Gazprom Neft · RUS:SIBN

Gazprom Neft — FY2012 Earnings Presentation

33 slides from Gazprom Neft's earnings presentation, Feb 26, 2013

  1. Slide 1: FY2012 IFRS Financial and Operating Results

    FY2012 IFRS FINANCIAL AND OPERATING RESULTS 26 February 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: Continuing to deliver strong financial results

    CONTINUING TO DELIVER STRONG FINANCIAL RESULTS  FY2012 Financial performance: • Revenue: RUB 1,230 bln (+19% Y-o-Y) • EBITDA*: RUB 323 bln (+8% Y-o-Y) • Net Income: RUB 176 bln (+10% Y-o-Y)  Operational progress 2012 vs. 2011: • Production up 4% • Refining volumes up 7% • Premium channels sales up

  5. Slide 5: Advancing on strategic goals

    ADVANCING ON STRATEGIC GOALS • First test oil production from Messoyakha • First oil from Novoportovskoe production well test • Started oil production from Junin-6 Block in Venezuela • Began second pilot drilling project at Orenburg field • Launched hydrotreating units at Omsk, allowing production o

  6. Slide 6: Macro Environment

    Macro Environment Stable prices; Higher MET offsets 60-66 reform gains FY2012 IFRS FINANCIAL AND OPERATING RESULTS 6

  7. Slide 7: Stable prices, rising mineral extraction tax

    STABLE PRICES, RISING MINERAL EXTRACTION TAX Brent, $/bbl Netbacks, $/bbl 55.4 53.7 50.2 47.6 111.7 43.6 43.1 25.7 23.0 21.2 111.3 79.5 4Q11 3Q12 4Q12 Ref ining Netback Crude Export Netback Net upstream price** Crude & Product Prices 2012 vs. 2011  Flat average crude prices in US$  Depreciated rub

  8. Slide 8: External factors have stronger impact on refining

    EXTERNAL FACTORS HAVE STRONGER IMPACT ON REFINING Upstream net price, $/bbl 1.0 -0.6 23.7 -2.0 2.0 -0.1 -0.1 23.8 Upstream Price Export Duty lag 60-66 MET Transport. Upstream net price duty rate tariffs net price 2011 2012 External impact on refining netback, $/bbl 1.4 -0.2 -2.7 47.3 45.8 Refining O

  9. Slide 9: Upstream

    Upstream 4.3% production growth and 221% RRR FY2012 IFRS FINANCIAL AND OPERATING RESULTS 9

  10. Slide 10: New projects augment pipeline

    NEW PROJECTS AUGMENT PIPELINE Iraq Yuzhno-Kinyaminskoe Entered Kurdistan License transferred from Gazprom Reserves: 174 MMTonnes Reserves: 5.1 MMTonnes Startup: 2013 Startup: 2013 Peak: 7.2 MMToe at 2017 Peak: 0.4 MMTonnes at 2016 2012 January February March April May June July August September Octo

  11. Slide 11: Yuzhno-Kinyaminskiy under active development

    YUZHNO-KINYAMINSKIY UNDER ACTIVE DEVELOPMENT Key Results for 2012  Received license for field development  Tested 4 out of 5 exploratory wells, all of which confirmed the presence of commercial oil  Organized winter road, equipped town Yuzhno- Kinyaminskoye  Prepared FEED for pilot infrastructur

  12. Slide 12: Reserves replacement rate surges on organic growth

    RESERVES REPLACEMENT RATE SURGES ON ORGANIC GROWTH Changes in PRMS (SPE) proved reserves*, Revisions, MMToe MMtoe 221% Reserves replacement ratio 42 128 5 2 9 1,200 51 0 1,130 128 58 19 YE2011 Group Revisions Acquisitions** YE2012 Legacy Orenburg Slavneft Tomskneft SPD Sever- Total production fields

  13. Slide 13: 4% hydrocarbon production growth

    4% Hydrocarbon production growth PRODUCTION GROWTH DRIVEN BY ORENBURG ASSETS, IMPROVED TECHNOLOGIES, SEVERENERGIA Hydrocarbon production MMToe 15.0 14.8 15.4 16.0 14.8 14.8 0.2 0.1 1.1 1.0 1.0 1.0 1.0 14.0 1.5 1.5 1.4 1.4 1.4 12.0 2.3 2.4 2.3 2.3 2.3 10.0 8.0 6.0 10.1 10.0 9.9 9.9 10.5 4.0 2.0 0.0 4

  14. Slide 14: Increased total hydrocarbon production by 4.3%

    INCREASED TOTAL HYDROCARBON PRODUCTION BY 4.3% 1.6 (0.4) (0.8) (0.4) 0.4 59.7 0.7 0.4 (0.6) 0.4 1.2 0.1 15% 0.9 0.1 0.0 85% 1.2 57.2 13% 87% 2011 Priobskoye Orenburg Legacy fields JVs Sever Energia 2012 Crude oil Gas FY2012 IFRS FINANCIAL AND OPERATING RESULTS 14

  15. Slide 15: Increasingly sophisticated application of new technologies

    INCREASINGLY SOPHISTICATED APPLICATION OF NEW TECHNOLOGIES Horizontal wells drilled, units 81 +200% Results of new technology application in 4Q2012 27 Technology Activity Average flow 12M11 12M12 Vyngapurovskoye-12 wells Average starting flow, tonnes / day Horizontal 163 wells with Vyngayahinskoye-4

  16. Slide 16: Industry-leading operational efficiency

    INDUSTRY-LEADING OPERATIONAL EFFICIENCY OVERALL OPERATING EFFICIENCY GPN used OPEX benchmarking to limit 2012 per-unit costs to 2011 levels, despite a 5.0% increase in the producer price index. GPN is the industry leader in certain operating cost areas:  Cost of electric submersible pump leasing, r

  17. Slide 17: New upstream projects developments update

    NEW UPSTREAM PROJECTS DEVELOPMENTS UPDATE Orenburg • Began pilot drilling at western Orenburg • Began reservoir pressure maintenance at Orenburg Badra • Began drilling pilot at Novoport Junin-6 Badra Began building oil Tsarichanskoye First test oil Completed BD-4 • Began pilot drilling and side Firs

  18. Slide 18: 2013 plans for major upstream developments

    2013 PLANS FOR MAJOR UPSTREAM DEVELOPMENTS Chonskiy Kuyumba Zagros Dolginskoye July 2013 August 2013 September 2013 October 2013 Exploration program Complete drilling program: Phase 1: Debriefing - 3 exploratory wells Begin drilling Shakal-2 well Finish drilling - 6 operational wells 3-SD well 2013

  19. Slide 19: Downstream

    Downstream Modernization drives quality increase; international expansion of premium channels continues FY2012 IFRS FINANCIAL AND OPERATING RESULTS 19

  20. Slide 20: Refinery modernization and premium channel expansion continue

    REFINERY MODERNIZATION AND PREMIUM CHANNEL EXPANSION CONTINUE 2012 Key events: 2013 Major goals: Refining  Launch FCC gasoline hydrotreating and  Increased refining volumes by 7.0% Y-o-Y isomerization units at Moscow  Completed construction of closed  Initiate FEED: cycle mechanical treatment fa

  21. Slide 21: Higher value product mix and expanded refining throughput

    HIGHER VALUE PRODUCT MIX AND EXPANDED REFINING THROUGHPUT Refining throughput (MMTonnes) NIS Slavneft Moscow 7.6 7.4 Omsk 1.9 0 -1% 10.8 10.7 Gasoline and diesel yields (MMTonnes) 21.0 19.9 Gasoline Diesel 12% 13% 2.4 23% 2.1 7% 18% 17% 8% 11% 80% 60% 49% 2010 2011 2012 FY2012 IFRS FINANCIAL AND OPE

  22. Slide 22: Strong year-on-year growth as margins stay high

    STRONG YEAR-ON-YEAR GROWTH AS MARGINS STAY HIGH Gazprom Neft crude mix Gazprom Neft average netbacks (MMTonnes) $/bbl Introduction of 60-66 Crude to CIS & Russia Crude Exports Refining  Despite significant crude price fluctuations, refining margins remain above crude export netback price  Export c

  23. Slide 23: Rebranding pushes continued retail sales growth

    REBRANDING PUSHES CONTINUED RETAIL SALES GROWTH Rebranding* 1 Loyalty program 3 Accompanying goods and services 2 Retail metrics 4 1 Rebranding* 2 Non oil sales, 3 Loyalty program, mln 4 Retail metrics 1,000 RUB/cu.m. members 17.7 1,400 14.2 18.0 10.1 CIS 14.0 1,200 202 205 10.0 network 74% 21% 1,00

  24. Slide 24: Domestic and international premium channels deliver continued growth

    DOMESTIC AND INTERNATIONAL PREMIUM CHANNELS DELIVER CONTINUED GROWTH Acquired refueling complex Premium sales volume growth Market share ∆ at Krasnoyarsk 2012 vs. 2011 2011 vs. 2012 17.7% 18.6% 26% Aviation 9.0% 16.0% 25% Lubricants 18.3% 18.5% v 14% Bunkering Launched refueling complex at New bunke

  25. Slide 25: Pancevo refinery modernization increases product quality and conversion rate

    PANCEVO REFINERY MODERNIZATION INCREASE OIL PRODUCT QUALITY AND CONVERSION RATE Gazprom Neft has completed its first major international project: 500 mln EUR modernization and ecological improvement project at Pancevo Project completed on time: Deadlines  22.08.2012 – Mechanical work completed  29

  26. Slide 26: Financials

    Financials 8% EBITDA increase 2012 vs. 2011 FY2012 IFRS FINANCIAL AND OPERATING RESULTS 26

  27. Slide 27: Volume, quality and efficiency improvements drive positive financial results

    VOLUME, QUALITY AND EFFICIENCY IMPROVEMENTS DRIVE POSITIVE FINANCIAL RESULTS +16.9% +19.5%  Increased revenue 19.5% Y-o-Y on -4.6% 333 318 1,230 higher crude oil and petroleum 272 278 301 Revenues 1,030 products prices and expanded sales RUB bln volumes  Revenue declined 4.6% Q-o-Q on 4Q11 1Q12 2Q

  28. Slide 28: EBITDA reconciliation FY2012 vs. FY2011

    EBITDA RECONCILIATION FY2012 VS.FY2011 EBITDA 12M 2012 vs. 12M 2011, RUB mln. 21,844 (542) 323,106 (14,341) 23,245 (3,999) (25,838) 300,077 8,387 9,078 5,196 61,011 35,662 Changes in net price= (12,546) 264,415 262,095 12M 2011 Price Export duty rate FX Transport MET rate Crude oil and gas Refining&

  29. Slide 29: EBITDA reconciliation 4Q12 vs. 3Q12

    EBITDA RECONCILIATION 4Q12 VS.3Q12 EBITDA 4Q 2012 vs. 3Q 2012, RUB mln. 95,597 (2,781) (4,488) (5,415) 2,143 1,728 (7,367) 20,435 (1,241) 36 78,212 13,579 Including duty lag = (6,229) Changes in net price = (11,782) 75,162 64,633 3Q 2012 Price Export duty rate FX Transport MET rate Crude oil and Man

  30. Slide 30: US$2.3 billion free cash flow generated in 2012

    US$ 2.3* BILLION FREE CASH FLOW GENERATED IN Y2012 RUB million Cash flow reconciliation Y2012 (158,102) 231,073 25,418 (35,195) Bank deposits (15,500) (1,118) 4,239 72,971 46,576 Operating cash CAPEX Free cash flow Net borrowings Dividends New projects Other Net cash flow flow *At 31.09 RUB/US$ Y201

  31. Slide 31: Higher investments support strategic goals

    HIGHER INVESTMENTS SUPPORT STRATEGIC GOALS Investments (RUB bln) Active development of new Orenburg and Novoport assets, in addition to acreage in Kurdistan, drove a 55% Y-o-Y increase in +9.0% 183.07 greenfield capex 168.03 12% Y-o-Y growth in brownfield capex due to more intensive use of new techn

  32. Slide 32: Continued improvements in balance sheet and debt portfolio

    CONTINUED IMPROVEMENTS IN BALANCE SHEET AND DEBT PORTFOLIO* $ 6.9 bln $ 7.7 bln 6% 4% 2.0 5.60 20% 4.90 33% 1.5 4.20 35% 3.50 22% 1.0 2.80 16% 2.10 0.5 1.40 40% 25% 0.70 0.0 0.00 2011 2012 2010 2011 2012 Bank loans PXF Net debt/EBITDA Bonds Loan Participation Notes Debt to EBITDA target Other borrow

  33. Slide 33: Questions & Answers

    Questions & Answers FY2012 IFRS FINANCIAL AND OPERATING RESULTS 33

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