PRESENTATION TO INVESTORS

Transcription

1 Copyright PJSC TATNEFT, 2018 PRESENTATION TO INVESTORS April 2018

2 IMPORTANT NOTICE ABOUT FORWARD-LOOKING STATEMENTS AND DISCLAIMER THIS PRESENTATION IS BEING PROVIDED TO YOU SOLELY FOR YOUR INFORMATION AND MAY NOT BE REPRODUCED IN ANY FORM OR FURTHER DISTRIBUTED TO ANY OTHER PERSON OR PUBLISHED, IN WHOLE OR IN PART, FOR ANY PURPOSE. FAILURE TO COMPLY WITH THESE RESTRICTIONS MAY CONSTITUTE A VIOLATION OF APPLICABLE SECURITIES LAWS. THIS PRESENTATION SHALL NOT CONSTITUTE AN OFFER TO SELL, AN OFFER TO BUY OR SOLICITATION OF ANY OFFER TO SELL OR TO BUY ANY SECURITIES OF PJSC TATNEFT (THE COMPANY ) OR ANY OF ITS AFFILIATES, AND NEITHER THIS PRESENTATION NOR ANYTHING CONTAINED IN IT SHALL FORM THE BASIS OF ANY CONTRACT OR COMMITMENT. MATTERS DISCUSSED IN THIS PRESENTATION MAY CONSTITUTE FORWARD-LOOKING STATEMENTS. THEY APPEAR IN A NUMBER OF PLACES THROUGHOUT THIS PRESENTATION AND ARE IDENTIFIED BY THE WORDS EXPECTS, INTENDS, WILL, SEEKS, PLANS, ANTICIPATES, PROJECTS AND SIMILAR EXPRESSIONS. THE FORWARD-LOOKING STATEMENTS IN THIS PRESENTATION ARE SUBJECT TO RISKS, UNCERTAINTIES AND OTHER FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE STATED IN SUCH STATEMENTS. NEITHER WE NOR ANY OF OUR RESPECTIVE AGENTS, EMPLOYEES OR ADVISORS INTEND OR HAVE ANY DUTY OR OBLIGATION TO SUPPLEMENT, AMEND, UPDATE OR REVISE ANY OF THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS PRESENTATION. THE INFORMATION AND OPINIONS CONTAINED IN THIS PRESENTATION ARE PROVIDED AS AT THE DATE OF THIS PRESENTATION AND ARE SUBJECT TO CHANGE WITHOUT NOTICE. THE SUPPLY OF THE MATERIALS IN THIS PRESENTATION DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AT ANY TIME SUBSEQUENT TO THE DATE HEREOF. CURRENT AND PROSPECTIVE HOLDERS OF THE COMPANY S SECURITIES SHOULD NOT TREAT THE CONTENTS OF THIS PRESENTATION AS ADVICE RELATING TO LEGAL, TAXATION OR INVESTMENT MATTERS AND ARE TO MAKE THEIR OWN ASSESSMENTS CONCERNING THESE AND OTHER CONSEQUENCES OF THE POTENTIAL EVENTS OR TRANSACTIONS DESCRIBED HEREIN. THIS PRESENTATION DOES NOT TAKE INTO CONSIDERATION THE INVESTMENT OBJECTIVES, FINANCIAL SITUATION OR PARTICULAR NEEDS OF ANY PARTICULAR INVESTOR. PROSPECTIVE INVESTORS ARE ADVISED TO CONDUCT THEIR OWN DUE DILIGENCE. INFORMATION SET FORTH IN THIS PRESENTATION IS NOT AN ADVERTISEMENT OF THE SECURITIES OF THE COMPANY IN THE RUSSIAN FEDERATION AND IS NOT INTENDED TO DRAW ATTENTION TO, CREATE OR MAINTAIN AN INTEREST IN OR PROMOTE IN THE MARKET THE COMPANY, OR THE SECURITIES OR TO FACILITATE ANY SALE, EXCHANGE OR OTHER TRANSFER OF THE SECURITIES IN THE RUSSIAN FEDERATION OR TO OR FOR THE BENEFIT OF ANY RUSSIAN PERSON OR ENTITY. THIS PRESENTATION HAS NOT BEEN VERIFIED PERSUANT TO ANY SPECIAL PROCEDURES AND DESPITE THE USE OF RELIABLE SOURCES, THE COMPANY SHALL NOT BE LIABLE FOR ANY DISCREPANCY WITH FACTUAL DATA. THIS PRESENTATION MAY CONTAIN INADVERTENT MISTAKES AND OTHER DISCREPANCIES. THE COMPANY SHALL NOT BE LAIBLE FOR SUCH MISTAKES AND SHALL BEAR NO OBLIGATION TO CORRECT THEM. IN THIS PRESENTATION TATNEFT MEANS PJSC TATNEFT ; AND TATNEFT, THE COMPANY AND TATNEFT GROUP SHALL MEAN PJSC TATNEFT TOGETHER WITH SUBSIDIARIES. 2

3 KEY FACTS PILLARS OF GROWTH 3

4 KEY FACTS ABOUT TATNEFT Vertically integrated oil company with high quality assets, efficient operations and sound strategy 5 th largest crude oil producer in Russia (approx. 5.3% of the country s total in 2017), current 561Mbbl/day (Feb 2018) The largest public company in Tatarstan 10 th largest public company in Russia by market capitalization, approx.$24.3 billion (as of 30 March 2018) Top tier listing on the Moscow Exchange; ADRs listed on the London Stock Exchange (since December 1996) Large free float with MSCI Russia weight of 7.01% (Dec 2017) One of the top 10 world leaders amongst oil companies for total shareholder return (average total shareholder return of 26.4%)* * BCG Value Creators 2017, report by The Boston Consulting Group 4

5 TATNEFT GROWTH MILESTONES 1948 Discovery of Romashkinskoye oilfield, which is one of the world s largest* 1971 First billionth tonne (>7 BB) of crude oil produced 1981 Second billionth tonne (14.2 BB) of crude oil produced 1996 Tatneft GDRs offering, listing on the London Stock Exchange 2007 Third billionth tonne (21.4 BB) of crude oil produced Strategy 2025 approved by the Board of Directors 1950 Tatneft Production Association was established 1970 Annual production of crude oil reached 100 mln tonnes (1,95 mln bbl per day); the level was maintained up to Privatization of Tatneft, becoming an open joint-stock company 1995 Crude oil production stabilized 1998 Retail network launched 2010 In-house heat and power generation unit created 2011 Commencement of commercial operation of the 1 st stage of TANECO refining complex * Romashkinskoye is the Company s core oilfield: 53% of production (from production of PJSC Tatneft 2017), 62% of proved reserves (as of 31 December 2016) 5

6 HUMAN CAPITAL Human Capital is the foundation of the Company s success Advanced competencies, talents Professional growth & personal development Occupational health and safety The Company s commitment to be a fair employer is reflected in the high level of social guarantees provided for by the collective agreements of the Group companies 6

7 TECHNOLOGICAL CAPABILITIES The Company possesses the industry s leading technologies and has vast experience in crude oil extraction, refining, and petrochemicals production from the stage of project inception to optimization of processes in existing operations Development and implementation of advanced technologies in the areas of: Aims of the Company s Innovation Policy Reliance on own inventions and advancements - exploration and production of conventional and hard-torecover hydrocarbons, bitumen and oil shale reserves - enhanced oil recovery and oil treatment - oil refining and petrochemicals production process management, relying on advanced IT solutions Strengthening of corporate R&D and project management capabilities Collaboration with leading research centers and peers Tatneft has been ranked in the top 10 amongst world leaders, and as the absolute leader in Europe and the Middle East, by the number of inventions in the area of oil and gas exploration and production (according to the State of Innovation 2016 report by Thomson Reuters) 7

8 EXAMPLES OF TECHNOLOGIES USED IN OILFIELD DEVELOPMENT AND CRUDE OIL PRODUCTION By using modern technologies and equipment, as well as through optimization of completions, Tatneft achieves increased efficiency and control over per-unit costs upon production Horizontal drilling Multilateral completions Hydraulic fracturing (incl. multistage) Chain Drives (manufactured in-house) Dual completions Development of highly viscous oilfields (thermal methods) More than 44% of all crude produced by the Company is extracted using tertiary and hydrodynamic enhanced oil recovery techniques 8

9 RESOURCE BASE AND ASSETS Crude oil and condensate reserves, MBbls (SPE-PRMS) Consolidated Assets* (under IFRS/US GAAP, RR billion) 394,476 Proved Developed Producing ,518,154 3,510,967 Proved Developed Nonproducing Proved Undeveloped ,131 Probable Possible ,224,638 1P 6,213,736 thousand barrels 2P 8,731,890 thousand barrels Useful life of proved reserves - more than 30 years (based on the current production level) Current proved gas reserves 1.6 Tcf Total assets of the Group under IFRS as of 31 December 2017 RR billion* The share of downstream assets has been increasing due to TANECO construction Based on Reserves Report by «Miller & Lents, LLC» as of * Excluding banking segment assets of RR billion 9

10 OPERATIONS 2017 RESULTS PLANS FOR

11 CRUDE OIL PRODUCTION: 2017 RESULTS AND PLANS FOR crude oil production th. tonnes/year MBbl/day chg. to ,7 тыс. тонн в день PJSC Tatneft Conventional oil 26, % Highly viscous oil 1, % 76,2 76,7 тыс. тонн в тыс. тонн в PJSC Tatneft день Total день 28, % Subsidiaries % Tatneft Group Total 28, % 2018 crude oil production, projections* th. tonnes/ year MBbl/day chg. to 2017 PJSC Tatneft Conventional oil 26, % Highly viscous oil 1, % PJSC Tatneft Total 28, % Subsidiaries % Tatneft Group Total 28, % * Crude oil production plans for 2018 assume the extension of OPEC+ agreement till the end of For conversion of tonnes into barrels a conversion factor of bbl/tonne is used. See the note regarding forward-looking statements on page 2. 11

12 REFINED PRODUCTS OUTPUT: 2017 RESULTS AND PLANS FOR 2018 Refined 72,4 products output: тыс. тонн в день Refined products output at TANECO 2017, tonnes 2018*, tonnes Inputs: Crude oil 7,847,762 9,404,557 Vacuum gasoil from third parties 458, ,803 Auxiliary materials 381, ,132 Total raw materials 8,687,417 10,184,492 Liquefied petroleum gas 96, ,819 Stable Gasoline/Naphtha 1,607,335 1,144,453 Motor gasoline - 875,437 Middle distillates 3,298,924 1,943,764 Jet fuel 221, ,106 Diesel fuel 1,407,283 2,861,930 Hydrotreated vacuum gasoil 402, ,443 Base lube oils 148, ,910 Fuel oil - 326,201 Petroleum coke 571, ,218 Sulfur 81, ,855 Hydrocarbon gas 390, ,387 Other 461, ,969 Depth of refining 99.24% 95.3% Output of light products 87.50% 83.2% * Based on planned launch of processing units in 2018: 1Q 2018: Isomerization; 2Q 2018: Diesel Fuel & Kerosene Hydrotreaters, CDU/VDU-6, Aromatics complex with gasoline mixing unit; 4Q 2018: Vacuum Residue Visbreaking. Scheduled maintenance was carried out in See the note regarding forward-looking statements on page 2. 12

13 INVESTMENTS Funds allocated towards investment program financing 72,4 тыс. тонн в день FY 2017, RR bn ,7 тыс. тонн в день 30.5 Production and Development in Tatarstan Other P&D (incl. geological exploration works) Highly viscous oil 2018 Forecast, RR bn (Dec 2017) Production and Development in Tatarstan Other P&D (incl. geological exploration works) Highly viscous oil TANECO complex (incl. maintenance) TANECO complex (incl. maintenance) Retail Network of Filling Stations Petrochemicals Retail Network of Filling Stations Petrochemicals Other Other 89.1 RR bn in total 98.8 RR bn in total Not a forecast of additions to property, plant and equipment. Some of the expenditures might be expensed in respective period. See the note regarding forward-looking statements on page 2 13

14 4Q 2017 AND FY 2017 IFRS RESULTS 14

15 KEY FINANCIAL INDICATORS* (in RR bn) Chg. %, 2017 / Q Q 2017 Chg. %, 4Q2017 / 3Q2017 Sales, gross % % Export duties & excise tax (104.7) (84.9) (91.5) 8% (21.8) (24.3) 12% Revenue, net % % Costs and other deductions % % EBITDA (**) % % EBITDA margin 28% 29% 27% 25% 27% EBITDA, adjusted (***) Profit for the period % % Profit attributable to Group shareholders % % Free Cash Flow (*) Revenues and costs are presented ex banking activities. (**) We define EBITDA as net revenue on non-banking activities less (a) costs and other deductions on non banking activities less (b) gain/(loss) on disposal of interest in subsidiaries and associates less (c) banking operating results plus (d) amortization and depreciation, according to our consolidated financial statements. EBITDA is non-ifrs measure. (***) Adjusted for the effect of nonrecurring and exceptional items (RR, mln): 13,754 FY2017, 6,007 4Q 2017, 7,747 3Q 2017, and 8,745 FY2016 (please see page 4 of the Directors report for the year ended 31 December 2017 published on the company s web-site). Unless stated otherwise, all data in this section is based on respective IFRS financial statements of Tatneft. 15

16 Volumes, mln tonnes Volumes, mln tonnes REVENUE* Net Revenue on non-banking activities by product type - dynamics, RR bn % 7% 39% % 8% 37% % 7% 35% Other sales Petrochemicals Refined products sales Crude oil sales 49% 51% 54% 4% 8% % 38% 50% 51% 3% 8% Q Q 2017 * Revenue is presented ex banking activities and include purchased crude oil and refined products, respectively Crude oil sales by destination market Refined products sales by destination market % 39% 27% 6% 5% 7% 54% 56% 67% 6% Domestic CIS Non-CIS % 28% 68% 66% Q Q % % 6% 43% % 2% 43% % 4% 44% Q Q % % 43% Domestic CIS Non-CIS** ** About 70% of refined products sold for export were naphtha and middle distillates % 48% 7% 16

17 COSTS* Cost per barrel on non-banking activities breakdown**, RR/bbl 1,866 11% 8% 13% 30% 1,747 10% 9% 13% 33% 2,178 10% 8% 11% 28% 2,227 14% 8% 10% 28% 2,453 12% 7% 10% 27% Other expenses Transportation expenses Selling, General and Administrative expenses Operating expenses 38% 35% 43% 40% 44% Taxes other than income taxes Q Q 2017 * Costs are presented ex banking activities ** Cost of purchased products is not included. Taxes other than income taxes exclude export duties and excise taxes. Lifting costs, RR/bbl Refining expenses TANECO, RR/t per tonne of refined products output , , , , , ,9% ,2% avg 2016 avg 2017 avg 3Q2017 avg 4Q2017 avg avg 2016 avg 2017 avg 3Q2017 avg 4Q2017 avg 17

18 CAPEX AND DEBT PROFILE 2017 Additions to PPE by segments, IFRS, RR bn* Debt profile (at period ends), RR bn Exploration & Production Refining & Marketing, TANECO construction Refining & Marketing, Other Short-term debt Long-term debt, net of current portion Net Debt 33.7 Petrochemicals Others * RR bn * Approx. 33% of gross total debt is attributed to Bank ZENIT * Based on Consolidated Statement of Cash Flows. For more information see IFRS consolidated financial statements of Tatneft RR bn Net Debt Total (23.0) 4.0 Net Debt without Bank ZENIT (25.4)

19 STRATEGY

20 STRATEGY 2025: OIL PRODUCTION Tatneft Group s oil production division aims for sustainable organic growth Decreasing per-unit operating costs by 10% or more Studying the feasibility of production growth provided by the existing resource endowment Production volumes, mln tonnes Key indicators Indicator Growth potential being studied, incl. HVO * Production, mln tonnes, including: Conventional crude HVO production (2020) Investments (nominal), bn RR ** 2015 Conventional oil (E) HVO 2025(E) * The Board of Directors of PJSC Tatneft set the target of 36.7 mln tonnes resource replacement by 2025 ** Additional investments may be required to realize new production potential 20

21 STRATEGY 2025: REFINING Completion of the TANECO project (full utilization rate of both first and second trains of the TANECO facilities) Decreasing per-unit processing costs by 10% and more at Tatneft Group s oil and gas processing entities (in real terms) Development of highly marginal supply chains to distribute high quality TANECO refined products in Russia and abroad Crude oil throughput Light products yield 2 Conversion rate Planned units launch ( ) TANECO planned indicators, th. tonnes (proj.) (proj.) (proj.) (proj.) % 83.2% 87.8% 91.1% 89% 99% 95.3% 99% 99% 99% 2018 Kerosene HDT, Diesel Fuel HDT, Cat Reforming (Platforming), CDU/VDU-6, Visbreaker Vacuum Unit 2019 Heavy Coker Gasoil HDT, Hydroconversion (pilot unit) 2020 Fluid Cat Cracker, Aromatics production Indicators TANECO installed capacity, mln tonnes TANECO light products yield, % TANECO conversion rate, % Investments (nominal), bn RR Key indicators % 87.5% % 73% 99% 3 99% 1 - planned maintenance; 2 ex fuel oil, VCG, HCG and other (100% export duty); 3 - end-year results; 4 including other processing entities

22 Crude oil (14000 thous. t/y) CDU/VDU-6 CDU/VDU-7 TANECO CONFIGURATION IN 2023 IV quarter 2023 (projected) In operation Naphtha splitter Naphtha HDT 1st train Naphtha HDT 2 nd train Kerosene HDT Aromatic production CCR Platforming 1 st train CCR Platforming 2 nd train Izomerization 1 st train Izomerization 2 nd train Benzene (64 thous. t/y) Paraxylene (158 thous. t/y) Petrochemical Naphtha (330 thous. t/y) MTBE Motor Gasoline AI 92 (2 116 thous. t/y) Gasoline blending Motor Gasoline AI 95 (907 thous. t/y) Jet Kerosene (1 045 thous. t/y) Launch in 2017 Launch in 2018 Launch in 2019 Launch in 2020 Launch in 2021 Launch in 2022 Launch in 2023 Diesel Fuel HDT Middle distillates HDT Diesel Fuel (6 900 thous. t/y) Streams: 1. Feed components 2. Commercial products Hydrocracker 1 st train Heavy Coker Gasoil HDT Hydrocracker 2 nd train Visbreaker with Vacuum unit Hydroconversion Base lube Oil Unit Fluid Catalytic Cracker (FCC) Delayed Coker MTBE/ETBE PRODUCTION Methanol/Ethanol Gas Plant Alkylation Light base lube oil (37 thous. t/y) Middle base lube oil (158 thous. t/y) Propane-Propylene cut (132 thous. t/y) Liquefied petroleum gas (322 thous. t/y) Pet Coke (693 thous. t/y) Fuel gas Natural gas Anime absorption Sulfur (244 Hydrogen production Sulfur recovery unit and regeneration thous. t/y) 3. Vacuum residue (above 520 C) 4. Vacuum gasoil ( C) 5. Middle distillates ( C) 6. Light distillates (IBP- 180 C) 7. Motor gasoline components 8. Liquefied gases 22

23 STRATEGY 2025: RETAIL BUSINESS Over 50% sales of the Company s own gasoline and diesel fuel via proprietary retail network and wholesale Unique selling proposition: updated brand-concept, improved quality of filling stations and service standards, modification to regional coverage Retail Network Coverage by 2025 Key indicators Indicator Belarus Russian Federation Service stations * Sales per Station, t/d Sales via Company s Retail Network, incl. wholesale, mln tonnes Investments (nominal), bn RUR 39.2 Region of presence to year s end; * implying the optimization program for the existing retail network 23

24 DIVIDEND POLICY SHAREHOLDING STRUCTURE 24

25 DIVIDEND POLICY AND SHAREHOLDING STRUCTURE Dividend policy Amendments to the Regulation on dividend policy have been approved by the Board of Directors Concept of free cash flow not used for the Tatneft Group development and performance of obligations to be available for distribution in the form of dividends Target payout ratio at 50% of net income (higher of IFRS or RAS) Shareholding structure (ordinary shares, Nov. 2017) Tatarstan Treasury ADRs Other 35% 36% 26% 3% Republic of Tatarstan controls over 36% of Tatneft s ordinary shares and holds the Golden Share (mostly rights to block certain decisions at the shareholders level, but those are held by virtue of 25%+ shareholding anyway) No other shareholders with more than 5% stake The Company holds 3% in treasury 25.75% are in the ADR program managed by The Bank of New York Mellon (sponsored) Ordinary & preference shares represent 94% and 6% of capital, respectively 25

26 BANKING SEGMENT 26

27 BANK ZENIT A large banking group ranking top 40 Tier 1 capital is RUB 33.5 bn, assets are RUB 265 bn In 2017, Tatneft purchased new issue of shares increasing its equity stake in Bank Zenit to 71.9% The bank's management team has been strengthened with new professionals to implement best market practices, technologies and products A new 3-year (2020) strategy has been approved by the Board of Directors* The bank operates universal model with targets focusing on profitability and adequate risk/return profile in each business segment Special focus is cost optimization including consolidation of all subsidiaries and modernization of IT infrastructure Tatneft's goal: to achieve ROE of 15% for the bank based on sustainable and low-risk business model * see slides

28 BANK ZENIT STRATEGY

29 BANK ZENIT STRATEGY

30 BANK ZENIT STRATEGY

31 BANK ZENIT STRATEGY

32 BANK ZENIT STRATEGY

33 Web-site: Contacts: Headquarters: 75, Lenin st., Almetyevsk, Republic of Tatarstan, Russian Federation, IR. Phone: