Novatek · RUS:NVTK
Novatek — RenCap Securities 4th Annual Equity Conference "Russia: New Investment Horizons" 2005
30 slides from Novatek's conference presentation, Oct 20, 2005
Slide 1: Russia: New Investment Horizons, 4th Annual Equity Conference
RenCap Securities Russia: New Investment Horizons 4th Annual Equity Conference Mark A. Gyetvay, Chief Financial Officer and Member of the Board of Directors The Metropolitan Club, New York, NY Thursday, October 20, 2005
Slide 2: Novatek reserve summary
Novatek reserve summary Highly favorable gas market Map of operations fundamentals Highly experienced Prolific, low-risk management team resource base Impressive and Industry leading expanding margins production growth YNG Proven reserves, tcf 579 60 46 45 25 22 21 20 18 18 14 11 10 7 KhNG TSNG BP L
Slide 3: History of NOVATEK
History of NOVATEK Formation of AOOT FIK 1St private NOVAFININVEST New field placement of developments drive Novatek shares Creation of Tarkosaleneftegas significant production (with subsidiary of Gazprom as a growth non-controlling shareholder during ’94-’02) First oil production IPO Privatisation
Slide 4: Corporate restructuring
Corporate restructuring Simplify corporate structure and improve transparency Pre-restructuring (1H 2003) Post-restructuring (1H 2005) Novatek Novatek Shareholders Shareholders NОVАТEК Novatek Tarkosaleneftegas 32,3% 11% Mangaseya Khancheyneftegas 43% 52,2% Truboisolyatsya UPSTREAM Processing/ DOWNS
Slide 5: First half financial and operational results
First half financial and operational results 5
Slide 6: Summary highlights
Summary highlights Commencement of operations at the Purovsky processing plant and Vitino port facilities in June 2005 Commencement of BOPP production at Novatek-Polimer Disposals of our 66% participation interest in Geoilbent, our 34% equity stake in Selkupneftegas and our 25.1% equity stake
Slide 7: Robust financial performance
Robust financial performance RR million 1H04 1H05 +/(-) +/(-)% Total revenues 13,053 18,359 5,306 41% EBITDA(1) 3,718 12,610 8,892 239% EBITDA net of disposal gains (2) 3,718 8,999 5,281 142% Corporate Income Tax Rate 33% 25% (8%) Profit attributable to Novatek 2,318 7,923 5,605 242% Capex 4,212 3,2
Slide 8: Hydrocarbon sales volumes (HoH)
Hydrocarbon sales volumes (HoH) Natural gas (‘000 cm) Liquids (‘000 tonnes) Consolidation adding 32% to total growth Consolidation adding 3% Consolidation adding 18% to increase in volumes to increase in volumes 2,985 Production increased 10% adding 3% to 184 29 34% increase 13,771 increase in volum
Slide 9: Revenue reconciliation (RR million)
Revenue reconciliation (RR million) Increase due to 1,729 164 Volumes = 574 Price = - 574 317 18,359 4,802 Increase due to (2,053) Volumes = 831 (227) Price = 897 Disposed of Increase due to in 2Q04 Volumes = (310) Price = 627 13,053 Increase due to Volumes = 3,203 Price = 1,598 condensate revenues
Slide 10: Revenue and market breakdown
Revenue and market breakdown Revenue components Natural gas sales 100% 2% 1% 5,843 2% 2% Other 13% 4,175 16% 7,928 Polymers 80% 3% 5,091 5% 18% Construction 1H04 1H05 services Ex-field End-user 24% 60% Larger proportion of Ex-field sales in 2005 due to Increase Oil products in sales to Itera Stable
Slide 11: Expanding EBITDA margins
Expanding EBITDA margins 100% 90% 80% 69% 60% 52% 49% 46% 40% 35% 30% 31% 26% 28% 26% 20% 0% ) 04 05 ) 02 03 04 04 05 04 05 (1 (1 20 20 20 1H 1H 1Q 1Q 2Q 2Q 05 05 1H 2Q Notes: 1 EBITDA less gain on disposal of investments in oil and gas producing subsidiaries and associates 11
Slide 12: Condensed balance sheet (RR million)
Condensed balance sheet (RR million) RR million 1H04 1H05 +/(-) +/(-)% Total current assets 7,544 19,634 12,090 160% Incl. Cash & cash equivalents 2,095 2,344 249 12% Total non-current assets 22,413 65,456 43,043 192% Incl. Net PP&E 13,050 63,928 50,878 390% Total assets 29,957 85,090 55,133 184% To
Slide 13: Total debt maturity profile (RR million)
Total debt maturity profile (RR million) Current debt maturity profile as at 30 June 14,000 12,000 NVTK repaid $100 million 10,000 CLN on 14th October; reducing debt profile by 8,000 approximately RR3 billion 6,000 4,000 2,000 - 2006 2007 2008 2009 2010 2011 Short-term debt Current portion of long-t
Slide 14: Capital market transaction review
Capital market transaction review 14
Slide 15: Landmark transaction
Landmark transaction Second largest IPO of a Russian issuer, the first IPO of a Russian independent gas producer and the first Russian issuer under new UKLA requirements (effective 01.07.05) Morgan Stanley and UBS: Joint Global Coordinators Morgan Stanley, UBS and CSFB: Joint Lead Managers and J
Slide 16: Transaction overview timetable
Transaction overview timetable Schedule of key transaction items March April May June July Week of 14 21 28 4 11 18 25 2 9 16 23 30 6 13 20 27 4 11 18 25 Kick off meeting Preparation of IFRS accounts FY 2004 & 1Q 05 IFRS accounts published Business plan & valuation work Business, legal & financial d
Slide 17: Management roadshow
Management roadshow Management conducted 56 One-on-One meetings with investors as well as a series of group meetings and conference calls in Moscow, London, New York, San Francisco, Boston, Frankfurt and Rotterdam Roadshow schedule Summary of meetings # of Conversion Company Meetings Ratio (%) 8 Jul
Slide 18: Novatek trading performance pre-IPO
Novatek trading performance pre-IPO 155 7-Jul-05 2.0 Price range set 1.8 145 22-Jun-05 Novatek trading volume (000' shares) Announcement to float (IPO) 1.6 with LSE listing, syndicate 20-Jul-05 135 research published 1.4 Pricing 1.2 125 Indexed 1.0 115 0.8 105 0.6 0.4 95 0.2 85 0.0 03 Jan 05 25 Jan
Slide 19: Book summary
Book summary Limited price sensitivity across the price range and an extremely well covered book representing the largest ever demand for a Russian IPO Summary of final book of demand Total demand @ US$ 16.75 per GDR 681,581,020 Coverage @ US$ 16.75 per GDR (excl. Greenshoe) 13x Demand build up da
Slide 20: IPO allocation
IPO allocation Demand build up Allocation by geography Allocation by demand type 100 RoW Russia 14% 14% Global EMEA 80 16% 12% Germany % of offer 60 6% Top 10 investors = 90% of the offering 40 Top 20 investors = 100% of the offering Pan- 20 UK 33% GEMS Euro 0 US 36% 36% 0 100 200 300 400 33% No. of
Slide 21: Evolution of new investors in Russian IPO's
Evolution of new investors in Russian IPO’s Novatek received 30 orders for over US$ 100 MM compared to nil for the other issuers Russian IPO orders over US$ 10MM 2002 2005 200 51 150 8 8 53 2005 Expansion 100 191 71 50 0 LUKOIL Sistema Pyaterochka Evraz Novatek Total Source: Morgan Stanley 21
Slide 22: First Russian IPO to price at the top range
First Russian IPO to price at the top range Novatek has demonstrated the strongest performance among recent Russian deals Price ranges and offers by Russian Post-IPO price performance comparison issuers 20 150 18 17.0 16.75 130 +30% (offer price = 100) 16 (US$/GDR) 14.5 14 13.0 110 +5% 12 (1)% (5)%
Slide 23: History of Russian Equity Capital Markets
History of Russian Equity Capital Markets MSCI Russia MSCI Russia Composition Dec 04 Composition Today Weighting Weighting Company name in index % Company name in index % LUKOIL 35.3 LUKOIL 35.7 Surgutneftegaz 16.5 Surgutneftegaz 9.5 Norilsk Nickel 10.8 Norilsk Nickel 7.2 Surgutneftegaz (Pref.) 9.3
Slide 24: Rewards: Market Validation of Efforts
Rewards: Market Validation of Efforts Novatek Market Capitalization 7,500 IPO July 2005 19% equity stake for $966 million 7,000 6,500 6,000 2nd Private placement May 2005 USD millions 2% equity stake for $85 million 5,500 5,000 1st Private placement Dec 2004 3% equity stake for $100 million 4,500 4,
Slide 25: Current market capitalization relative to production and reserves
Value is relative Current market capitalization relative to 2004 production and reserves NVTK valued as a small Super-Independent cap player in spite of Peer Group world class resource base – ranked in top 10 in P1 natural gas reserves 350 2004 Production (MM boe 280 Encana Apache 210 Anadarko BG 14
Slide 26: Ratio comparison to peers (1H2005)
Ratio comparison to peers (1H2005) NVTK NVTK* Profitability AVG DVN BR APC APA CHK XTO PXD *Net of O&G disposals Peer Group 69% 49% EBITDA/Revenue 70% 68% 72% 74% 76% 58% 69% 74% 61% 41% EBIT/Revenue 48% 45% 52% 53% 57% 33% 49% 38% 57% 38% EBT/Revenue 44% 40% 47% 50% 54% 27% 44% 32% 43% 28% Net inco
Slide 27: Ratio comparison to peers (1H2005)
Ratio comparison to peers (1H2005) NVTK NVTK* Production AVG DVN BR APC APA CHK XTO PXD *Net of O&G disposals Peer Group 486 Natural gas (Bcf) 261 423 347 319 233 195 176 130 10 Liquids (Mm bbls) 27 47 29 43 46 4 8 12 92 Boe (Mm) 71 118 87 97 85 37 38 34 Liquidity ratio 1.21x Current ratio 1.24x 1.4
Slide 28: Novatek analyst coverage
Novatek analyst coverage Coverage by Analyst Date Recommendation GDR target price Global CSFB Vadim Mitroshin Oct 2005 Hold/Neutral 26.00 ING Ronald Smith Sep 2005 Hold 24.01 Merrill Lynch Alexander Gladyshev Aug 2005 Sell 18.00 Morgan Stanley* Irene Himona Jul 2005 none none UBS Kaha Kiknavelidze S
Slide 29: Forward-looking statements
Forward–looking statments 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 are other th
Slide 30: Questions and answers
Questions and answers p_|_ Sa MOVATEK 30