Novatek · RUS:NVTK
Novatek — Strategy Update 2009 – Conference Call
24 slides from Novatek's conference presentation, Dec 23, 2008
Slide 1: Strategy Update 2009 – Conference Call
Strategy Update 2009 – Conference Call NOVATEK, Moscow, Russia 23 December 2008
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: Presentation Team
Presentation Team Leonid V. V Mikhelson Mark A. A Gyetvay Chief Executive Officer Chief Financial Officer Chairman of the Member of the Management g Management Board Board Member of the Board of Member of the Board of Directors Directors Alexander M. Fridman Nikolay N. Titarenko Chief Operating Offi
Slide 4: Agenda
Agenda Section Slide # 1 C 1. Company O Overview………………………………………………… i 5 2. General Business Climate…………………………………………... 9 3. Exploration & Production…………………………………………… 11 4 Financial Strategy...………………………………………………….. 4. Strategy 19 5. Questions & Answers……………………………………………….. 24 4
Slide 5: Section 1: Company Overview
Section 1: C Company Overview O i 5
Slide 6: Our Strategy In Motion
Our Strategy In Motion Removed p production constraints Launched 2nd phase at the Yurkharovskoye field (September 2008); Constructed natural gas low temperature separation and gas condensate preparation units Increased field productive capacity by 7.2 bcm and NOVATEK’s total capacity to 37 b
Slide 7: 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 8: 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 9: Section 2: General Business Climate
Section 2: G General l Business B i Climate Cli t 9
Slide 10: 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 11: Section 3: Exploration & Production
Section 3: E l Exploration ti & Production P d ti 11
Slide 12: 2008 Key E&P Highlights
2008 Key E&P Highlights C1 NOVATEK’s exploration activities Reserve Growth Field/License area Seismic Drilling Gas Liquids Yurkahrovskoye 141 km2 (3D) 4 wells 13 bcm 0.9 mmt New Yurkharovskoye 42 km2 (3D) 1 well 6.9 bcm 1.0 mmt Khancheyskoye 225 km2 (3D) 3 wells 4.7 bcm 0.4 mmt Olimpiyskiy Interpret
Slide 13: 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 14: E&P Program 2009 and 2010
E&P Program 2009 and 2010 Continue p phase development p at the Yurkharovskoye y field Increase field capacity by up to 14 bcm per annum Complete gas condensate pipeline from the Yurkharovskoye field to the Purovsky Plant resulting in a significant decrease in operating expenses for 3rd party
Slide 15: E&P Program 2009 and 2010
E&P Program 2009 and 2010 Expand processing capabilities 2010 Russian gas balance will be main determining factor in expansion of processing facilities Purovsky k Plant l – expand d LPG G storage capacity i byb 18,000 8 000 m3 to 27,000 2 000 m3 Ust-Luga – continue with project design work
Slide 16: 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 17: 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 18: 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 19: Section 4: Financial Strategy
Section 4: Fi Financial i l Strategy St t 19
Slide 20: Current Financial Status
Current Financial Status Balance Sheet Strong positive cash position Reconfirmed access to available credit lines Debt ratios – among the lowest in industry peer group Limited bad debt exposure – Prepayments and Offtaker bank guarantees Currency exposure partially mitigated by USD denomi
Slide 21: 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 22: 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 pr
Slide 23: 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 24: Questions & Answers
| . ) | Vii, , J | . i a aa a ee | 1 Ba : | ; ¥ ff \ | = - 1 X Questions & Answers 24