expansion of the petrochemicals business Plans for UPS portfolio optimisation MOL to relinquish its share in the Akri-Bijeel block in Iraqi Kurdistan.

11 : Key Performance Indicators NIS Group 11 Q4. Q Q4. Q (%) 1 Key indicators Measurement unit (%) % Urals $/bbl % % Net profit bn RSD % % EBITDA 2 bn RSD % % Sales bn RSD % % OCF bn RSD % 42, % Taxes and other fiscal obligations 3 bn RSD % % Oil and gas production (Serbia and Angola) 4 thou. t.o.e. 1,577 1,653-5% % Oil and semi-finalized products refining volume thou. tons 3,281 3,104 +6% % Total sales of oil products thou. tons 3,254 3,090 +5% % Foreign assets 5 thou. tons % % Oil products local market sales 6 thou. tons 2,585 2,424 +7% % Motor fuel thou. tons 1,698 1,632 +4% % Retail thou. tons % За 1% Market share on retail market in the Republic of Serbia % За 1% % CAPEX 7 bn RSD % % Total bank indebtedness 8 m USD % [1] All possible discrepancies in percentage values and total values are due to rounding errors [2] EBITDA = Sales (without excise tax) inventories ( of oil, oil products and other products) operational expenditure (OPEX) other costs, which management cannot affect [3] Taxes, duties, fees and other public revenues calculated for the relevant period. The overview includes NIS' tax obligations and other public revenues in Serbia and in other countries in which it operates The amount does not include dividends paid out to the Republic of Serbia (in billion RSD and 2.3 billion RSD in ) [4] Gasolene and light condensate were included in the production of oil, and commodity production of gas was included in the gas production [5] The sales of foreign assets represent the sales accomplished by NIS subsidiaries abroad (retail and wholesale) [6] Apart from motor fuels, production of other petroleum products was included as well.. [7] Financing, without VAT [8] Total indebtedness = total debt to banks + Letters of Credit. As at 31 December, it stands at million USD of total debt million USD in Letters of Credit.

12 Market of motor fuels trends /2014 Recovery of the regional markets of engine fuels Fuel prices have been constantly dropping from the mid this year which is the key factor for the recovery of the engine fuels demand at the regional market. In Serbia, the growth of engine fuel consumption was caused by the growing consumption of diesel fuels and gasoline. Slovenia 4.0% Hungary 7.6% Romania 1.5% Recovery of the gasoline consumption is linked to the lower price, which is reflected in the increased sale scope. Croatia Serbia* 4.9% Growth in the diesel fuel consumption is largely linked to the lower price, and intensified work of the road enterprises in the second and third quarter. Consumption of car gas continues with the dropping trend mainly because of decreased price competitiveness which followed the increase of excise in three years in a row. 1.7% Bosnia and Herzegovina 0.8% Bulgaria 1.5% 12 Information sources used for the projection: *Serbia, internal analysis and evaluations, Block Sales and Distribution: - PFC - assessment of consumption in Bulgaria and Romania, Eurostat - PFC and internal assessment for BiH

13 Regional Retail Market and Motor Fuel Market 1 Trends Decrease trend in retail prices continues in the region Bosnia and Herzegovina % 9.4% Engine fuels market is recovering slower than the region due to weak commercial activities, although low prices and the cross-border sale contribute to the consumption growth. Consolidation of retail operators has been observed, where the local distributors' networks of petroleum products are being increased (HIFA, Neskovic, Petric), while the NESTRO Group has been optimizing its network. Smaller chains which have been territorially present in Republika Srpska or in the Federation, are now expanding their network, targeting at the national coverage in the entire BiH. Bulgaria % 3.8% There is a gradual market recovery in the engine fuels market as a result of increased diesel consumption, which should be the key factor for the further and long term growth. A new refinery block was opened in Bulgaria in May, owned by Lukoil. Hydro-cracking plant will increase the refining capacities by about a million tons of petroleum products intended both for the local market and for export, primarily to the Turkish market. NIS continues to build its importance as the wholesale market player, specifically in the gasoline distribution. Romania % 0.7% MOL, after acquisition of ENI, became the third biggest retail operator in Romania. OMV Petrom significantly improved its logistic base by finalizing the modernization of the warehouse in Kluz and Bacau, and by building three new depots in Jilava, Brazi and Isalnita, whereby the modern, available storage capacity reached 87,000 cubic meters. Number of FSs NIS market share in the total motor fuel market NIS market share in the retail market 13 Information sources used to process the projection: - PFC - assessed consumption by quarters in Bulgaria and Romania, Eurostat, - Data for BiH: PFC, internal analysis and assessments, Block Sales and Distribution: 1 Market of engine fuels: engine gasoline, diesel fuels and LPG; 2 Other than these there are another 2 refuelling stations in Bosnia-Herzegovina operating in DODO (Dealer Owned Dealer Operated) mode

14 Market Share on Serbian Market Total consumption of petroleum products has been growing The volume of overall petroleum products market in the Republic of Serbia, thousand tons (23%) 705 (22%) 2,594 (77%) 2,466 (78%) 3,366 3, % In the total consumption of petroleum products in Serbia grew, which was mainly a result of the growing consumption of diesel fuels, heavy oil, bitumen and somewhat lower of gasoline, and which was all mainly caused by the lower prices of petroleum products and significant infrastructure works. Reasons to preserve an extremely big market share of NIS are the business flexibility and readiness to adjust the offer to the clients, even in conditions of extremely dynamic market changes. Others NIS Retail market* РС, in thousands of tons 3.4% 951 (58%) 679 (42%) 1,630 Retail market was enlarged in total by 3.4% in, compared to the same period in NIS increased its total market share in the Serbian retail marker, with growth in the sale of gasoline and diesel, while the car gas had a small drop, which is all in line with the consumption trend on the local market (59%) 642 (41%) 1,576 Portfolio of petroleum products offered in the market was improved this year, specifically in the part of aditized fuels. NIS launched a high-octane gasoline of top quality, under brend: G DRIVE. Others NIS 14 * The sales range of NIS and other competitors includes engine fuel (gas, engine fuel, Diesel and EL heating oil used as the engine fuel). LPG cylinders are not included

15 The effect of measures for increasing operational efficiency The operational efficiency increase measures carried out in gave the effect of 10.6 billion dinars, which is 5.3 times more than projected Additional measures Business Plan for 0.8 Exploration and Production 0.4 Services Refining Sales and Distribution Energy Corporate Centre (Functions) (without prevented damage) Prevented damage (with prevented damage) Exploration and Production Services Refining Sales and Distribution Energy Corporate Centre (Functions)

16 Financial Indicators EBITDA fell, OCF rose compared with 2014 EBITDA, bn RSD 27% 46.5 Q4 ' EBITDA in fell by 27% on 2014: Crude oil price fluctuations Q3 ' Q2 ' Q1 ' Q4 ' OCF, bn RSD 3% Q4 ' Q3 ' Q2 ' Q1 ' Q4 ' Increase in operating cash flow: Lower payments for imported crude oil and oil products (lower price), and consequently lower payments for customs duties Introduction of operational efficiency boost measures (less operational expenditure, extending payment maturity period to 60 days ) First instalment of PU Srbijagas debt paid in December 16

17 Financial Indicators The amount paid for investments was twice the amount of net profit Net Profit, bn RSD 47% 14.6 Q4 ' net profit was down 47% on the 2014 figure: Q3 '15 Q2 ' Price of crude oil and petroleum products Negative FX rate difference comprising 8.1 bn RSD Q1 ' Q4 ' CAPEX, bn RSD 23% 30.3 Q4 ' Q3 ' Q2 ' Q1 ' Maximisation of effects from investments: Investment projects were prioritised Balanced investment portfolio was created, allowing for: Stable growth and development Strong base for future investments Q4 '

18 Exploration and production Oil and gas production was at planned levels Oil and gas production, thousand t.o.e. -5% 1% compared to plan ,058 1,148 1,199 1, , , , ,670 Q4 '15 Q3 '15 Q2 '15 Q1 ' Compared with the Business Plan, oil and gas production exceeded the projected volume. Total oil and gas output in was 1,577 thousand toe, which is by 5% less compared with , ,545 Q4 ' Serbia - oil Serbia -gas Angola Estimate of HC reserves increment in. 8% Estimate of hydrocarbon reserves increment for is 8% HC Production Reserves Increment 31 Dec '15 Estimate Any possible deviations in percentage points and aggregate values are due to rounding

19 Refining Refining throughput was up on the Plan figure and in line with Sales and Distribution demands Refining volume, thousand tons 6% ,034 1,114 1,180 1,114 1, ,281 1, ,104 1, ,066 1, ,253 Q4 '15 Q3 '15 Q2 '15 Q1 ' The volume of oil and semi-finished products processed in was 6% up on the previous year: Tailoring of the scale of refining to market demand and optimisation of oil refining. Natural gas for internal use was substituted by heavy-fuel oil from production in, which reduced refining costs , ,428 Q4 ' Imported crude oil Domestic crude oil Semi-finished products 19 Any possible deviations in percentage points and aggregate values are due to rounding

20 Sales and distribution Sales increased in line with market demands Sales volume, thousand tons 5% ,525 1,663 1,903 1,781 1, , , ,254 3,090 3,079 Sales structure, thousand tons Q4 '15 Q3 '15 Q2 '15 Q1 '15 Q4 ' Retail Serbia Wholesale Serbia Export Wholesale Serbia ,551 2,390 2,413 3,254 3,090 3,079 Q4 '15 Q3 '15 Q2 ' saw a 5% increase in sales compared with 2014, so the sales totalled 3,254 thousand tonnes Retail (Serbia) - increase in retail volume by 6%: growing sales of Diesel fuel by 8%, as well as motor gasoline by 6%. Foreign assets growth by 24% growing sales of motor fuels by 25%, out of them Diesel sales grew by 53% and gasoline sales dropped (12%). Wholesale (Serbia) growth by 7%: growing sales of motor fuels by 9%, (gasoline 11%, diesel 9%). 7% growth of fuel oil sales 30% growth of bitumen sales Drop in LPG sales (9%) ,547 1,445 2,395 2,428 Black and other products Q1 '15 Q4 ' White products Export 7% drop: Drop in export of heavy fuel oil (68%) and virgin naphtha (71%). Increase in exports of diesel fuel by 56% export of propylene is two times higher compared to All possible discrepancies in percentage values and total values are due to rounding errors Foreign sales is the sales made by NIS subsidiaries.

21 Indebtedness Indebtedness increased due to premature withdrawal of available credit lines (negotiated before the imposition of sanctions) in order to build reserves to finance investments in Q4 and Maturity and currency structures changed. Total debt to banks, million USD 1 GPN loan, million EUR ' ' ' ' ' Short-term Mid-term Long-term ' ' ' ' ' ' ' ' ' '15 Total bank indebtedness 2, million USD Structure of total debt to banks, by currency, in % ' ' ' ' ' ' '15 72% 72% 86% 81% 27% 28% 13% 18% 1% 1% 1% 1% ' ' ' ' Letters of credit Total debt 1, ' ' ' ' '09 56% 70% 74% 67% 85% 26% 25% 21% 32% 14% 18% 5% 1% 5% 1% USD EUR Other 21 All possible discrepancies in percentage values and total values are due to rounding errors 1 Term structure of debt is shown according to contracts signed with banks and not by maturity of the debt as at 31 December. 2 In addition to debt to banks and Letters of Credit, as at 31 December, NIS j.s.c. Novi Sad also holds issued bank guarantees in the amount of 57.7million USD, corporate guarantees in the amount of 43.5,million USD and signed Letters of Intent in the amount of 0.8 million USD

22 Investments Despite investment cutbacks, the operating targets were either equal to or up on the Plan figures Investment funding by type of project Ecology Angola PSA* Projects with direct economic effect Projects without direct economic effect Design and research work TOTAL: *in billion RSD and do not include VAT Although OCF allowed the planned scope of investments to be met investments were still reduced in order to lay the grounds for future investments. CAPEX by investment projects, funding in RSD billion Investments by segments, у % % -50% -14% 157% % % 3% Ecology Angola PSA Projects with direct economic effects Projects with out direct economic effects Design and research work 9% 2% 2% 8% All possible discrepancies in percentage values and total values are due to rounding errors *PSA - Production Sharing Agreement; NIS j.s.c. Novi Sad with subsidiary companies, excluding Jubos d.o.o. Bor, NIS Overseas o.o.o. Saint Petersburg, and NIS Svetlost d.o.o. Bujanovac 76% Exploration and production Refining Sale and distribution Services Energy Corporate Centre

23 Comparative analysis (benchmarking) of key indicators (NIS *, other 9M ) EBITDA margin (%) EBITDA/FTE** (USD 000) Daily throughput per retail station (t/d/s) ton/day White products yield (%) OPEX ($/boe) Lifting costs REVEX Н/Д 23 Sources: NIS, Companies reports * Data EBITDA / FTE are presented for 9M ** Without leased employees

24 Meeting of oil and gas production targets Rise in sales (+5%) and better share in the Serbian retail market (by 1%) Fulfilment of projected operating indicators despite investment cutbacks Expansion of operational efficiency increase programme 10.6 billion RSD, which is 5.3 times more than planned Lower oil price than the year before Effect from currency losses (net currency losses of RSD 8.1 billion) Limitations regarding new loan arrangements to finance strategic projects and inability to refinance the existing ones with the sanctions in place Law on Takeover of Liabilities of PU Srbijagas to NIS High investments even with lower net profit

25 NIS a.d. Novi Sad Investor Relations Narodnog fronta Novi Sad, Serbia