Gazprom Neft · RUS:SIBN

Gazprom Neft — Q2 2013 Earnings Presentation

33 slides from Gazprom Neft's earnings presentation, Aug 6, 2013

  1. Slide 1: IFRS Financial and Operating Results for Second Quarter 2013

    IFRS FINANCIAL AND OPERATING RESULTS FOR SECOND QUARTER 2013 6 August 2013, St. Petersburg

  2. Slide 2: Agenda

    AGENDA  Highlights, Alexey Yankevich Macro Member of the Management Board, Environment, CFO Financials  Upstream Mihail Zhechkov Head of Economics and Investment Department, Exploration and Production Division  Downstream Vladimir Konstantinov Head of Economics and Investment Department, Refining

  3. 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

  4. Slide 4: Highlights

    HIGHLIGHTS 1H 2013 Financial performance:  Revenue: RUB 591 bln (+1.8% Y-o-Y)  EBITDA*: RUB 151 bln (+0.9% Y-o-Y)  Net Income: RUB 78 bln (-1.4% Y-o-Y) Operational progress in 1H 2013:  Hydrocarbon production up 3.6% Y-o-Y  Refining volumes down 0.8% Y-o-Y due to planned refinery turnaround  P

  5. Slide 5: Upstream

    Upstream Major project execution and use of new technologies deliver continued growth in hydrocarbon output IFRS FINANCIAL AND OPERATING RESULTS FOR SECOND QUARTER 2013 5

  6. Slide 6: Legacy Fields: Exploring New Opportunities

    LEGACY FIELDS: EXPLORING NEW OPPORTUNITIES 1H 2013 Key events: Exploration: Tight oil  Testing continues on Bazhenov formation at Palyanovskaya acreage of Krasnoleninskoye field  Exploratory drilling identified Jurassic layer crude deposit in eastern section of Western Luginetsky license block. We

  7. Slide 7: Growth Driven by Orenburg Assets, SeverEnergia, and Legacy Fields

    GROWTH DRIVEN BY ORENBURG ASSETS, SEVERENERGIA, AND EFFICIENT DEVELOPMENT OF LEGACY FIELDS Group hydrocarbon production, MMtoe 2Q 2013 vs 2Q 2012 reconciliation Legacy fields  Increased hydrocarbon production 4.4% Y-o-Y:  Growth partially offset by: • Application of new technologies at legacy fiel

  8. Slide 8: Gazprom Neft Leads the Industry in 1H 2013 Hydrocarbon Production Growth

    GAZPROM NEFT LEADS THE INDUSTRY IN 1H 2013 HYDROCARBON PRODUCTION GROWTH Peer comparison: hydrocarbon production increase in Russia* Average daily production**, ktoepd 1H 2013 vs 1H 2012, % 180 Gazprom neft 175 169.0 169.2 Lukoil 170 167.2 165 162.1 Rosneft 161.2 160 Surgutneftegaz 155 150 TNK-BP 2Q

  9. Slide 9: Active Use of New Technologies at Legacy Assets

    ACTIVE USE OF NEW TECHNOLOGIES AT LEGACY ASSETS Horizontal Drilling As part of 2013 drilling efficiency improvement program, increased drilling of highly effective horizontal wells by a factor of 2.8 vs. 2012 Multi-stage hydrofracking To increase efficiency and develop hard-to-recover reserves, plan

  10. Slide 10: Drilled First Quadrilateral Well at Umseyskoye Field

    DRILLED FIRST QUADRILATERAL WELL AT UMSEYSKOYE FIELD (KHMAO), DELIVERING 200 TPD INITIAL PRODUCTION Well No. 1001, Cluster 13  In planning the drilling project, multiple options were evaluated, including 2, 3, 4 and 5 horizontal bores Umseyskoye Field  The quadrilateral well options was recommende

  11. Slide 11: Significant Growth in Associated Gas Utilization

    SIGNIFICANT GROWTH IN ASSOCIATED GAS UTILIZATION Associated gas production/utilization, bcm Associated gas production/utilization +1.1 bcm of utilized associated gas 1H13 vs. 1H12, bcm Utilization 78%* 6.7 66%* Flaring 6.4 3.3 3.1 1.4 0.7 4.7 2.2 1.1 1.8 5.3 2.6 4.2 2.0 2.8 2011 2012 F2013 1H12 1H13

  12. Slide 12: Upstream Project Development Update

    UPSTREAM PROJECT DEVELOPMENT UPDATE 1H 2013 Key events: 2013 Major goals: Russian projects  Messoyakha: Increased reserves by 2.9 MMtoe as  Messoyakha: Order equipment for key a result of exploration program. Delivered 421 infrastructure. Drill and test exploration wells tonnes by winter road  Or

  13. Slide 13: Upstream Project Development Update

    UPSTREAM PROJECT DEVELOPMENT UPDATE 1H 2013 Key events: 2013 Major goals: International  Iraq (Badra): Drill and complete well P8. Projects Test three wells. Commission infrastructure  Iraq (Badra): Two wells drilled and in for first phase of field development. development. Finalized EPC contract

  14. Slide 14: Development of Hard to Recover Reserves

    DEVELOPMENT OF HARD TO RECOVER RESERVES Key Events  Kuyumba exploration and test production: Shot 501.5 km2 of 3D seismic; drilled a total of 5.9 km of exploratory wells, 13.9 km of development wells  Palyanovskiy Project: Well 153 in Palyanovsk area flowed at 82 tpd from Bazhenov formation  Form

  15. Slide 15: Downstream

    Downstream Continuing product quality increases and substantial growth in premium channels IFRS FINANCIAL AND OPERATING RESULTS FOR SECOND QUARTER 2013 15

  16. Slide 16: Crude Prices and Netbacks Fall as Retail Prices Fluctuate

    CRUDE PRICES AND NETBACKS FALL AS RETAIL PRICES FLUCTUATE Crude oil prices Gazprom Neft average netbacks $/bbl $/bbl Domestic product wholesale prices change Domestic product retail prices change +11% Diesel +10% Diesel +7% Premium Gasoline (95) +5% Regular -2% Regular Gasoline (92) Gasoline (92) IF

  17. Slide 17: 87% of Own Crude Processed in Company's High Quality Refineries

    87% OF OWN CRUDE PROCESSED IN COMPANY’S HIGH QUALITY REFINERIES Crude distribution, Change 1.52 MMTonnes Y-o-Y MMTonnes -51.9% Crude Purchases 12.49 MMTonnes -0.5% Omsk Crude Production 5.2 -1.0% Refinery Crude Balance 76% Moscow 14.0 MMTonnes 2.8 -3.3% Refining Refinery  Crude purchases down 52% -

  18. Slide 18: Refining Highlights

    REFINING HIGHLIGHTS  Executing turnaround cycle extension programme  Complete Quality programme at all Refineries  Switch to Euro 5 quality motor fuels at all refineries  Formed JV with TOTAL to produce euro-bitumen at Moscow Refinery Solomon availability Omsk Moscow Yaroslavl 95.5 95.3 95.2 95

  19. Slide 19: Completed Russian Refinery Quality Upgrade Program

    COMPLETED RUSSIAN REFINERY QUALITY UPGRADE PROGRAM Omsk Gasoline excise tax rates*, RUB/tonne Gasoline yield Capacity Naphtha 15,000 Unit (MM tonnes) Year Class 2 Isomerization 0.8 2010 13,000 Class 3 58% FCC Hydrotreater 1.2 2012 65% Class 5 11,000 Diesel 3.0 2012 Hydrotreater 9,000 Class 4 34% Mos

  20. Slide 20: Retail Sales Grow in Second Quarter

    RETAIL SALES GROW IN SECOND QUARTER  Retail sales in 2Q 2013: • Russia and CIS 2.0 MMTonnes +7.1% Y-o-Y • NIS 0.2 MMTonnes +66.1% Y-o-Y  Throughput per station in Russia reached 18.4 tpd in 2Q 2013  Non-oil sales grew by 41% Y-o-Y in 2Q 2013  Acquired 1 station, built 3 stations, reconstructed 1

  21. Slide 21: Gazprom Neft Retail Gasoline and Diesel Sales Outperform Russian Average

    GAZPROM NEFT RETAIL GASOLINE AND DIESEL SALES OUTPERFORM RUSSIAN AVERAGE Russia +4.3% +3.4% + 8.3% + 10.8% Gazprom Neft Gasoline sales growth drivers: Diesel sales growth drivers:  Retail chain rebranding  Retail chain rebranding  G-Drive fuel sales growth  Non-cash payment system  Loyalty prog

  22. Slide 22: Substantial International Expansion in Premium Channels

    SUBSTANTIAL INTERNATIONAL EXPANSION IN PREMIUM CHANNELS Aviation Bunkering 1H 2013 Key events: 1H 2013 Key events:  Expanded global presence to 104 airports in 42 countries  Finalized acquisition of Romanian bunkering operator ( +16 in 1H 2013) Marine Bunker Balkan S.A.  Increased number of Russi

  23. Slide 23: Expanding Market Share Drives Volume Growth

    EXPANDING MARKET SHARE DRIVES VOLUME GROWTH Lubricants Bitumen 1H 2013 Key events: 1H 2013 Key events:  Sales of G-Family products grew by 41% y-o-y  Began rail shipments of packaged bitumen from Omsk  Began deliveries to Libya, Nigeria and Turkmenistan, refinery in March 2013 bringing total numb

  24. Slide 24: G-Drive and G-Energy Declared Brands of the Year

    G-DRIVE AND G-ENERGY DECLARED BRANDS OF THE YEAR The G-Drive premium fuel and G-Energy premium-class motor oil brand names were awarded the 2012 Effie Brand of the Year award, given to the most successful brand creation and promotion programs G-Energy series is part of a new G-Family range of automo

  25. Slide 25: Financials

    Financials Production increases offset by adverse moves in prices, taxes, inflation and exchange rates IFRS FINANCIAL AND OPERATING RESULTS FOR SECOND QUARTER 2013 25

  26. Slide 26: Lower Crude Price and Higher Taxes Negatively Affected Financials

    LOWER CRUDE PRICE AND HIGHER TAXES NEGATIVELY AFFECTED GAZPROM NEFT FINANCIALS Brent, export duty & Fx MET tax rate reconciliation Rub. Domestic product prices & excise taxes  Crude prices decrease Y-o-Y and Q-o-Q  Ruble devaluation lags oil price dynamics  Growing Taxes: MET and Excise  Domesti

  27. Slide 27: Profit Eroded by Taxes and Tariffs on Natural Monopolies

    PROFIT ERODED BY TAXES AND TARIFFS ON NATURAL MONOPOLIES  Revenue grew 1.8% Y-o-Y on higher -1.0% +1.8% production volumes and increased +2.4% sales through premium channels, 345 591 Revenues 319 580 partially offset by lower crude oil sales RUB bln 302 299 volume 292  Expanded refining throughput

  28. Slide 28: EBITDA Reconciliation 1H 2013 vs. 1H 2012

    EBITDA RECONCILIATION 1H 2013 VS. 1H 2012 EBITDA 1H 2013 vs 1H 2012, RUB mln IFRS FINANCIAL AND OPERATING RESULTS FOR SECOND QUARTER 2013 28

  29. Slide 29: EBITDA Reconciliation 2Q 2013 vs. 1Q 2013

    EBITDA RECONCILIATION 2Q 2013 VS. 1Q 2013 EBITDA 2Q 2013 vs 1Q 2013, RUB mln IFRS FINANCIAL AND OPERATING RESULTS FOR SECOND QUARTER 2013 29

  30. Slide 30: Strong Free Cash Flow Generation

    STRONG FREE CASH FLOW GENERATION RUB million Cash flow reconciliation 1H 2013 (78,580) 125,885 (11,917) (3,225) (6,011) 35,388 (8,356) 1,186 18,982 Operating CAPEX Change in Free cash flow Acqusitions New projects Net Other Net cash flow cash flow advances borrowings issued IFRS FINANCIAL AND OPERAT

  31. Slide 31: Investments Support Strategic Goals and Upstream Production

    INVESTMENTS SUPPORT STRATEGIC GOALS AND UPSTREAM PRODUCTION IN MATURE FIELDS Investments (RUB mln) 12% Y-o-Y growth in brownfield capex due to increase in use of new technologies in 87,816 legacy fields +22% 6,011 3,225 Active development of Orenburg, Novoport 72,138 1,799 consolidation and continue

  32. Slide 32: Continued Improvements in Balance Sheet and Debt Portfolio

    CONTINUED IMPROVEMENTS IN BALANCE SHEET AND DEBT PORTFOLIO 2.0 80% 0.5% 1.5 60% 14.4% 1.0 40% USD RUB Euro 0.5 20% 52.9% Other 32.2% 0.0 0% 2012 1Q13 2Q13 Net debt/EBITDA (lhs) Debt to EBITDA target (lhs) Short term debt/Total debt, % (rhs)  Net debt/EBITDA 0.4x vs. target <1.5x  Reduced average i

  33. Slide 33: Questions & Answers

    Questions & Answers IFRS FINANCIAL AND OPERATING RESULTS FOR SECOND QUARTER 2013 33

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