Novatek · RUS:NVTK
Novatek — Non-Deal Roadshow (February 2009)
32 slides from Novatek's roadshow presentation, Feb 9, 2009
Slide 1: A Strategic Perspective 2009
A Strategic Perspective 2009 M k Gyetvay, Mark G t Chief Chi f Financial Fi i l Officer Offi and d Member M b off the th Board B d off Directors Di t HSBC – US Investor Meetings New York City – Los Angeles – San Diego – San Francisco Week of 9th February 2009
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: Company Overview
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Slide 4: Four Pillars Supporting Growth & Value Creation
Four Pillars Supporting Growth & Value Creation SEC P1 Reserves movements1 mm boe Ten years of natural gas production1 World class efficiency Pricing update to achieve export netback parity 150 bcm Current netback parity price ~ $180.00 297 4 664 4,664 651 bcm 3 yr. Avg. Reserve Replacement Cost 65.
Slide 5: Resource Management & Results
Resource Management & Results Three year reserve replacement (RR) metrics 2007 Year end reserves, mm boe1 500% NOVATEK 4 678 450% XTO Chesapeake Large US EnCana 3 144 400% E&Ps 350% Apache 2 446 2005-07 RR, % 300% EnCana Anadarko 250% EOG A d k Anadarko 2 431 200% NOVATEK Apache BG 2 039 Tatneft Out
Slide 6: Oil & Gas Operational Results
Oil & Gas Operational Results 2007 Results of operations 2008E Production results, mm boe1 40 Tatneft EnCana 287 35 Gapromneft NOVATEK 223 30 ost, $/boe BG 223 25 Lukoil Anadarko 205 2007 Lifting co 20 Anadarko Rosneft Apache 199 15 Outside N.A. Large US Apache E&Ps Chesapeake 144 2 10 E&Ps XTO EOG
Slide 7: Valuation Screens
Valuation Screens Per barrel valuation 2010 P/CF multiples vs. production growth 1 000 9,0x 8,0x XOM Majors 7,0x 7,0 EV/2008E Production ($/boe)) European US E&Ps orward P/CF E&Ps 100 6,0x Rosneft RDS CVO OXY Lukoil 5,0x Gazprom Ga po NVTKI1 BP 2010 Fo NOVATEK 4,0x TOT COP Surgut- EV/Reserves $1.40
Slide 8: A Compelling Investment Case
A Compelling Investment Case 23 year R/P life 653 bcm P1 Gas reserves 84% Proved Developed Low-risk Efficient 1.3+ tcm of natural gas Natural g gas will remain Assets 185+ mmtt off liquids li id the fuel of choice in approx. 10 billion boe the 21st century VALUE Domestic gas price will continue to F
Slide 9: General Business & Market Environment
General Business & Market Environment
Slide 10: Call on Natural Gas
Call on Natural Gas Europe demonstrates the greatest natural …and Russia currently supplies approximately gas deficiency… g y 30% of current European p demand Natural gas production & consumption, bcm Gas imports from Russia, 2007, % total imports Total 2007 gas consumption, bcm 0% 20% 40% 60% 80% 1
Slide 11: Relative Growth Despite Recessions
Relative Growth Despite Recessions Gas consumption in Russia Global Recessions bcm Emerging Mkts 450 418 15% Financial Crisis 406 395 384 392 400 383 376 361 365 351 351 10% 339 337 336 331 338 350 300 5% 250 0% 200 150 -5% 100 -10% 50 0 -15% 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 20
Slide 12: Steady Industrial Consumption
Steady Industrial Consumption Breakdown of industrial consumption in Russia, bcm 127 114 118 109 111 108 106 99 99 101 98 97 91 89 91 88 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Metals Fertilizer Cement Oil Gazprom Chemicals Machinery Agriculture Source: Troika
Slide 13: Main Themes – 2009
Main Themes – 2009 ¾ maintain strong cash position ¾ manageable debt position Liquidity ¾ sustainable cash flows ¾ no management g shareholder collateralization issues ¾ decreasing inflationary pressure on oil service costs Capital ¾ largely financed by operating cash flows Expenditures ¾ continued
Slide 14: Operating Environment
Operating Environment Capacity Constraints Market Dynamics Eliminated through… Non-Controllable 2nd Phase Yurkharovskoye field development Gas pipeline – Yurkharovskoye field to UGSS 2008 Weather (34 bcm capacity) 2nd Phase Purovsky Plant 2nd Stage methanol plant Yurkharovskoye field (40,000 tons p.
Slide 15: Looking Ahead - Focus On Core Gas Segment
Looking Ahead - Focus On Core Gas Segment Prioritize investment program to focus on core natural gas and gas condensate d t production d ti capacity it and d changing h i market k t conditions diti 2009 – Estimated E&P CAPEX between RR 14.21 billion (minimum case) and d RR 21 21,8 81 billion billi
Slide 16: Exploration & Production
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Slide 17: NOVATEK License Areas
NOVATEK License Areas NOVATEK BBB) core Nova Tex fiaids || Other NOVATEH fields NOVATEH License Areas NOVATEH Affiliate Licanse Areas Purovshy Plant Gas pipeline | | =— om Gas condensate pipeline , § Yurkharovskoye Field Purovsky 5 Tarko 4) P wh | Field ° { oye , Khancheyskoye Field 1 Yuruharovshiy
Slide 18: Migration of Reserves & Resources
Migration of Reserves & Resources Capital p Exploration p Expenditures Development PDP² PUD3 1.035 VALUE 557 96 t tcm bcm bcm Proved Probable Possible C3+ (P1) (P2) (P3) STAKEHOLDERS Reserves Resources RISK Notes: 1. All data provided as of 2007 risked unrisked 2. PDP – proved developed producing 3.
Slide 19: NOVATEK Development Profile
NOVATEK Development Profile 6 Khancheyskoye Field License term - 2019 East Tarkosalinskoye Field 5 License term - 2043 Prroduction Profile 4 3 Yurkharovskoye Field License term - 2034 2 Significant Si ifi t un-booked b k d 1 15 Exploration reserves supports future Licenses Sterkhovoye Field producti
Slide 20: Natural Gas Production, 2005-2008
Natural Gas Production, 2005-2008 NOVATEK quarterly natural gas production 7,98 8,00 7,58 7,55 7,53 7,54 7,38 7,22 7,23 7,16 7,16 7,03 7,00 , 6 58 6,58 6,25 6,22 5,99 5,94 6,00 5,00 4,00 3,00 2,00 1,00 - 1Q05 1Q06 1Q07 1Q08 2Q05 2Q06 2Q07 2Q08 3Q05 3Q06 3Q07 3Q08 4Q05 4Q06 4Q07 4Q08e 20
Slide 21: E&P CAPEX Forecast - 2009
E&P CAPEX Forecast - 2009 2009F E&P CAPEX Program, RR MM1 2009F E&P CAPEX by Activity Other 334 Minimum Maximum 1% 1% Other exploration 352 8% 6% 5% 8% 27% 9% 718 34% Sterkhovoye Minimum Capex 14,216 14% 12% Khancheyskoye Maximum Capex 21,770 21 770 761 19% 23% 33% Purovsky/Ust-Luga 1 087 E. Tarkosa
Slide 22: Yurkharovskoye Field Development Plan – 2009
Yurkharovskoye Field Development Plan – 2009 E&P Capex Breakdown, RR MM1 Capacity Increase, bcm (annualized) Field capacity max 2009 capex 2009F – Minimum Mi i 8,981 8 981 25 3 336 20 7.2 2 627 15 Field capacity min 2009 capex 2 549 10 360 5 109 0 IQ IIQ IIIQ IVQ 2009F – Maximum 16,535 2009 6 965 20
Slide 23: Yurkharovskoye Field - Transportation Scheme
Yurkharovskoye Field - Transportation Scheme Gas pipelines Gas condensate pipelines Field development stages: Gazprom’s Gazprom’s • Stage 1 – up to 9 bcm/yr Existing NOVATEK’s Existing NOVATEK’s • Stage 2 – up to 7 bcm/yr New NOVATEK’s NOVATEK’s under construction Yamburgskoye Yurkharovskoye field f
Slide 24: Yurkharovskoye Field Development Plan
Yurkharovskoye Field Development Plan Key changes to original development plan Drilling program “New well” “Old well” +/-,% Original – total of 88 wells and an artificial Diameter, mm 168 114 +47% island to reach planned field capacity of 27 bcm Deviation, m 3,500 2,000 +75% Horizontal run,m +100%
Slide 25: Questions & Answers
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Slide 26: Appendices
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Slide 27: Financial Highlights
Financial Highlights RUR mm 2005 2006 2007 2007 vs. 2006 +/(-)% Total Revenues 38,477 49,234 62,431 26.8% EBITDA 23,022 23,129 29,283 26.6% Profit for the Period 13,662 14,079 18,736 33.1% Operating Cash Flow 10,246 16,938 21,383 26.2% Capital expenditures 6,460 4,703 19,466 313.9% Total Assets 78,7
Slide 28: Continued Strong Results
Continued Strong Results 3Q07 3Q08 +/( ) +/(-) +/( )% +/(-)% 9m07 9m08 +/( ) +/(-) +/( )% +/(-)% 14,695 19,437 4,742 32.3% Oil and gas sales 44,130 60,015 15,885 36.0% Total revenues & other 15,210 20,452 5,242 34.5% 45,546 62,501 16,955 37.2% income 8,539 11,936 3,397 39.8% Operating Expenses 27,12
Slide 29: Financial Guidance
Financial Guidance Metric 2003 2004 2005 2006 2007 9M08 Guidance EBITDA, %1 30% 36% 54% 48% 47% 49% 43 – 45% Effective tax rate2 33.1% 28.3% 27.3% 26.7% 27.0% 24.5% 24 – 26% Net Income, %3 19% 23% 32% 29% 30% 32% 23 – 25% ROE, %4 27% 13% 24% 21% 23% Na 21 – 23% ROACE %5 ROACE, 21% 13% 20% 20% 21% N
Slide 30: Operational Metrics
Operational Metrics Metric 2003 2004 2005 2006 2007 3yr Avg4 Lifting costs, $/boe 0.43 0.38 0.52 0.45 0.58 0.52 F &D costs, $/boe 0.72 1.06 0.30 0.57 3.14 1.46 RR costs, $/boe1,2 0.72 0.69 0.30 0.66 3.70 1.13 RR rate t 3 249% 118% 313% 144% 107% 198% W rank We k as the th second d lowest l t costt p
Slide 31: E&P Breakdown 2008
E&P Breakdown 2008 Production Estimate E&P Capex Estimate, RR 30,136 MM1 Infrastructure 2% Natural Gas 30.8 BCM 11% Drilling 35% Pipelines Liquids 2.6 MMT 21% Compressor Stations Purovsky/Ust-Luga Total 221 MMBOE 4% 11% 16% Exploration Other Development Capex Estimate, RR 26,812 MM1 Exploratio
Slide 32: 2008 Key E&P Highlights
2008 Key E&P Highlights C1 NOVATEK’ss exploration activities NOVATEK Reserve Growth G h Field/License area Seismic Drilling Gas Liquids y Yurkharovskoye 141 km2 ((3D)) 2 wells 13 bcm 0.9 mmt New Yurkharovskoye 42 km2 (3D) 1 well 6.9 bcm 1.0 mmt Khancheyskoye 226 km2 (3D) 3 wells 4.7 bcm 0.4 mmt Olim