Novatek · RUS:NVTK
Novatek — Investor Day (June 2010)
37 slides from Novatek's investor day presentation, Jun 21, 2010
Slide 1: Moving Forward – Still a Growth Story
Moving Forward – Still a Growth Story Mark Gyetvay, Chief Financial Officer and Member of the Board LSE and Granit Capital – Russia and CIS Capital Markets Day – Oil and Gas London Stock Exchange, London, UK 21 June 2010
Slide 2: Disclaimer
Disclaimer This presentation does not constitute or form part of, and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of the Company or any of its subsidiaries in any jurisdiction or an inducement to enter into investment activity in
Slide 3: NOVATEK YTD Performance
NOVATEK YTD Performance NOVATEK 18,2% CNOOC 11,8% ConocoPhillips 8,0% Encana 7,2% Marathon oil 7,0% Tatneft -0,5% BG Group -0,6% Royal Dutch Shell -3,0% Chesapeake Energy -3,9% Lukoil -6,3% Talisman Energy -7,5% Exxon Mobil -8,2% Total -10,1% StatoilHydro -13,8% Eni -20,8% Gazprom -21,0% Rosneft -24
Slide 4: Undervalued, over-risked
Undervalued, over-risked Reserve1 based valuation2 multiples Risk premium effect on NVTK GDR price Lukoil 2,6 195 NOVATEK 3,3 BP 5,2 185 Rosneft 5,5 Chesapeake 6,9 175 ConocoPhillips 7,8 Pioneer 165 9,2 NOVATEK, USD/GDR Anadarko 9,6 155 XTO 10,5 TOTAL 11,0 145 Shell 11,5 ENI 12,2 135 Statoil 12,6 Pe
Slide 5: Mitigating Risk
Mitigating Risk Key Factors Reducing Risk Premium Proven track record regarding pipeline and transportation access as well as production growth Stable tax regime with no punitive changes planned Production tax on natural gas has remained steady at RR 147/mcm for the past four years. Proposed c
Slide 6: Significant Company Milestones
Significant Company Milestones Launch of 2nd phase of NOVATEK successfully places 19% development at Production and exploration NOVATEK acquires of its shares on London and Yurkharovskoye field – 16 licenses in Yamal-Nenets 50% of El Arish Russian exchanges in one of the bcm total field production A
Slide 7: Operational Profile
Operational Profile 7
Slide 8: Summary – 2009
Summary – 2009 Quality Growth Model Lowest capital and production costs amongst relative peer group – for the past five consecutive three-year average periods High returns on predominantly lower regulated prices – Approximately 65% of our revenues are derived from the regulated natural gas marke
Slide 9: NOVATEK’s Fields and License Areas (LA)
NOVATEK’s Fields and License Areas (LA) gas pipeline gas condensate pipe- line gas condensate pipe- Yamal-Nenets Autonomous line under construction Region (YNAO) – the world’s producing fields largest natural gas producing other fields & license region areas Purovsky Plant 1. Yurkharovskoye field 8.
Slide 10: Production Profile
NOVATEK Development Profile 6 Khancheyskoye Field License term – 2019 5 East-Tarkosalinskoye Field License term – 2043 Production Profile 4 Yurkharovskoye Field License term – 2034 3 7 new layers discovered in 2009 2 South Tambeyskoye Field1 License term – 2045 1 Sterkhovoye Field (Olimpiyskiy licen
Slide 11: A Proven Strategy to Build Reserves
A Proven Strategy to Build Reserves Proved Reserves (SEC), mmboe* Compound Annual Growth Rate: 13% 6,853 6,853 6,853 7 000 Sterkhovoye Termokarstovoye 6 300 Khancheyskoye 5 600 South Tambeyskoye 4,963 4,663 4,678 4 900 4,573 4,099 4,126 4 200 3,964 3,858 East-Tarkosalinskoye 3 500 2 800 2,353 2 100
Slide 12: International Reserve Scale
International Reserve Scale Historical natural gas reserve growth 2009 Proved SEC gas reserves, bcm 1 BCM Gazprom 18,200 1 500 1,462 ExxonMobil 1,926 1 350 Shell 1,389 1 200 1,017 BP 1,278 1,015 1,029 1 050 1,006 923 NOVATEK 967 900 784 967 750 Total 745 681 750 Conoco 687 600 690 641 651 653 585 Ch
Slide 13: Reserves to Production
Reserves to Production Long Life Reserves 2009 Proved Reserves, mm boe 300 NOVATEK 6 853 ECA 250 BG NVTK 2 600 2009 Production, MM boe APC BG APA 200 XTO 2 471 XTO CHK Chesapeake 2 376 150 EOG Apache 2 367 100 Anadarko 2 304 50 PXD EnCana 1 920 EOG 1 796 0 0 2 000 4 000 6 000 8 000 Pioneer 899 2009
Slide 14: Efficient Operator
Efficient Operator Low cost – long life Low realized prices – high margins 500% 70 APC NVTK 60 400% Oil & Gas Revenue, $/boe XTO XTO 50 3Yr Avg R/P ratio CHK 300% EOG PXD 40 APA 200% CHK 30 APA EOG 100% PXD ECA 20 0% NVTK APC 10 ECA -100% - 0 5 10 15 20 25 -80% -60% -40% -20% 0% 20% 40% 3Yr Avg RR C
Slide 15: NOVATEK Transportation & Processing
NOVATEK Transportation & Processing 15
Slide 16: Yurkharovskoye Field – Transportation Scheme
Yurkharovskoye Field – Transportation Scheme Gas pipelines Gas condensate pipelines Gazprom Gazprom Field development stages: • Phase 1 – up to 9 bcm/yr NOVATEK (existing) NOVATEK (existing) January 2003 NOVATEK (new) NOVATEK (under construction - 2010) • Phase 2/stage 1 – up to 7 bcm/yr September 2
Slide 17: Increasing Gas Condensate Production
Increasing Gas Condensate Production Structure of 2009 natural gas reserves “Wet” gas vs. “Dry” gas production 61% 68% 100% 37% 29% 90% 2% 3% 26% 80% 45% 42% 39% 47% 70% 60% 50% 40% 74% 30% 55% 58% 61% Natural gas 1,500 m. 53% 20% Gas/gas condensate 1,500 – 3,000 m. 10% 0% 2005 2006 2007 2008 2009 G
Slide 18: OAO Yamal LNG – South Tambeyskoye Field
OAO Yamal LNG – South Tambeyskoye Field Map of the Yamal Fields OAO Yamal LNG holds the license for exploration and development of the South-Tambeyskoye field • Discovered in 1974, the field is located on the Northeastern side Malyginskoye of the Yamal-Peninsula • Initial license issued 13 July 2005
Slide 19: Historical Production Results
Historical Production Results Natural gas production, bcm Liquids production mmt 35 32.8 3,5 30.9 3.0 30 28.7 28.5 3,0 25.2 2.6 2.5 2.5 25 2,5 2.3 20.9 2.2 20 2,0 15 1,5 10 1,0 5 0,5 0 0,0 2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009 Yurkharovskoye Field East-Tarkosalinskoye Field Yur
Slide 20: Historical Production Results
Historical Production Results Total production by field, mmboe Total production gas & liquids, mmboe 250 240 250 240 223 223 208 207 208 207 200 186 200 186 159 159 150 150 100 100 50 50 - 0 2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009 Yurkharovskoye Field East-Tarkosalinskoye Field N
Slide 21: Domestic Natural Gas Sales and Production
Domestic Natural Gas Sales and Production NOVATEK’s natural gas sales to Russian regions NOVATEK today is… ~ 1% of world gas production ~ 6% of Russian gas production ~ 10% of deliveries to domestic market ~ 10% of Russian LPG production ~ 20% of Russian condensate production 2009 Russian
Slide 22: Predictable Gas Pricing Model
Predictable Gas Pricing Model Historical and forecasted regulated price increases for Russian domestic gas 350% 5 000 4 642 4 500 300% 3 774 4 000 % change in regulated price 250% 3 282 3 500 2 854 23.0% 3 000 200% RR/mcm 2 481 15.0% 15.0% 15.0% 2 500 2 158 150% 2 032 15.0% 1 899 2 000 1 690 1 775 7
Slide 23: Expanding Our Liquids’ Commercial Reach
Expanding Our Liquids’ Commercial Reach Breakdown of 2009 Liquids sales volumes 6% 70% 24% Diversifying our commercial activities to the growing Asia- Stable gas condensate LPG Pacific markets Crude oil Oil products 23
Slide 24: Our Stock Performance Since IPO
Our Stock Performance Since IPO 33 475% $23.7 billion 30 425% 27 375% 366 % 24 Market capitalization, Bn USD NVTK share price increase, % 325% 21 275% 18 15 225% 12 175% 9 125% 6 75% 3 25% 0 -25% -3 May-10 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Nov-05 May-06 Nov-06 May-07 Nov-07 May-08 Nov-08 May-09 Nov
Slide 25: A Compelling Investment Case
A Compelling Investment Case 29 year R/P life 967 bcm P1 Gas reserves 68% Total Proved Developed reserves Low-risk Efficient Natural gas will remain Assets ~2.0 tcm of natural gas the fuel of choice in ~235 mmt of liquids the 21st century ~15 billion boe VALUE Domestic gas price Focus on developing
Slide 26: Questions and Answers Session
Questions and Answers Session Contact details: NOVATEK’s Investor Relations Mark Gyetvay, Chief Financial Officer Gregory Madick, Head of Investor Relations Tel: +7 (495) 730-6013 Email: ir@novatek.ru Website: www.novatek.ru 26
Slide 27: Appendices
Appendices 27
Slide 28: Supply/Demand Environment – Europe & Russia
Supply/Demand Environment – Europe & Russia 28
Slide 29: OECD Europe Gas Scenarios – Base Case
OECD Europe Gas Scenarios – Base Case OECD Europe Gas Production OECD Europe Gas Balance Scenario BCM / yr The main issue is BCM / yr 0.8% - 1.0% per 350 today’s production annum growth in Norway 700 Production sustainability consumption Other OECD Europe Imports 300 United Kingdom 2008 WEO Import S
Slide 30: Natural Gas Supply and Demand Balance
Natural Gas Supply and Demand Balance United States Europe Asia Pacific Billions of Cubic Feet per Day Billions of Cubic Feet per Day Billions of Cubic Feet per Day 120 120 120 100 100 100 80 80 80 Imports Imports 60 60 60 40 40 Imports 40 Local Local 20 20 20 Production Production Local Production
Slide 31: Domestic Balance Weighted to Independents
Domestic Balance Weighted to Independents No change to fundamental supply and demand dynamics for the Russian domestic market Gazprom is still inclined to supply gas to the European market for higher prices and to maintain its market influence The postponement of Gazprom’s investment program w
Slide 32: Relative Growth Despite Recessions
Relative Growth Despite Recessions Gas consumption in Russia bcm Global Recessions 450 15,00% 400 Emerging Mkts Financial Crisis 10,00% 350 Consumption breakdown not yet available 300 5,00% 250 0,00% 200 150 -5,00% 100 -10,00% 50 0 -15,00% 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Slide 33: Natural Gas Supplied to RF Domestic Market
Natural Gas Supplied to RF Domestic Market mm cm/day mm cm/day 2 000 120 1 800 100 1 600 1 400 80 1 200 1 000 60 800 40 600 400 20 200 - 0 Oct Oct Oct Oct Mar Nov Dec Nov Dec Nov Dec Apr Mar Apr Mar Apr Mar Nov Dec Apr Mar Apr May Jul Aug Sep May Jul Aug Sep May Jul Aug Sep May Jul Aug Sep Jun Jan J
Slide 34: Select Financial Data
Select Financial Data 34
Slide 35: Comparison of Quarterly Results (RR million)
Comparison of Quarterly Results (RR million) Q-o-Q Y-o-Y 1Q 09 2Q 09 3Q 09 4Q 09 1Q 10 +/- % +/- % Oil and gas sales 16,316 22,376 21,217 26,994 27,237 0.9% 66.9% Total revenues 16,981 23,148 21,971 27,854 27,742 -0.4% 63.4% Operating expenses 11,379 15,038 13,638 16,075 15,947 -0.8% 40.1% EBITDA (1
Slide 36: NOVATEK 1Q10/4Q09 performance summary
NOVATEK 1Q10/4Q09 performance summary Macroeconomic WTI US$/bbl $76.4/bbl $3/bbl RR depreciation to US$ (1.42 RR/USD) 29.47 RR/USD Financial (in millions of Russian roubles) Total revenues (112) 27,854 Total operating expenses (128) 16,075 Profit attributable to NOVATEK 9,378 1,804 EBITDA 13,373 1,7
Slide 37: Financial Results Summary, million RR
Financial Results Summary, million RR 89,954 86,903 79,272 76,076 62,370 60,406 39,566 36,702 29,283 26,043 22,899 18,736 44% 47% 46% 2007 2008 2009 Total revenues Oil & gas sales EBITDA Net income 37