Lukoil · RUS:LKOH
Lukoil — Investor Presentation (October 2002)
24 slides from Lukoil's investor presentation, Oct 3, 2002
Slide 1: Operational and Financial Performance 1st Half 2002
Operational and Financial Performance 1st Half 2002 Vagit Alekperov President and CEO LUKOIL October 3, 2002 1
Slide 2: Part of the world premier league
Part of the world premier league 2001 Reserves (mln boe)*,** 2001 Production (thousand boe/d)* 21,561 4,392 20,004 3,920 16,976 3,419 16,779 2,754 16,337 2,424 12,018 2,197 10,978 1,661 10,097 1,636 9,257 1,369 * Source: Company reports ** Proved internationally audited reserves Oil Natural gas 2
Slide 3: Main events of 2002
Main events of 2002 • Leadership in financial disclosure, transparency and corporate governance - Obtained LSE listing - Two independent members joined LUKOIL’s BoD (Mark Mobius from Templeton and Richard Matzke, former Vice-Chairman Chevron) - regular publication of quarterly GAAP accounting • Cont
Slide 4: The fastest growing Russian company
The fastest growing Russian company Production as restated for 1995 including acquisitions* 140% • Since 1995 LUKOIL has been continually growing 130% LUKOIL** 120% 110% SurgutNG 100% Yukos*** • LUKOIL has maintained its 90% leading position in Russia’s oil & Sibneft gas industry 80% 1995 1996 1997
Slide 5: Compelling valuation
Compelling valuation 2002E Multiples LUKOIL 19.1 Russian Peers* International Peers** 9.7 9.4 9.4 4.6 3.7 3.8 0.89 1.2 P/E (x) EV/EBITDA (x) EV/Reserves ($/boe proved) * Peers include: SurgutNG, Gazprom, YUKOS, Sibneft (market cap. weighted) ** Peers include: ExxonMobil, BP Amoco, Royal Dutch, Chevr
Slide 6: Well positioned for faster growth
Well positioned for faster growth 3500 3000 • Aiming to achieve highest production growth rate in Russia’s oil industry after 2005 Total Annual production, kbpd 2500 increase: 88% 2000 CAGR = 7.3% • Targeting production of 1500 approximately one-third of Russia’s total crude output by 2010 1000 500
Slide 7: Portfolio for long-term growth
Portfolio for long-term growth Output in kbpd 200 >3,000 300 280 650 Gas 1,649 2001 West Siberia Timan Caspian Current 2010E** Pechora International Projects – LUKOIL outperforms global majors on key operational metrics • Average lifting cost of $3.14 per barrel in 2001 vs. $3.78 per barrel for inte
Slide 8: Short-term (2002-2003) restructuring program
Short-term (2002-2003) restructuring program SHORT-TERM LONG-TERM RESTRUCTURING STRATEGY (2002-03) • Revenue enhancement • Develop new provinces • Increase exports • Accelerate development of new fields • Gas program • Cost reduction • Shut down marginal wells • International expansion • Reduce head
Slide 9: Flexible export/domestic supply policy
Flexible export/domestic supply policy • Why increase distillate 4.0 60% exports: 52% • Capture higher margins 3.5 50% • Protect against crude 3.0 export cuts 34% 40% 2.5 • Counter sluggish mln tons domestic demand 27% 2.0 30% • Take advantage of high 3.6 Global fuel oil prices 1.5 2.5 20% • Why dec
Slide 10: Shutting down marginal wells – cutting costs
Shutting down marginal wells – cutting costs 19% percentage of idle wells 18% 17% 16% 17.5% 18.0% 15% 15.7% 14% 15.2% 13% 1/1/02 4/1/02 7/1/02 9/1/02 Development wells 28,464 28,507 28,713 28,816 Producing wells 24,126 24,020 23,680 23,643 23,633 Idle wells 4,338 4,487 5,033 5,173 Shutting Shuttingd
Slide 11: Crude production costs
Crude production costs* 3.6 3.4 3.2 3.0 $/bbl 2.8 2.6 2.4 3.35 3.15 3.15 3.01 2.95 2.90 2.2 2.0 Q1 01 Q2 01 Q3 01 Q4 01 Q1 02 Q2 02 * Exploration and production costs, including lifting costs, maintenance and repairs of expensed wells, insurance and other costs; excluding taxes and depreciation. Cal
Slide 12: Restructuring has begun
Restructuring has begun Number of entities* merged & reduced • Improving management efficiency 120 110 • Simplifying corporate structure 100 102 90 • Spinning off non-core assets 80 • Centralizing treasury and risk 70 management 66 60 • Establishing investment committee and guidelines 50 2001 1H 02
Slide 13: Reserves additions
Reserves additions 2001 reserve additions, bn boe NPV*, bn $ Proved 3.61 $4.35 Probable 3.25 $1.44 Total 6.86 $5.79 *NPV calculated according to the U.S. SEC’s methodology Finding and acquisition costs for Finding and acquisition costs, proved reserves , $/bbl global average**, $/bbl 0.20 5.00 ** So
Slide 14: Leading position in exploratory drilling in Russia
Leading position in exploratory drilling in Russia Reserves addition from exploration (ABC1) 150 Reserves addition, mln tons 128.8 LUKOIL 125 SurgutNG Tyumen Oil Company 100 Yukos 79.1 75 52.7 54.8 50 42.3 41.1 33.6 32.2 31.6 35.7 48.5 32.1 21.3 25.4 37.8 25 29.5 21.0 35.5 24.4 27.2 34.8 10.9 6.8 4.
Slide 15: Operating highlights
Operating highlights 1H 2001 1H 2002 YoY Crude production mbbl 255.7 258.2* + 1% Crude sales domestic mbbl 63.3 37.3 - 41% Crude sales international mbbl 84.8 100.7 + 19% Product sales domestic mln tn 9.2 9.3 + 1% Product sales international mln tn 9.7 12.3 + 27% *Under GAAP standards, including onl
Slide 16: Financial highlights 2Q/1Q
Financial highlights 2Q/1Q 02 $m 1Q 2002 2Q 2002 YoY Revenues 2,867 3,809 + 33% Operating profit 371 792 + 113% EBT 317 810 + 156% Net Profit 243 598 + 146% EBITDA 630 1,036 + 64% EPS ($) 0.30 0.73 + 143% 16
Slide 17: Long-term strategy
Long-term strategy SHORT-TERM LONG-TERM RESTRUCTURING STRATEGY (2002-03) • Revenue enhancement • Increase exports • Develop new provinces • Accelerate development of new fields • Cost reduction • Close low-margin wells • Gas program • Reduce headcount • Apply enhanced oil recovery technologies • Cor
Slide 18: Natural gas program
Natural gas program • LUKOIL expects significant growth in natural gas production at its fields • Revenue should grow through developing projects in the CIS and export quotas • There are opportunities to find additional sources of natural gas • LUKOIL and Gazprom are studying opportunities to jointl
Slide 19: Bolshekhetskaya depression gas reserves
Bolshekhetskaya depression gas reserves • In 2001 LUKOIL acquired S. Messoyakhskoe Yamalneftegazdobycha, 1st stage: which holds licenses for significant reserves Nakhodkinskoe Vareiskoe in the Bolshekhetskaya depression Yamburg • 290 bcm of total P1+P2 reserves; L=150км Pyakyakhinskoe management est
Slide 20: Northern Caspian – a province with potential
Northern Caspian – a province with potential In 2001 LUKOIL successfully continued development in the Northern Caspian Scheme of fields ang perspective projects disposition, – Three large oil and gas condensate fields that were discovered by LUKOIL in Nothern and Middle Caspian scale 1 : 2 000 000 d
Slide 21: Major projects with global partners
Major projects with global partners Northern Polar Territories Lights T a im y r A u t. O k r. M u rm a n s k N e n e ts A u t. O k r. Vysotsk Ya m a l- N e n e ts A u t. O k r Ev e n k i A u t. O k r. terminal A rk h a n g e ls k Ko m i K a re lia K h a n ty - M a n s is k A u t. O k r S t. P e te
Slide 22: Assets in Iraq: Frozen Potential
Assets in Iraq: Frozen Potential ¾ The West Qurna deal was signed in Baghdad on March IRAQ The West Qurna 21, 1997 scale 1 : 2 500 000 ¾ A LUKOIL-led consortium signed an agreement for a US$4 bn development of the West Qurna oil field in Southern Iraq ¾ The 23-year contract is split between LUKOIL (
Slide 23: LUKOIL vs. RTS and domestic peers
LUKOIL vs. RTS and domestic peers 1.6 1.5 1.4 Sibneft 1.3 LUKOIL 1.2 Yukos 1.1 RTS SurgutNG 1.0 0.9 Mar-02 Apr-02 May-02 Jun-02 Jul-02 Aug-02 Sep-02 23
Slide 24: Vagit Alekperov President and CEO LUKOIL
Vagit Alekperov President and CEO LUKOIL Tel: 7 (095) 927-44-44 e-mail: investor@lukoil.com October 3, 2002 24