Download - Presentation 1Q09
1 Q 2009 US GAAP Financial and Operating Results
June 18, 2009
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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. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Gazprom Neft to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘intend’’, ‘‘may’’, ‘‘plan’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘probably’’, ‘‘project’’, ‘‘will’’, ‘‘seek’’, ‘‘target’’, ‘‘risks’’, ‘‘goals’’, ‘‘should’’ and similar terms and phrases. There are a number of factors that could affect the future operations of Gazprom Neft and could cause those results to differ materially from those expressed in the forward-looking statements included in this presentation, inclusively (without limitation): (a) price fluctuations in crude oil and oil products; (b) changes in demand for the Company’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserve estimates; (f) loss of market and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) economic and financial market conditions in various countries and regions; (j) political risks, project delay or advancement, approvals and cost estimates; and (k) changes in trading conditions. All forward-looking statements contained in this presentation are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on these forward-looking statements. Each forward-looking statement speaks only as of the date of this presentation. Neither Gazprom Neft nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information.
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Management Participants in Today’s Call
Vadim YakovlevDeputy Chairman of the Management Board and CFO
Anatoly ChernerDeputy Chairman of the Management Board, Deputy CEO for Logistics, Processing and Sales
Yuri KalnerHead of Strategic Planning Department
Boris ZilbermintsDeputy Chairman of the Management Board, Deputy CEO for Exploration and Production
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1Q 2009 Highlights
1Q 2009 Headline numbers – recovery in progress
Costs Performance
Asset Portfolio Expansion
• 51% stake in NIS (February 2009)• 34% stake in Sibir Energy (April-June 2009)• Gazprom Neft Marine Bunker - #2 Bunkering Co in Russia, • Gazprom Neft Avia – presence in 11 airports across Russia• Gazprom Neft Lubricants – Acquisition of Lubricants Plant in Italy (Bari)
• Revenue 16% down Q-o-Q; Y-o-Y 47% down• EBITDA up 362% Q-o-Q to US$ 942 MM; Y-o-Y 53% down• Adjusted EBITDA* up 131% Q-o-Q to US$ 945 MM; Y-o-Y 56% down • Net Income Q-o-Q up to US$ 335 MM; Y-o-Y 76% down• Operating Cash Flow Q-o-Q
• Operating Costs down 12% Q-o-Q;10% down 10% Y-o-Y• Export Duties Q-o-Q 52% down; Y-o-Y 62% down• Taxes other than Income Tax Q-o-Q 5% up; Y-o-Y 50% down
Adjusted EBITDA includes the Company’s share in its equity affiliates (Slavneft and Tomskneft) EBITDASource: Company data
Macro
• Brent 19% down Q-o-Q to US$ 44/bbl from US$ 55/bbl and Y-o-Y 54% down from US$ 97/bbl
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Key Macroeconomic Factors
• Low crude pricing environment was the major driver for revenue decrease in 1Q09. However sharp taxes cuts were the main reason for profitability recovery in 1Q09
• Pricing fall was partially compensated by drastic Russian Ruble devaluation which dragged costs down, but also had a negative impact on domestic revenues denominated in rubles
Crude pricing, RUR/USD Rate (eop) relation Crude Export Profitability ($/bbl)
Source: Platt’s, Federal Statistics Service, Company data, Central Bank of Russia, Argus
($30)
$0
$30
$60
$90
$120
Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09
Average freightStraits demurrage/port dues, insurance, port handling, customs fees, otherTransneft tariffCrude export dutyMETCrude export netback less MET in Western SiberiaAverage crude export netback less MET in Western Siberia since 2001
Urals (cif Novorossiysk)
Current taxation regime** Effective from January 1, 09 MET threshold price raised from 9 to $15/bbl
Export duties formula amended0
20
60
100
140
Jan-08 Apr-08 Jul-08 Oct-08 Jan-09
24
28
32
36
Brent, $/bbl (lhs)RUR/USD rate (rhs)
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• Oil prices were the core drivers for revenue decrease in 1Q 2009
• Rouble devaluation stressed domestic revenues in dollar terms
• Significant Tax Cuts determined Financials recovery in 1Q 2009
• Costs reduction through Rouble devaluation
• Recovery in quarterly financials • Non-cash foreign exchange
loss of $166 MM eroded non-operating income and reduced bottom line profitability in 1Q 2009
$8 045 $9 957 $10 085$4 988 $4 185
1Q08 2Q08 3Q08 4Q08 1Q09
Gazprom Neft Financial Results (US$MM)
Revenues*
EBITDA
Net Income
(48%)(16%)
$2 026$3 093 $2 642
$204$942
1Q08 2Q08 3Q08 4Q08 1Q09
$1 411$2 196 $1 594
-$543
$335
1Q08 2Q08 3Q08 4Q08 1Q09
(54%)+362%
(76%)N/A
* Revenues for 2-3Q08 were adjusted for excise tax that was previously excluded (2Q08 - $0.3B; 3Q08 - $0.8B)Source: Company data
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1Q09 Factor Analysis
Products Domestic
28%
Other3%
Gas Sales1% CrudeNon-
CIS Export35%
Products CIS Export
4%Products
Non-CISExport
24%
Crude Domestic
1%
Crude CIS Export
3%
Revenue Breakdown (%)
Source: Company data
FCF (US$MM)
186
-38
99
-643397
373
70
231
179-482
FCF 4Q08 Price Fx TaxRate Changes MET
thresholdprice
ExportDuty Lag
CostReduction
Work. Cap. Other FCF 1Q09
8
-4 p.p.
+15 p.p.-54%
+140%
-57%
+131%
-76%
N/A
-54%
+362%
-48%
Financial Performance
*Adjusted EBITDA includes the Company’s share in its equity affiliates (Slavneft and Tomskneft) EBITDASource: Company data
8%
23%
27%
4Q08 1Q09 1Q08
Adjusted EBITDA* Margin (%)
Net Income (US$MM)
$5
$12
$26
4Q08 1Q09 1Q08
Adjusted EBITDA* per barrel ($/bbl)
$204
$942
$2 026
4Q08 1Q09 1Q08
EBITDA (US$MM)
$409
$945
$2 195
4Q08 1Q09 1Q08
Adjusted EBITDA* (US$MM)
$4 988$4 185
$8 045
4Q08 1Q09 1Q08
Revenues (US$MM)
-16%
-$543
$335
$1 411
4Q08 1Q09 1Q08
9
0.0%0.0%0.0%0.0%+5.6%
+14.3%-11.1%
-6.8%+17.1%-7.0%-3.9%
55,9 53,1 58,2
17,7 17,0 18,010,3 9,7
10,4
0,7
4Q08 1Q09 1Q08Own Production NISSlavneft* Tomskneft*
3,5
4,14,4
4Q08 1Q09 1Q08
0,7
0,8
0,9
4Q08 1Q09 1Q08
Crude output (MM bbl)
Operational Performance
86.680.5
* Production figures include 50% of Slavneft and TomskneftSource: Company data
Crude Oil Export (MM Tonnes) Crude Oil Export to CIS (MM Tonnes)
4,5 4,4 4,2
0,61,7
1,71,6
0,9 0,80,8
4Q08 1Q09 1Q08Omsk NIS Yaroslavl Moscow
2,8 3,2 3,2
0,8 0,4 0,4
4Q08 1Q09 1Q08Export CIS
1,8 1,4 1,8
1,1 1,5 1,1
0,6 0,6 0,6
4Q08 1Q09 1Q08Wholesale from refineries Wholesale tank farmsRetail
Refining (MM Tonnes)
6.67.5
Oil Products Export (MM Tonnes)
3.6
Domestic Oil Products Sales (MM Tonnes)
3.5 3.53.6
83.8
3.57.1
3.6
+13.6%
10
-21%+43%
+49%
-61%
$1 658$2 075
-$268
-$480
-$826
$491
$666
Consistent Cash Performance
Available Net Cash Flow (US$MM)
• Debt used for refinancing and M&A• Capex financed by operating cash flow• $1.7B of cash remained at end 1Q09
2008 Operating Cash Flow
Capital Expenditures
Other (Investing Activities)
Debt Net Change
Dividends 1Q09
Source: Company data
1 008
1 442
2 147
847666
1Q08 2Q08 3Q08 4Q08 1Q09
Operating Cash Flow (US$MM)
$559
$107
$480
$153
$1 551
$1 060
$514
$427$417
Sources Uses
Operating Activity (excl. Working Capital) Working CapitalCapital Expenditures DividendsDebt Received Debt RepaidInvestment (NIS) OtherCash Increase/Decrease
Cash Sources and Uses (US$MM)
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0,00
0,10
0,20
0,30
0,40
0,50
0,60
2006 2007 2008 1Q090%
10%
20%
30%
Net Debt/EBITDA (lhs) Gearing (rhs)
Debt Profile
939
1 372
567
221 152
2010 2011 2012 2013 2014
Net Debt/EBITDA, Gearing (%)
Debt Structure as of March 2009, %
Maturity Profile (US$MM)
Source: Company data
Credit Ratings
B-/B3B/B2
B+/B1BB-/Ba3BB/Ba2
BB+/Ba1BBB-/Baa3BBB/Baa2
2003 2004 2005 2006 2007 2009
Investment Grade
S&P Moodys
2008
54% 46%
Short-term Long-term
94%
6%
Foreign Currency (USD,EUR, RSD)RUR
Net Debt totaled US$ 3,357
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• 1Q09 Capex down 46% Q-o-Q from US $885 MM in 4Q08 to US $480 MM in 1Q09
• Total exploration and production accounted for more than 75% of Capex in 1Q09
• Nearly 90% of Capex is RUR denominated
Organic Capex Breakdown
462
184
485
265
181
254
88
72
70
43
2023
4Q08 1Q09 1Q08
Production - Brown Fields Production - Green Fields Refining Marketing & Distribution
1Q081Q094Q08
$19.4/bbl$13.5/bbl$20.0/bblGreen Fields$8.3/bbl$4.6/bbl$8.3/bblBrown Fields $10.4/bbl$6.9/bbl$10.5/bblUpstream
Capex Dynamics (US$MM)
Source: Company data
$782
$885
-39%-46% $480
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Operating Results
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122
203
123162
132
4044,374,6 51,665,7
1Q08 2Q08 3Q08 4Q08 1Q09
Average flow at new wells, Tonnes per day
Number of New Wells Launched*
Sporyshevskoye 5,9%
Others 31,6%Sugmutskoye
13,1%
Priobskoye 24,6%Krapivinskoye
3,5%
Sutorminskoye 7,8%
Vyngapurovskoye 11,1%
Muravlenkovskoye 2,4%
Muravlenkovskoye 2,4% Vyngapurovsko
ye 11,1%Sutorminskoye 8,1%
Krapivinskoye 3,8%
Priobskoye 23,8%
Sugmutskoye 13,9%Others 30,8%
Sporyshevskoye 6,0%
Upstream
58,2 57,2 57,4 55,9 53,1
18,0 17,8 17,7 17,7 17,010,4 10,3 10,2 10,3 9,7
0,7
1Q08 2Q08 3Q08 4Q08 1Q09Gazprom Neft NIS Slavneft Tomskneft
Source: Company data
1Q094Q08
Source: Company dataNote: Including our share in equity investees
Oil Production (MM Bbl)80.585.385.386.6
Gazprom Neft Production by Field*
*Gazprom Neft data not including its share in equity affiliates (Slavneft , Tomskneft) and NIS
83.8
• NIS – 1% in overall production in 1Q09• Organic production decline driven by accelerating rate of depletion at the
Sugmutskoye and Sporyshevskoye fields in Western Siberia and their transition to the 3rd level of the production cycle
• Priobskoye (+3 580 bbl a day) and Vyngayakhinskoye (+2 565 bbl a day) are leaders in terms of extraction growth
• 126* new wells drilled • Drilling program cut was due to overall cost cutting programme
(434* M Meters drilled – 60* M Meters – down from the level of 4Q08)
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$57,4$50,6
$45,7 $44,4 $43,8
Omskrefinery
MNPZ &YANOS
Russia &CIS Sales
ExportPipelines
ExportSeaports
1Q2009 Netback (US$ per bbl)
$24,3 $21,7 $23,8 $23,0 $22,5
Omskrefinery
MNPZ &YANOS
Russia &CIS Sales
ExportPipelines
ExportSeaports
%, volume
37.0% 20.8% 8.7% 7.9% 25.7%
1Q2008 Netback (US$ per bbl)
Maximizing Netbacks & Enhancing Operational Efficiency through Oil Flows Distribution
Source: Company data
• Refining Netbacks Decreased In 1Q 2009 unlike the same period of 2008
• Refining Cover remained on the same level
• Sales in Russia and export to CIS had insignificant changes
• Export Sales were limited by Transneft export schedule
• Netbacks of Export through Seaports do not exceed Refining Netbacks
• Rouble devaluation had a negative impact on Refining and Marketing Netbacks
%, volume
36.3% 21.4% 8.9% 10.5% 22.9%
54% 41% 42% 42%
46% 59% 58% 58%
1Q06 1Q07 1Q08 1Q09
Crude Sales (Export & Domestic) Refining & Products Sales (Domestic & Export)
Crude Balance (%)
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Downstream
Fuel Oil22%
Jet Fuel7%
Gasoline28%
Diesel33%
Other9%
Lubes1%
4,2 4,9 4,8 4,5 4,4
0,60,80,6 0,9 0,9 0,81,61,6 1,9 1,7 1,7
1Q08 2Q08 3Q08 4Q08 1Q09
Omsk NIS Moscow Yaroslavl
6.67.1 7.6 7.1 7.5
+5%
Source: Company data
Refining Throughput (MM Tonnes)
+42%+3%
+12%
Source: Company data
Oil Products Slate, % (1Q09)
Source: Company data
Capacity Utilization (1Q09)
91%
88%
82%
ONPZ
YANOS
MNPZ
Source: INFOTEK
Refining Conversion Ratio, % (1Q09)
63,4%65,5%66,5%70,3%72,5%76,1%78,5%79,5%80,9%82,7%86,1%88,3%
Novo-Ufimskiy
NPZ
OmskRefinery
Volgograd Perm Ufa Ukhta Angara Saratov MNPZ Ryazan Kirishi Yanos
• NIS acquisition leads to growth of refining volumes
• Depth of refining is one of the highest at Omsk Refinery
• Maximizing netbacks through high value added oil products
Oil Refining
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Oil Products Marketing in Russia
Refineries
Distribution sites
Source: Company data
Central Asia
• Domestic retail market is still underpenetrated • Retail sales through owned gas stations – most efficient downstream
segment• Rebranding of petrol stations is under way• New retail segments – bunkering, aero fueling and lubricant business
Retail – Most Efficient Downstream Segment
3,54,2 4,5
3,5 3,5
1Q08 2Q08 3Q08 4Q08 1Q09
+20%
+7%-22%
0%
0,6 0,7 0,80,6 0,6
1Q08 2Q08 3Q08 4Q08 1Q09Retail
673 777 782 865 876
2005 2006 2007 2008 1Q09
+15%+1% +11%
+1%
+17%+14%
-13%0%
Oil Products Sales in Russia (MM Tonnes)
Oil Products Distribution Throughretail network (MM Tonnes)
Number of Active Gas Stations
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Outlook
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2009 Perspectives – Three aspects to deal with
* Source: Company data
Revenues Opex $ Capex Financial Situation
•Upstream impacted by oil prices
•Ruble devaluation is a constraint for domestic revenues
•Refining margins are to improve
• Lower tax burden
• $230 M saving plan- natural monopoly
tariffs optimization- reducing prices of
materials and services- cutting administrative
and headcount expenses
•Contracts renegotiation (decrease in contractor prices by 10-30%)
• Prioritizing Capital expenditures
•Strong cash flow generation levels allow to continue with our investment commitments
•Goal to maintain a comfortable financial position
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Recent transactions
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• NIS A.D. is a vertically integrated oil company specializing in exploration and production of crude oil and natural gas as well as processing and marketing of crude oil and oil products
• Increased refining capacity– Capacity of NIS A.D. Refineries (Pancevo and Novi Sad) is 7.2 MM Tonnes per annum
• Increased resource base– NIS oil reserves (ABC1) amount to 142.2 MM Tonnes, 52.2 MM Tonnes of which
are recoverable– In 2008, oil production equalled to 0.6 MM Tonnes
• A leading supplier of oil products in the Serbian market, the company produces about 85% of domestically consumed oil products
– NIS has its own distribution chain of 485 gas stations and oil tank farms
Acquisition of Naftna Industrija Srbije AD, Novi Sad, Serbia (“NIS” AD)
Achieved Results
• On February 3, 2009 Gazprom Neft completed the acquisition of 51% of shares in Serbia’s NIS
• Acquisition properties:
• Purchase price of NIS A.D. - Euro 400 million
• Financing an investment program (reconstruction and modernization) - Euro 547 million
Source: Company data
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Sibir Energy Overview
Upstream businessReserves
- 120 MM Tonnes (C1 reserves)
Production
- 4.8 MM Tonnes in 2009E
Downstream business Moscow Refinery
(joint venture with Gazprom Neft )
- 10 MM Tonnes of refining throughput
(capacity 12 MM Tonnes )
- 133 filling stations
- One of the leading position in Moscow and Moscow region market of oil products
Source: Company data, Public sources