Novatek · RUS:NVTK
Novatek — Renaissance Capital 10th Annual Investor Conference (June 2006)
32 slides from Novatek's conference presentation, Jun 19, 2006
Slide 1: Renaissance Capital 10th Annual Investor Conference
Renaissance Capital 10th Annual Investor Conference Mark A. Gyetvay, Chief Financial Officer and Member of the Board of Directors Chamber of Commerce, Moscow, Russian Federation 19 June 2006
Slide 2: Disclaimer
Disclaimer This presentation is strictly confidential to the recipient, may not be distributed to the press or any other person, and may not be reproduced in any form. Failure to comply with this restriction may constitute a violation of applicable securities laws. This presentation does not constit
Slide 3: Gas market overview
Gas market overview ote 4 NOVATEK
Slide 4: Natural gas – fastest growing primary energy source
Natural gas – fastest growing primary energy source World Natural Gas Consumption Natural Gas Consumption in W. Europe 1980 – 2025, TCF by Source 2002 – 2025, TCF 200 25 Imports Production 20 150 15 100 10 50 5 0 0 1980 1990 2002 2010 2015 2020 2025 2002 2010 2015 2020 2025 Fuel Shares of World Elec
Slide 5: World population's impact on future energy demand
World population’s impact on future energy demand Represents significant future energy World population demand potential if energy is approximately consumption per capita increases to 6 billion people World average consumption per capita of 1.46 TOE 475 392 401 163 1,269 987 Asian Pacific 784 energy
Slide 6: World population projected to grow to 7.4 billion
World population projected to grow to 7.4 billion EE/FSU Europe’s By 2020, developing Asia’s per oil and gas oil and gas consumption consumption energy consumption is 9.5 mmbpd projected to grow 4% per 15.4 mmbpd 37.5 Tcf annum, the largest growth 26.1 Tcf percentage in the world 385 Middle East 414
Slide 7: Competitive Intensity
Natural gas “Market Maturity Matrix” Significant future growth potential but infrastructure and regulatory Bangladesh India issues must be resolved - a long- Philippines term investment horizon Low Indonesia Market Vietnam China Brazil Taiwan Concentration Competitive Intensity Venezuela Thailand Ja
Slide 8: Global gas balance – “Call on Russian Gas”
Global gas balance – “Call on Russian Gas” Russia, Other FSU Europe P1 Reserves: 47.6 TCM; 8.0 TCM P1 Reserves: 5.4 TCM N. America 286 193 P1 Reserves: 7.5 TCM 139 (21) (62) (185) (295) (139) (476) Middle East P1 Reserves: 72.6 TCM Latin America 21 37 Asia - Pacific P1 Reserves: 7.1 TCM P1 Reserves:
Slide 9: Gas production in the Russian Federation (BCM)
Gas production in the Russian Federation (BCM) 675 652.9 641.0 643.0 646.6 633.5 620.3 625 592.1 595.3 584.2 581.5 575 525 475 425 375 1999 2000 2001 2002 2003 2004 2005 2006E 2007E 2008E Gazprom Oil companies Joint ventures Novatek Other independents Oil cos. & Independents Source: Cambridge Energy
Slide 10: Opportunity: natural gas market – Europe
Opportunity: natural gas market – Europe Gazprom European Market Share (%) Gas fired power generation to drive and Gazprom’s Supply (BCM) consumption growth 329 Deficit in Europe to expand BCM 277 – UK shift to net imports 40% BCM 38% 207 166 34% 130 BCM – Groningen decline BCM BCM 29% 30% 28% 2
Slide 11: Domestic gas market projected to triple
Domestic gas market projected to triple Russian Gas Market: Demand, Supply 600 European supply deficit Market Uncertainty – will growing the Central Asian gas 500 imports materialize? 400 256 BCM (bcm) 300 Gazprom export share expanding 200 100 0 2005e 2007e 2009e 2011e 2013e 2015e 2017e 2019e 2003
Slide 12: Existing and planned gas pipelines to Europe
Existing and planned gas pipelines to Europe Existing Gas Pipeline Gas Pipeline Project Shtokmanovskoye Europe Baltic Pipeline 22 – 35 bcm Yamal l - Europe 15 – 32 bcm Yamal ll - Europe + 35 bcm Blue Stream 16 bcm Source: IGU 2006 12
Slide 13: Alternative flows of Russian natural gas - Asia
Alternative flows of Russian natural gas - Asia The Russian Far East, West and East Siberian regions Significant competition have enough supply will come from the export potential to meet the future of LNG, which is abundant energy demand of in Southeast Asia Northeast Asia (Indonesia, Malaysia and
Slide 14: Natural gas demand growth - China
Natural gas demand growth - China • Up to 80 BCM • First deliveries as early as 2011 • 2 pipeline routes with 30 to 40 BCM p.a. each Natural gas from • 3,000 km western Altai pipeline, est. cost West and East Siberia And the Far East 4.5 – 5 billion US$ • Environmental and cultural worries may incre
Slide 15: Significant investment required – Russian gas sector
Significant investment required – Russian gas sector 1 Average investment needs in Russian gas sector Gas Investment in Russia 14 2001-2010 2011-2020 2021-2030 12 10 Bln $US E&P1 $5.2 bln p.a $ 7 bln p.a. 8 6 Transmission1 $3 bln p.a. 4 2 Total2 2003 – 2020 $9.4 bln -$11.1 bln p.a. 0 Notes: 2001-201
Slide 16: Demand driving prices to export netback parity
Demand driving prices to export netback parity Price increased by 11% eff. Russia-EU 01/01/2006. Forecasted price increase of 8% for 2007, Gas Reform for WTO $160 however, GZPM is seeking Accession increases in gas tariff of 22% in $140 2007 and 2008, and 10% in 2009 $120 (US$ / MCM) $100 METD count
Slide 17: Less volatile Russian domestic gas price
Less volatile Russian domestic gas price $160 Natural gas is one of the $140 most volatile commodities traded on the NYMEX; $120 whereas Russian domestic gas prices are regulated and more stable and (US$ / MCM) $100 predictable $80 $60 $40 $20 $- 2006e 2007e 2008e 2009e 2010e 1997 1998 1999 2000 200
Slide 18: Price disparity between crude oil and natural gas
Price disparity between crude oil and natural gas Historical Range of Average Oil/Gas Price Ratios 25 90 Oil - $27.46/bbl Oil - $60.71/bbl Gas - $0.32/Mcf Gas - $1.14/Mcf Oil - $21.22/bbl 80 Gas - $1.45/Mcf 20 70 6:1 conversion would Oil - $27.38/bbl Gas - $0.64/Mcf suggest domestic gas price of $10
Slide 19: Novatek snapshot
Novatek snapshot ote 4 NOVATEK 19
Slide 20: High quality portfolio: low risk, prolific basin
High quality portfolio: low risk, prolific basin Basin accounts for approx. 90% of Russian gas production and 20% of the world’s gas production Resource base – 4.6 billion BOE P1 (“proved”) – 7.4 billion BOE P2 (“proved + probable”) – R/P ratio of 25 years Near existing infrastructure – Gazpro
Slide 21: Top 30 Natural Gas Reserve Holders, BCM
- 2,000 4,000 6,000 8,000 30,000 Gazprom NIOC QP Rosneft Saudi Aramco PdVSA 29,093 Sonatrach 27,501 INOC 18,563 NNPC Adnoc Petronas Pertamina ExxonMobil BP PetroChina KPC Shell Libya NOC EGPC LUKoil Total Chevron NOVATEK Top 30 Natural Gas Reserve Holders, BCM PDO 641 BCM ConocoPhillips ENI Surgutne
Slide 22: Increasing gas production
Increasing gas production Novatek achieves record level of production of 80 Monthly Gas Production, MMCM/day MMCM/day 90 80 70 60 50 40 30 Seasonality effect 20 10 0 Oct Oct May Dec May Dec Mar Mar Apr Mar Apr Nov Nov Jul Jul Jan Jun Jan Jun Aug Sep Feb Aug Sep Feb Feb Jan 2004 2005 2006 Avg. 56 MMC
Slide 23: Delivered gas – our main industrial regions
Delivered gas – our main industrial regions • Novatek delivers gas to 30 regions from Western Siberia to European Russia • 9 core regions accounted for ~ 80% of 2005 delivered volumes Novatek’s core fields Leningrad region Yamal Nenets AO Western Siberia Kostroma region Kirov region No transportatio
Slide 24: Gas condensate – maximizing our value chain
Gas condensate – maximizing our value chain • Processing: Purovsky processing plant at 100% capacity Kirkenes (Norway) • Transportation: 2005 signed long-term agreement with Sverdlovsk RR (affiliate of Russian RR) for transportation from Purovsky to Vitino Vitino • 1Q 2006 “Gold Star” partner for 20
Slide 25: Stellar financial performance
Stellar financial performance 1Q 05 1Q 06 +/(-)% RR million 2004 2005 +/(-)% 8,789 11,504 31% Total revenues & other income 24,727 42,187 71% 8,482 11,319 33% Oil & gas sales 21,018 37,246 77% 4,153 5,820 40% EBITDA(1) 8,785 22,876 160% nm nm nm EBITDA (net of disposals and other income) (2) 8,342 2
Slide 26: Achieved first-time corporate credit rating
Achieved first-time corporate credit rating NOVATEK’s first-time ratings are in line with the first-time ratings of the Russian oil majors Baa1/BBB+ Baa2/BBB Baa3/BBB- Ba1/BB+ Ba2/BB Ba2 Ba3/BB- BB- B1/B+ B2/B B3/B- Norilsk Nickel Wimm-Bill- RAO UES MegaFon Severstal Gazprom Novatek TNK-BP Sistema L
Slide 27: World class efficiency
World class efficiency Lifting Costs (2005) 1,2 Reserve Replacement Cost (2005) 3 Quicksilv er 10.07 Bill Barret t 23.07 Murphy Oil 7.92 15.74 Pioneer Dev on 7.43 Devon 14.34 Chesapeake 6.72 Encana 6.69 Chesapeake 13.82 Pioneer 6.64 Anadarko 11.26 Apache 6.27 10.07 Burlington Anadarko 5.38 Apache 9.
Slide 28: Efficiency indicators – year average RRR & RRC
Efficiency indicators – 3 year average RRR & RRC 500% CHK XTO 400% PXD 300% RRR, % (Avg. all E&P’s) BG DVN APA ECA NVTK 200% (Avg. Super E&P’s) BR 100% APC 0% - 1 2 3 4 5 6 7 8 9 10 RR Cost, $/boe (Bubbles drawn to scale based on proved reserves) Source: John S. Herold and Company data Notes: 1. 3yr
Slide 29: Efficiency indicators – Leveraged Full Cycle Ratio
Efficiency indicators NOVATEK’s efficient use of capital and cost discipline in a regulated price environment underscores the potential for sustainable growth 600% Leveraged Full Cycle Ratio 500% NVTK XTO APC 400% APA BR 300% Average DVN ECA 200% CHK BG 100% 0% 0% 5% 10% 15% 20% 25% 2005 ROCE Source
Slide 30: NVTK share price comparison to peer group - 2006
NVTK share price comparison to peer group - 2006 NOVATEK’s share price movement in 2006 demonstrates our solid underlying fundamentals in an environment of volatile global energy prices and supply considerations Source: MarketWatch - Big Charts 30
Slide 31: Concluding comments
Concluding comments ote 4 NOVATEK 31
Slide 32: NOVATEK: turning opportunity into strategy
NOVATEK: turning opportunity into strategy Substantially increase our production of hydrocarbons, especially natural gas – Targeting 45 BCM of natural gas production and 4.6 MMT of liquids by 2010 from our key fields Maintain our low-cost structure and leverage competitive cost advantage – Prove
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