Gazprom Neft · RUS:SIBN
Gazprom Neft — FY2010 Earnings Presentation
39 slides from Gazprom Neft's earnings presentation, Feb 22, 2011
Slide 1: Gazprom Neft 2010 Results and Outlook
Gazprom Neft 2010 Results and Outlook 22 February 2011
Slide 2: Management participating in this call
Management participating in this call Vadim Yakovlev Deputy Chairman of the Management Board, First Deputy CEO, Chief Financial Officer Boris Zilbermints Deputy Chairman of the Management Board Deputy CEO for Exploration and Production Vladimir Konstantinov Head of Economics and Investment Departmen
Slide 3: Disclaimer
Disclaimer This presentation contains forward-looking statements concerning the financial condition, results of operations and businesses of Gazprom Neft and its consolidated subsidiaries. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements
Slide 4: Agenda
Overview 2010 Results Upstream Downstream Financial Q&A Appendix 44
Slide 5: Solid 2010 highlighted by 5% production growth, 21% EBITDA growth
Solid 2010 highlighted by 5% production growth, 21% EBITDA growth Solid financial performance in 2010 • EBITDA: US$7,226 mln (+21% Y-o-Y) • Adjusted Net Income: US$3,346 mln (+25% Y-o-Y) • ROACE: 16% • Cash flow from operating activities: US$5,392 mln (+55% Y-o-Y) Total reserves replacement: 110
Slide 6: 2010 results laying foundation for 2020 objectives
2010 results laying foundation for 2020 objectives Key Events: 2020 Goals: Upstream Reach 100 MMTonnes oil Acquired share in SeverEnergia to develop Yamal fields equivalent production Established Messoyakhaneftegaz JV with TNK-BP in order to (2 MMboepd) streamline field development Maintai
Slide 7: Upstream
Upstream Yamal projects to drive domestic growth while international expansion continues 77
Slide 8: Optimizing legacy assets and developing new resources
Optimizing legacy assets and developing new resources Hydrocarbon production MMtoe 60 +7.6% +5.3% Orenburg* 50 SPD Tomskneft 40 Slavneft Gazprom Neft 30 20 Cenomanian Gas 10 0 2007 2008 2009 2010 2011E •Assuming Orenburg consolidation in 2Q11 88
Slide 9: Growing resource base with substantial upside
Growing resource base with substantial upside Changes in PRMS (SPE) proved reserves (MMtoe) 110% total reserves replacement 1,018 1,023 53 61 3 110% Reserve replacement ratio Substantial resource upside in new field developments YE Group Revisions SeverEnergy YE 2009 Production Acquisition 2010
Slide 10: Expanding global presence diversifies upstream portfolio
Expanding global presence diversifies upstream portfolio Serbia & Bosnia: Increasing share in NIS Yamal: Region slated for major expansion via Sever Energia, Novoport and Messoyakha JV Libya: Signed an agreement on entrance into Elephant field Cuba: Partnering with Petronas to develop four Iraq: Bad
Slide 11: Future Yamal projects open access to new exploration regions
Future Yamal projects open access to exciting new exploration and development regions Yamal peninsula Gydan Exploration Messoyakha ▪ Gazprom assets Novoportovskoye ▪ M&A in the area ▪ Mobilization synergy ▪ Unlicensed federal resources “Zapolyarnoye Purpe” pipeline ▪ Novoportovskoye oil field Gazpro
Slide 12: Major Messoyakha field development is key to future production
Major Messoyakha field development is key to future production Region: Yamal (Gydan peninsula) Field: East & West Messoyakhskoe JV Messoyakhaneftegaz with TNK-BP (50%/50%) Operator: GPN Square: 7,279 km2 Status: – Areas for test production specified – 42 exploration wells drilled – 2D Se
Slide 13: Acquisition of Sever Energia facilitates expansion into northern YANAO
Acquisition of Sever Energia facilitates expansion into northern YANAO region SeverEnergy Ownership Structure: Samburgsky license area 51% - Yamal Razvitie (50/50 Gazprom Neft and Novatek JV) 49% : Eni + Enel Messoyakha Yaro-Yahinsky license area Estimated reserves ABC1+50%C2: Novoportovskoye Gas Bc
Slide 14: Novoportovskoye and Orenburg field transfers from Gazprom
Novoportovskoye and Orenburg field transfers from Gazprom add significant domestic potential Novoportovskoye Largest crude and condensate reserves among any Rotterdam - 2923 km field in Yamal peninsula Transfer to 146 exploration wells drilled world markets Field fully covered by 3D seismic
Slide 15: Cenomanian gas to drive new source production in 2011
Cenomanian gas to drive new source production in 2011 Novogodneye and Muravlenko fields ▪ Cenomanian gas development project covers deposits at Muravlenko and Novogodneye fields ▪ ABC1 Reserves of 51.2 MMToe ▪ Production start: October 2010, with ~500,000 mcm extracted by December 31, 2011 ▪ Start o
Slide 16: Kuyumba offers potential for further Siberian growth
Kuyumba offers potential for further Siberian growth Region: Eastern Siberia Field: Kuyumbinskiy and Tersko-Kamovskiy blocks Joint project with TNK-BP through Slavneft JV Status: 65 exploration wells drilled as of end-2010 Transportation: Significant distance from ESPO (~630 km) necessitat
Slide 17: Signed PSA contract in Libya for Elephant field
Signed PSA contract in Libya for Elephant field 12% 88% KNOC PSA JV agreement 33.3% NOC ENI North Africa 33.3% 50% 50% Management GPN North Committee Africa 33.3% Mellitah Oil & Gas Company Operator ■ Acquired 33% stake from Eni ■ 25 year PSA ■ 2 options for 5-year prolongation ■ Purchase price of U
Slide 18: First step into the Middle East with Badra
First step into the Middle East with Badra ▪ Region: Iraq ▪ Field: Badra ▪ Operator: GPN ▪ Contract with the government of Iraq for Badra field development ▪ Key contract provisions: – Start up: 2013 – reaching plateau of 170 mb/d in 2017 – plateau production period of 7 years – compensation for exp
Slide 19: Diverse offshore exploration projects to add technological capacity
Diverse offshore exploration projects to add technological capacity ▪ Region: Equatorial Guinea ▪ Offshore blocks: Т & U Equatorial Guinea ▪ Operator: GPN GEPetrol JV structure ▪ Status: 20% ▪ Signed PSA with Ministry of Energy of Equatorial Guinea and the NOC GEPetrol ▪ Finalized seismic exploratio
Slide 20: Leadership position in Junin-6 Russian consortium
Leadership position in Junin-6 Russian consortium ▪ Region: Venezuela ▪ Field: Junin-6 (heavy crude) ▪ Operator: PetroMiranda ▪ JV between PDVSA and the Russian National Oil Consortium (RNOC) ▪ GPN appointed RNOC project leader ▪ Established project headquarters in Puerto la Cruz ▪ Opportunity to ad
Slide 21: Downstream
Downstream Asset modernization and refining expansion add to integration benefits 21 21
Slide 22: Capitalizing on growing domestic market and superior margins
Capitalizing on growing domestic market and superior margins Oil Product Demand Growth 2005-2010 5.0% $US/bbl Netback Dynamics 50 4.0% Switch to demand forecasts for key 3.0% 40 markets GPN is exposed to – Russia, Central Asia, Balkans 2.0% 30 (and compare to Western Europe) 1.0% 20 0.0% -1.0% 10 -2
Slide 23: Refining volumes up following Moscow consolidation
Refining volumes up following Moscow consolidation Refining to crude production ratio Refining throughput MMTonnes 90% 45 80% 37.9 38.4 40 70% 33.4 2.2 35 2.8 28.4 2.4 7.2 7.0 60% 30 26.2 24.3 6.8 50% 25 6.7 10.3 6.4 8.9 17.6 4.8 5.8 40% 20 3.3 3.2 3.3 15 3.1 30% 10 18.4 18.4 19.0 18.9 20% 14.5 16.3
Slide 24: Medium-term investment program to boost refinery complexity
Ambitious medium-term investment program to boost refinery complexity and light product yields Omsk Refinery Moscow Refinery Yaroslavl Refinery NIS refineries 2009 - 2010 results*: 2009 - 2010 results*: 2009 - 2010 results*: 2009 - 2010 results*: Completed projects: On-going projects: Completed proj
Slide 25: Developing business units in high-margin premium sales channels
Continuing to develop business units in high- margin premium sales channels Retail Lubricants Аviation Bunker Rebranding campaign well Launch of G-Family Lubricants #1 retail supplier of aviation #1 supplier of bunker fuel in underway, with 87% of brand fuel in Russia Russia Russian and CIS
Slide 26: Financial Results
Financial Results Financials rise on higher crude prices, increased production and acquisitions 26 26
Slide 27: Macroeconomic indicators recovering after the crisis
Macroeconomic indicators recovering after the crisis Brent, $/bbl +27% 79 62 ■ Global crude and product prices increased, driving similar growth in 2009 2009 2010 2010 Russia ■ Ruble appreciated against the dollar, Exchange rate, rub/$ PPI Валютный курс, руб./$ driving costs up +2.8 p.p. 31,7 31.7 -
Slide 28: Financials rise on higher crude prices, increased production and acquisitions
Financials rise on higher crude prices, increased production and acquisitions 20% 36% Revenues grew 36% year-on- 8% year, 4Q09driven revenues roseby in part 7%theq-o-q to 8,387 9,063 32,772 US$7,568inmln recovery on the crude strength prices and of 7,568 7,296 8,026 24,166 continued crude pricin
Slide 29: 21% EBITDA increase driven by volume and price growth
21% EBITDA increase driven by volume and price growth EBITDA 12M 2010 vs 12M 2009 ($US mln.) -2,590 4,198 488 -531 478 -394 7,226 -342 -789 714 18 949 5,977 Changes in netbacks = 1,564 OPEX = - 144 SG&A = - 313 931 Exploration expenses = + 63 6,277 5,046 12M 2009 Price Export duty Fx in Transport Ta
Slide 30: 12% increase in OPEX driven by volume, tariffs and ruble
12% increase in OPEX driven by volume and tariff increases as well as ruble appreciation 30 30
Slide 31: Ample cash flow to cover capex, M&A and dividends
Ample cash flow to cover capex, M&A and dividends US$ mln Cash reconciliation: FY2010 vs. FY2009 5,392 3,301 1,624 Free cash flow 419 2,091 728 120 1,146 868 868 Cash at Operating Capex Cash at 1Q10 Acquisitions Net Dividends Other Cash at FY2009 cash flow + free cash borrowings FY2010 flow 31 31
Slide 32: Continued optimization of high-quality debt portfolio
Continued optimization of high-quality debt portfolio By category By currency 5% Other EUR 2% 1% Other 19% Ruble Average weighted rate reduced by 18% Russian bonds 23% RUB banks 1.15 p.p from 5.11% to 3.96% International 22% USD DCM PXF 58% 74% Capital discipline has maintained debt/EBITDA well
Slide 33: 2011 outlook sees 8% production growth
2011 outlook sees 8% production growth from continued organic investments Capex and investments* (US$bln) Outlook for key figures* + 7.6% 4.9 5.4 2010 2011E 5 60 0.7 Sibir Energy 0.5 Acquisition 4 New projects 50 52.8 56.8 +1.3% Other 40 3 37.9 38.4 NIS 30 2 Marketing & +9.4% 20 distribution 1 Refin
Slide 34: Proposed "60-66" tax system would benefit Company
Proposed “60-66” tax system would benefit Company Changes in 2011 EBITDA due to export duty reforms ■ On December 27, 2010 the Russian US$ mln government issued act №1155, which enacts a 3-year change in duties for oil products starting from February 2011 ■ New oil product duty rates to have a neutr
Slide 35: Strong upside potential according to major market indicators
Strong upside potential according to major market indicators 2007-2010 indexed share price of Russian Majors 180% 160% ■ Strong three-year share Gazprom Neft performance, ahead of peer 140% group 120% ■ Valuation multiples at 100% attractive levels for investment 80% ■ Relative performance since 60%
Slide 36: Questions & Answers
0 cazpnom NE F T Questions & Answers
Slide 37: Appendix
0 cazpnom NE F T Appendix
Slide 38: EBITDA Reconciliation (4Q10 vs 3Q10)
EBITDA Reconciliation (4Q10 vs 3Q10) EBITDA 4Q 2010 vs 3Q 2010, $ mln. OPEX =2 SG&A =1 Transport =2 Taxes =2 -108 -10 2,079 2,011 320 -66 -122 209 7 -37 -125 238 275 OPEX = - 41 SG&A = - 36 Exploration expenses = - 26 Cost of other sales = - 19 1,841 1,736 3Q 2010 Price Export Duty Fx in revenues Tr
Slide 39: OPEX reconciliation (4Q10 vs 3Q10)
OPEX reconciliation (4Q10 vs 3Q10) ОРЕХ reconciliation 4Q10 vs 3Q10 (US$ mln.) -14 -2 55 589 550 3Q 2010 Volume Tariff increase FX gain (loss) 4Q 2010 39 39