Slide 1: Second Quarter 2010 Operational and Financial Results Conference Call
Second Quarter 2010 Operational and Financial Results Conference Call Mark A. Gyetvay, Chief Financial Officer and Member of the Board of Directors Moscow, Moscow Russian Federation 17 August 2010
Slide 2: Disclaimer – Forward Looking Statement
Disclaimer – Forward Looking Statement Matters discussed in this presentation may constitute forward-looking statements. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which
Slide 3: Summary Results – 2Q 2010
Summary Results – 2Q 2010 Increase in revenues and earnings driven by higher natural gas and liquids prices – Natural gas sales increased by 18.2% Y-o-Y – Liquids sales increased by 3.5% Y-o-Y Cash flow from operations decreased by 25.0% Y-o-Y to RR 6,340 million from RR 8,448 million Capital
Slide 4: Operational Overview
Operational Overview nm sae MOVATEK ;
Slide 5: Hydrocarbon Production
Hydrocarbon Production 820 838 Other Other 719 Khanchey 9,847 Other Khanchey mcm Other Kh Khanchey h 8,276 uction, mm Khanchey 7,563 Other Other Khanchey n, mt Khanchey Yurkharov Yurkharov Yurkharov Liquids Production Natural Gas Produ Yurkharov Yurkharov Yurkharov East-Tarko Khanchey Khanchey East-
Slide 6: Purovsky Plant & Vitino Sea Port Terminal
Purovsky Plant & Vitino Sea Port Terminal Total volumes delivered: 833 mt – East-Tarkosalinskoye and Khancheyskoye fields: 336 mt (100% of net production) – Yurkharovskoye field: 489 mt (99% of net production) – Other : 8 mt Total plant output: 825 mt – Stable gas condensate: 595 mt – LPG: 230 m
Slide 7: Stable Gas Condensate in Transit
Stable Gas Condensate in Transit Yosu Singapore “Goods in transit” “Goods in transit” “Goods in transit” 30.06.2009 31.03.2010 30.06.2010 2 tankers 2 tankers 3 tankers ~ 111 thousand th d tons t ~ 120 thousand tons ~ 180 thousand tons 7
Slide 8: Financial Overview – 2Q 10 vs. 2Q 09
Financial Overview – 2Q 10 vs. 2Q 09 8
Slide 9: Comparison of Quarterly Results (RR million)
Comparison of Quarterly Results (RR million) Q-o-Q Y-o-Y 2Q 09 3Q 09 4Q 09 1Q 10 2Q 10 +/- % +/- % Oil and gas sales 22,376 21,217 26,994 27,237 25,051 -8.0% 12.0% Total revenues 23,148 21,971 27,854 27,742 25,706 -7.3% 11.1% Operating expenses 15,038 13,638 16,075 15,947 15,717 -1.4% 4.5% EBITDA (1
Slide 10: Market Distribution – Gas Sales Volumes (mmcm)
Market Distribution – Gas Sales Volumes (mmcm) 10 106 10,106 8,907 7,704 7,763 7,909 6 110 6,110 60 5% 60.5% 6,191 69.5% 5,196 65.7% 5,773 74.9% 5,859 75.5% 3,996 39.5% 2,716 30.5% 2,713 34.3% 1,931 25.1% 1,904 24.5% 2Q 09 3Q 09 4Q 09 1Q 10 2Q 10 Ex-field End-customer • Q-o-Q decrease in natural gas
Slide 11: Natural Gas Sales Volume Mix
Natural Gas Sales Volume Mix 100% 43% 75% 49% 49% 54% 60% 66% 70% 75% 75% 50% 57% 25% 51% 5 % 51% 5 % 46% % 40% 34% 30% 25% 25% 0% 2Q 08 3Q 08 4Q 08 1Q 09 2Q 09* 3Q 09* 4Q 09* 1Q 10 2Q 10 Ex-field End-customers ((incl. traders in remote points)* p ) 11
Slide 12: Market Distribution – Liquids Sales Volumes (mt)
Market Distribution – Liquids Sales Volumes (mt) 894 919 821 707 684 776 86.8% 790 86.0% 666 81.1% 585 82.7% 537 78.5% 0 0 1 0.1% 2 0.3% 1 0.1% 117 13.1% 120 17.0% 128 13.9% 147 21.5% 155 18.9% 2Q 09 3Q 09 4Q 09 1Q 10 2Q 10 Domestic CIS Export • Q-o-Q Q o Q increase in export sales volumes was due t
Slide 13: Total Revenues (RR million)
Total Revenues (RR million) Change due to price Change due to volume Due to overall increase in benchmark Total average g realized p prices and related commodity prices on increased by 15.1%; international markets and, to a lesser production increased by 9.4% extent, an increase in volumes sold 280
Slide 14: Total Revenues Breakdown
Total Revenues Breakdown 2Q09 0% 7% 2% 2% 1% Natural gas Stable condensate 32% 56% LPG Crude oil 2Q10 2% 2% 12% Oil products Polymers 59% 25% Other 14
Slide 15: Realized Hydrocarbon Prices (net of VAT and export duties)
Realized Hydrocarbon Prices (net of VAT and export duties) 2Q 09 2Q 10 +/(-) +/(-)% 1Q 10 2Q 10 +/(-) +/(-)% Domestic prices 1,932 2,289 357 18.5% Natural g gas end-customers,, RR/mcm / 2,304 2,289 (15) -0.7% 1,836 - n/a n/a Natural gas traders in remote points, RR/mcm - - n/a n/a 1,027 1,223 196 19
Slide 16: Operating Expenses (RR million and % of Total Revenues)
Operating Expenses (RR million and % of Total Revenues (TR)) 2Q 09 % of TR 2Q 10 % of TR 1Q 10 % of TR 2Q 10 % of TR 8,295 35.8% 8,436 32.8% Transportation expenses 9,063 32.7% 8,436 32.8% 1,935 8.4% 2,260 8.8% Taxes other than income tax 2,424 8.7% 2,260 8.8% 10,230 44.2% 10,696 41.6% Non-controlla
Slide 17: Transportation Expenses (RR million)
Transportation Expenses (RR million) Change due to tariffs/distance Change due to volume Export iff/ i = 154 Tariff/Dist. Volumes = (173) Tanker = (68) 562 Domestic = (6) 8,295 5 43 3 8,436 Export Other includes: (567) Tariff/Dist. = 34 • Unallocated rail Volumes = 33 services; Domestic • Oil produc
Slide 18: Taxes Other Than Income Tax Expense (RR million)
Taxes Other Than Income Tax Expense (RR million) Change due to tax rate Change due to production - 32 33 43 32 2,260 104 79 1 935 1,935 2 15 2Q 09 Natural Gas Crude Property Excise and Other 2Q 10 gas condensate oil tax fuel taxes UPT tax The increase in UPT tax for natural gas and gas condensate
Slide 19: Materials, Services and Other Expenses (RR million)
Materials, Services and Other Expenses (RR million) Increase was consistent with our Increase in production of polymers ongoing maintenance schedule and insulation tape products and the associated increase in purchases of raw materials 20 116 86 1,740 120 (113) (5) (11) 58 1,469 , Decrease due to th
Slide 20: General and Administrative Expenses (RR million)
General and Administrative Expenses (RR million) Increase in the accrual of bonuses related to 2009 financial and operational results, as well as Decrease in operating services recognition of RR 86 million due to the initiation at the El Arish offshore block of a share-based compensation program 108
Slide 21: Profit Attributable to NOVATEK Shareholders (RR million)
Profit Attributable to NOVATEK Shareholders (RR million) 2,558 187 (213) (141) (325) 7,178 , 38 58 7,138 , (2,182) (20) 2Q 09 Total OPEX Transport Taxes other Other Finance Share of Income tax Non-controlling 2Q 10 revenues controllable than income income income profit (loss) of expense interest exp
Slide 22: Financial Overview – 2Q 10 vs. 1Q 10
Financial Overview – 2Q 10 vs. 1Q 10 22
Slide 23: Total Revenues (RR million)
Total Revenues (RR million) Change due to price Change due to volume 408 27,742 (28) (100) 1 3 25,706 92 28 4 142 8 (4 113) (4,113) 1 519 1,519 Decrease due to a 16.0% decrease in production and the change in inventory balances 1Q 10 Natural Stable gas LPG Crude Oil Polymers Other 2Q 10 gas condensa
Slide 24: Total Revenues Breakdown
Total Revenues Breakdown 1Q10 1% 2% 0% Natural gas 11% 18% Stable condensate LPG 68% Crude oil 2Q10 2% 2% 12% Oil products P l Polymers 59% 25% Other 24
Slide 25: Transportation Expenses (RR million)
Transportation Expenses (RR million) Change due to tariffs/distance Change due to volume Tariff/Dist. = 11 Volumes = 222 9,063 (39) Tanker = 234 (3) 5 (2) 8,436 Export (1,004) Tariff/Dist. = (135) Other includes: Volumes = 64 • Unallocated rail services; Domestic Tariff/Dist. = 40 • Oil products 20
Slide 26: Taxes Other Than Income Tax Expense (RR million)
Taxes Other Than Income Tax Expense (RR million) Change due to tax rate Change due to production Decrease due to a 16.0% decrease in volumes produced - 2,424 9 12 17 20 2,260 (231) 10 (1) 1 1Q 10 Natural Gas Crude Property Excise and Other 2Q 10 gas condensate oil tax fuel taxes UPT tax 26
Slide 27: Materials, Services and Other Expenses (RR million)
Materials, Services and Other Expenses (RR million) 14 3 1,740 123 9 (1) (4) (1) 1,548 49 Increase in production of polymers products and the associated increase in purchases of raw materials 1Q 10 Payroll Materials & Processing Repair & Staff training Operator Transport Other 2Q 10 supplies fees ma
Slide 28: General and Administrative Expenses (RR million)
General and Administrative Expenses (RR million) 163 58 33 3 1,631 18 11 1,463 (104) (14) Increase in the accrual of bonuses related to 2009 financial and operational results, as well as recognition of RR 86 million due to the initiation of a share-based compensation program 1Q 10 Payroll Social and
Slide 29: Profit Attributable to NOVATEK Shareholders (RR million)
Profit Attributable to NOVATEK Shareholders (RR million) 11,182 164 627 (2,036) (561) (1,549) 1,043 7,138 (33) (1,691) (8) 1Q 10 Total OPEX Transport Taxes other Other Finance Share of Income tax Non-controlling 2Q 10 revenues controllable than income income income profit (loss) of expense interest
Slide 30: Appendices
Appendices nm sae MOVATEK x0
Slide 31: Maintaining Margins (% of total revenues)
Maintaining Margins (% of total revenues) 54.6% 48.0% 51.9% 45.3% 45.5% 40.3% 40.3% 33.5% 33.7% 36.7% 31.0% 27.8% 2Q 09 3Q 09 4Q 09 1Q 10 2Q 10 EBITDA margin Net profit margin EBITDA margin net of disposals Net profit margin net of disposals Margins in-line with Group’s strategic guidance 31
Slide 32: Increasing Natural Gas Production (mmcm per day)
Increasing Natural Gas Production1 (mmcm per day) 120 100 80 60 40 20 0 Nov v Nov v Nov v Decc Decc Decc May y May y May y Marr Marr Marr Febb Febb Febb Jun n Jun n Jun n Sepp Sepp Sepp Octt Octt Octt Aprr Aprr Aprr Augg Jann Augg Jann Augg Jann Jul Jul Jul 2007 2008 2009 2010 2007 Avg. 2008 Avg. 20
Slide 33: Condensed Balance Sheet (RR million)
Condensed Balance Sheet (RR million) 30 June 2010 31 December 2009 +/(-) +/(-)% Total current assets 35,778 26,867 8,911 33.2% Incl. Cash and cash equivalents 18,082 10,532 7,550 71.7% Total non-current assets 181,472 166,264 15,208 9.1% Incl. Net PP&E 176,929 161,448 15,481 9.6% Assets classified a
Slide 34: Total Debt Maturity Profile (RR million)
Total Debt Maturity Profile (RR million) 21,223 9 In July 2010, the Group repaid RR 3,466 million 16 235 16,235 (USD 114 million) of our Syndicated term loan facility as per maturity schedule 19,174 7,530 9 In July 2010, the Group fully repaid id a RR 5 billion billi lloan from f OAO Sberbank ahead
Slide 35: Questions and Answers
Questions and Answers a= sae MOVATEK s