gazprom: 3q 2018 ifrs results · net sales to russia rub/mcm bcm bcm rub bn rub calculations may...
TRANSCRIPT
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GAZPROM: 3Q 2018 IFRS RESULTS
DECEMBER 3, 2018
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Alexander Ivannikov
Head of Department
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DISCLAIMERS
This presentation has been prepared by PJSC Gazprom (the “Company”), and comprises the slides for a presentation to investors
concerning the Company. This presentation does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of
any offer to purchase or subscribe for, any shares or other securities representing shares in the Company, nor shall it or any part of it nor
the fact of its presentation or distribution form the basis of, or be relied on in connection with, any contract or investment decision.
Any viewer of this presentation considering a purchase of such securities is hereby reminded that any such purchase should be made
solely on the basis of the information contained in the prospectus or other offering document prepared in relation thereto and will be
subject to the selling restrictions set out therein. The information in this presentation should not be treated as investment advice. Care
has been taken to ensure that the facts stated in this presentation are accurate, and that the opinions expressed are fair and
reasonable. However, the contents of this presentation have not been verified by the Company. Accordingly, no representation or
warranty, express or implied, is made or given by or on behalf of the Company or any of its members, directors, officers or employees or
any other person as to the accuracy, completeness or fairness of the information or opinions contained in or discussed at this
presentation. None of the Company or any of their respective members, directors, officers or employees nor any other person accepts
any liability whatsoever for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection
therewith.
The information in this presentation includes forward-looking statements, such statements may also occur during the Q&A session.
These forward-looking statements include all matters that are not historical facts, statements regarding the Company’s intentions,
beliefs or current expectations concerning, among other things, the Company’s results of operations, financial condition, liquidity,
prospects, growth, strategies, and the industry in which the Company operates. By their nature, forward-looking statements involve risks
and uncertainties, including, without limitation, the risks and uncertainties to be set forth in the prospectus, because they relate to
events and depend on circumstances that may or may not occur in the future. The Company cautions you that forward looking
statements are not guarantees of future performance and that its actual results of operations, financial condition and liquidity and the
development of the industry in which the Company operates may differ materially from those made in or suggested by the forward-
looking statements contained in this presentation. In addition, even if the Company’s results of operations, financial condition and
liquidity and the development of the industry in which the Company operates are consistent with the forward-looking statements
contained in this presentation, those results or developments may not be indicative of results or developments in future periods.
The information and opinions contained in this presentation are provided as at the date of this presentation and are subject to change
without notice. No person is under any obligation to update or keep current the information contained herein.
By attending the presentation you agree to be bound by the foregoing limitations.
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26; 124;195
19.8 21.5
23.7 25.0 25.1
28.6
31.7
35.7
10
15
20
25
30
35
40
2016 1q17 2q17 3q17 2017 1q18 2q18 3q18
EBITDA LTM
KEY HIGHLIGHTS: STRONG FINANCIAL RESULTS IN 3Q2018
• 3q18 EBITDA growth +86% y-o-y in Rubles (+62% in 9m18)
7 consecutive quarters of LTM EBITDA growth in dollar terms
• Marginally positive Free cash flow RUB 3 bn* in 3q (vs. RUB -166* bn in 3q 2017),
RUB 369 bn* in 9m (vs. RUB -53.2* bn in 9m 2017)
• Reduction of leverage continues:
Net debt*/EBITDA decreased to 0.9 q-o-q (1.0 in 2Q2018)*
Key factors:
• Seasonally weakest quarter in a year
• Record high gas exports to Europe
• Gas, oil and oil products price growth
• High level of cost control, optimization
and prioritization of CAPEX schedule
• Ruble weakening
• Oil business growth
+81%
Key highlights:
USD bn
*Adjusted for bank deposits
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26; 124;195
KEY EVENTS AND MARKET ENVIRONMENT
Source: Company data, Bloomberg, Bank of Russia website 1 OC - Other countries: including LNG sales
59.0 65.5
58.0
65.6
0
20
40
60
80
3q17 3q18
USD/RUB AVERAGE RATE
USD/RUB AS OF THE END OF PERIOD
USD/RUB USD/bbl
Market environment in 3q18 vs 3q17
USD/mcm
194.6
250.8
0
50
100
150
200
250
3q17 3q18
AVERAGE GAZPROM GAS SALES
PRICE IN EUROPE & OC
3,692 3,831
0
1,000
2,000
3,000
4,000
3q17 3q18
AVERAGE PRICE IN RUSSIA
RUB/mcm
1
Jan
2018
-
Nov
2018
• Gas production increased by 7.2% YoY to 365 bcm as of
9M2018
• Exports to Europe increased by 6.7% YoY to 185.4 bcm
• Over 96% of the first phase of the Power of Siberia pipeline
laid
• Offshore part of the TurkStream completed.
Gazprom and Turkey agreed on the onshore section of the
second string of the TurkStream
• Germany, Sweden, Finland and Russia granted all required
approvals to build the Nord Stream-2 pipeline.
More than 300 km of the pipeline built.
Financing was received from European energy companies
according to the agreements.
• Moody's and S&P upgraded Gazprom’s ratings to
investment grade
52.1
75.3
50.9
74.3
0
20
40
60
80
3q17 3q18
BRENT URALS USD bn
6
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26; 124;195
33
73 88
41 33
3,692 3,942 3,974 3,823 3,831
0
1000
2000
3000
4000
0
25
50
75
100
3Q17 4Q17 1Q18 2Q18 3Q18
VOLUMES AVERAGE PRICE IN RUSSIA
55 68 72 57 57
195 219 232 238 251
0
50
100
150
200
250
300
0
20
40
60
80
100
3Q17 4Q17 1Q18 2Q18 3Q18
VOLUMES AVERAGE PRICE IN EUROPE & OC
GAS SALES
121
288
351
158 128
0
100
200
300
400
3Q17 4Q17 1Q18 2Q18 3Q18
NET SALES TO RUSSIA
RUB/mcm bcm
RUB bn
Calculations may differ due to rounding. 1 Net of value added tax (VAT) 2 OC - other countries: including LNG sales 3 VAT is not charged on export sales 4 Net of custom duties and excise tax on gas exports
494
674 758
653 729
0
200
400
600
800
3Q17 4Q17 1Q18 2Q18 3Q18
NET SALES TO EUROPE & OC
RUB bn
bcm
6
11 14
7 7
165 157 155 149
181
0
50
100
150
200
0
5
10
15
20
3Q17 4Q17 1Q18 2Q18 3Q18
VOLUMES AVERAGE PRICE IN FSU
51
91
111
56 69
0
50
100
3Q17 4Q17 1Q18 2Q18 3Q18
NET SALES TO FSU
bcm USD/mcm USD/mcm
1
Russia Europe & OC2 FSU
3,4 3,4
RUB bn
+5% +48% +35%
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OIL AND UTILITIES BUSINESS
Calculations may differ due to rounding. 1 Net of value added tax (VAT), excise tax and custom duties.
Net Sales1
561 612 620
717 800
0
200
400
600
800
1,000
3Q2017 4Q2017 1Q2018 2Q2018 3Q2018
86
154
175
99 88
0
50
100
150
200
3Q2017 4Q2017 1Q2018 2Q2018 3Q2018
RUB bn
+1%
3Q2017 3Q2018
+43%
Electricity and heat sales Crude oil and gas condensate; refined products sales
41%
54%
5%
CRUDE OIL AND GAS CONDENSATE; REFINED
PRODUCTS
GAS BUSINESS AND OTHER REVENUES
ELECTRICITY AND HEAT
RUB bn
39%
55%
6%
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1,930
664
386 401 403
3
2,204
-200
300
800
1,300
1,800
2,300
Total net sales Adj. EBITDA Net profit Capex Adj. Operating
CF
Adj. FCF Adj. Net debt1 2 3 4, 5
1 EBITDA adjusted for changes in impairment provisions 2 Profit for the period attributed to shareholders of PJSC Gazprom 3 Cash capital expenditures 4 Compared to Adj. Net debt as of December 31, 2017
SUMMARY OF 3Q2018 IFRS FINANCIAL RESULTS
+35%
+137%
+7%
+86%
3Q2017 vs 3Q2018
RUB bn
RUB bn
+93% +19%
5 In order to reflect the effects of the bank deposits (reported as part of Other current and
non-current assets). See page 14
5 5
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OCF before
working capital
changes
Net working
capital and
operating items
changes
Tax paid
OCF
reported Capex
FCF
reported
Adjustment for
increase in
ST deposits
FCF
adjusted
1,978
205
213
1,426
1,192
235
134
369
134
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
9M2018 ADJUSTED FREE CASH FLOW BREAKDOWN*
1 Free Cash Flow = Net Cash from operating activities – Cash Capex 2 Free Cash Flow adjusted for changes in the ST bank deposits
RUB bn
FCF adjusted for changes in bank
deposits remains positive at
RUB 369 bn ($6 bn) in 9M2018 Changes in
bank deposits
* Free Cash Flow adjusted for changes in the ST bank deposits
Reported as a part
of Changes in
working capital
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1,952 1,747 2,068 2,204
1,491 1,083
1,199 1,308
0.9
1.5 1.4
0.9
0.0
0.5
1.0
1.5
0
2000
4000
6000
2015 2016 2017 3Q2018
CASH&CASH EQUIVALENTS (INCL. DEPOSITS)
NET DEBT ADJ. FOR BANK DEPOSITS
NET DEBT ADJ./ADJ.EBITDA
RUB bn
3 512
886
2,627
421 1
2,204
1.1
0.9
0
0.5
1
1.5
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Total Debt Cash &
equivalents
Net Debt
reported
ST deposits LT deposits Net Debt
adjusted
NET DEBT ADJ./ADJ.EBITDA
RUB bn
KEY DEBT METRICS
3Q2018 adjusted Net Debt structure
Total Debt breakdown by currency Total Debt and Net Debt adj.
Cash, cash equivalents, bank deposits
breakdown by currency
1 Calculated using dollar values of Net debt and EBITDA. Net Debt adjusted for the bank deposits reported as a part of Other current and non-current assets
RUB
20%
USD
32%
EUR
39%
Other
9%
RUB
59%
USD
21%
EUR
17%
Other
3%
1
1
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26; 124;195
1 641
1 369 1 406
336 401
0
600
1200
1800
2015 2016 2017 3Q2017 3Q2018
Cash CapEx
1 CapEx breakdown as provided in Management Report
CAPITAL EXPENDITURES
(17%)
+19%
RUB bn
37%
16%
18%
19%
3%
7%
TRANSPORT
PRODUCTION OF CRUDE OIL AND GAS CONDENSATE
PRODUCTION, DISTRIBUTION AND STORAGE OF NATURAL GAS
REFINING
ELECTRICITY AND HEAT
OTHER CAPEX
The Group’s 3Q2018 CapEx breakdown1
+3%
27,053
20,464
24,100
5,695 6,117
0
5000
10000
15000
20000
25000
30000
2015 2016 2017 3Q2017 3Q2018
USD mn (24%)
+18%
+7%
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High competiveness
of Gazprom’s gas.
Record exports
Outstanding resource base and
infrastructure Low cost base
UNIQUE
FUNDAMENTALS
Strategic transformative projects
(capex peaking
in 2018 - 2019)
Improving gas markets
outlook.
Spare production and export
capacity
Business growth
in gas and oil
segments; further
growth potential
BUSINESS
GROWTH
STRONGER FINANCIAL
OUTLOOK
Conservative
financial policy,
cost control
Balanced
dividend policy
Improving
FCF profile
BUSINESS GROWTH, ENHANCING SUPPLY SECURITY
INVESTMENT CASE
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ADDITIONAL INFORMATION
14
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150; 150; 150
68; 103; 124
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245; 190; 50
100; 190; 235
90; 90; 90
140; 200; 40
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26; 124;195
• Changes in working capital (a part of Operating
cash flows) include changes in ST bank deposits
• Operating cash flows and Free cash flow need to
be adjusted for changes in ST bank deposits for
analytical purposes
IMPACT OF BANK DEPOSITS
Impact of bank deposits on Net debt:
• Bank deposits are NOT included in Сash and
cash equivalents
• Net Debt and Net Debt/EBITDA need to be
adjusted for bank deposits for analytical
purposes
XX
TOTAL DEPOSITS
ST and LT bank deposits volumes
Applying of LT and ST bank deposits is aimed at improving the efficiency of liquidity management
144
328
571 496
421 42
2
7
8
1
0
200
400
600
2016 2017 1Q18 2Q18 3Q18
LT DEPOSITS
ST DEPOSITS 186
330
579
503
-78
243 244
-35 -75
-100
-50
0
50
100
150
200
250
2016 2017 1Q18 2Q18 3Q18
RUB bn RUB bn
• Early withdrawal clause
• Deposit term of over 3 months
Key features of bank deposits2:
ST bank deposits changes
Impact of changes in ST bank deposits on Cash flows:
According to Gazprom 3Q2018 IFRS report1:
1 Source: Gazprom 3Q2018 IFRS report, page 21 2 Reported as a part of Other current assets and Other non-current assets
423
15
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10.3
43.4
57.4
18.8
9.9
0
20
40
60
3Q17 4Q17 1Q18 2Q18 3Q18
12.6 11.9 11.7 11.9 12.7
0
5
10
15
3Q17 4Q17 1Q18 2Q18 3Q18
3.7
4.3 4.1
3.8 3.7
0
2
4
3Q17 4Q17 1Q18 2Q18 3Q18
Crude oil Gas condensate
Gazprom Group’s volumes produced in Russia
Calculations may differ due to rounding.
mt mt (1%) 1%
PRODUCTION
32.9
42.5 46.7
32.7 31.0
0
20
40
3Q17 4Q17 1Q18 2Q18 3Q18
Electricity Heat
bn kWh mn Gcal (6%) (4%)
107.3
131.4 134.1 119.3
111.7
0
50
100
150
3Q17 4Q17 1Q18 2Q18 3Q18
Natural gas
bcm 4%
16
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150; 150; 150
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RUSSIAN NATURAL GAS BALANCE
Bcm 2016 2017 9M2017 9M2018
Natural gas resources 718.20 770.29 556.2 591,6
Domestic gas production 640.40 691.19 502.9 531,8
Other sources including Central Asian and Azerbaijani gas 22.97 25.33 19.2 19,2
Gas withdrawn from underground storage in Russia, Latvia and Europe 50.98 50.45 31.4 38,7
Decrease in the amount of gas within the gas transportation system 3.85 3.31 2.7 2,0
Natural gas distribution 718.20 770.29 556.2 591,6
Domestic consumption 456.68 468.01 327.2 348,7
including needs of the gas transportation system
and underground storages 32.29 37.81 26.7 29,8
Gas pumped into underground storages 28.54 53.02 48.9 52,2
Gas for LNG production 14.70 15.46 11.3 11,3
Foreign supplies 181.68 197.40 143.9 151,5
FSU supplies 32.11 32.88 22.3 26,1
Increase in the amount of gas within the gas transportation system 4.49 3.52 2.5 1,8
Source: Company Operating Data
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THANK YOU!