INVESTOR PRESENTATION 1H AND 2Q 2019 13 September 2019
DISCLAIMER This presentation (hereinafter – the “Presentation”) of the Alliance Oil Company (hereinafter – the “AOC”) was prepared exclusively for the information purposes in order to improve the transparency of disclosure of relevant information and materials of AOC and establish a continuous dialogue with investors. The data contained in this Presentation constitutes the confidential information of the AOC group of companies and shall not be disclosed or transmitted to any third parties without the prior written consent of the disclosing party. The information contained in this Presentation was prepared and provided by the AOC structural departments. These data can be changed with the course of time and are subject to regular update and amendment. This presentation is not an offer or solicitation of an offer and does not cause creation of any rights or obligations from the AOC and/or potential partners to carry out transactions or to enter into negotiations on cooperation. The information provided in this Presentation is not an offer or proposition to conclude an agreement. AOC makes no warranty in respect of the accuracy or reliability of the information contained in the Presentation and accepts no liability for any losses suffered by third parties arising from inaccuracy or unreliability of such information as well as for other negative effects. 2
Operating Environment On 1 June 2017 the Office of Foreign Assets Control of U.S. Department of the Treasury (“OFAC”) included AO Nezavisimaya Neftegazovaya Kompaniya and AO NNK-Primornefteproduct, subsidiaries of the Group, to the Specially Designated Nationals and Blocked Persons list (“SDN List”). Sanctions were imposed pursuant to the US President Executive Order No. 13722 of 15 March 2016, concerning blocking the property of the Government of North Korea and the Workers’ party of Korea, and prohibiting certain transactions with North Korea. The Group cooperates with OFAC on all arising matters. The Group has received a confirmation from The Bank of New York Mellon of the current absence of obstacles for the provision of services and payments settlement under the Group’s existing Eurobonds. As of now there are no further developments that the Group is able to report. Information will be updated accordingly. 3
1H 2019 Market Environment Oil products prices USD/bbl RUB/USD USD/bbl Crude oil prices and exchange rates 120 80 120 110 70 100 100 90 60 80 80 70 50 60 60 40 50 40 40 30 30 20 20 20 Brent Exchange rate Naphtha Diesel fuel (Gasoil 500 ppm) Fuel oil (HSFO 180) 1H 2019 1H 2018 1H 2019 1H 2018 Indicator % Indicator % average average average average Brent, USD/bbl 66.01 70.45 -6% Naphtha, USD/bbl 57.17 66.98 -15% Exchange rate, USD/RUB 65.34 59.35 +10% Diesel fuel, USD/bbl 78.06 82.54 -5% Fuel oil, USD/bbl 60.96 59.68 +2% 1H 2019 results were negatively affected by lower crude oil and oil products quotes along with RUB weakening 4
HIGHLIGHTS FOR 1H 2019 AND 2Q 2019 Indicator 1H 2019 1H 2018 2Q 2019 2Q 2018 Comments Financial Results 11% increase (1H) and stable revenue (2Q) effected by RUB weakening. H-on-H increase 1,790 Revenue, MUSD 1,771 854 905 primarily due to increased volumes of crude oil trading transactions and higher oil products prices Decreased profitability of upstream - due to increased MET (1H and 2Q) and downstream - due 169 196 50 126 EBITDA, MUSD to major maintenance works at the Khabarovsk Refinery and increase in the cost of crude oil purchased for refining (2Q) 65 (204) (17) (185) Net Result, MUSD Net result improved due to FX gains Decreased profitability of upstream (1H and 2Q) (27) 27 (44) 46 Adjusted Result 1 , MUSD and downstream (2Q) along with higher finance costs Operational Results 8.1 7.9 4.1 3.9 Production, mboe Stable volumes Decrease due to planned major maintenance 15.8 17.1 6.8 8.0 Refining volumes, mbbl works at the Khabarovsk Refinery in Q2 2019 Decrease due to planned major maintenance 15.3 16.7 6.5 7.9 Throughput, mbbl works at the Khabarovsk Refinery in Q2 2019 1 Adjusted Result is defined as the Group’s Net Result adjusted for non -cash items such as foreign currency exchange gain/(loss), modification loss on loans, allowance for deferred tax assets and other significant one-off items in profit or loss. 5
UPSTREAM OPERATIONS Crude Oil and Gas Reserves and Production Timano-Pechora 1H 2019 production: 2.5 mboe (31%) 1 2Q 2019 production: 1.3 mboe (31%) Volga-Urals and Kazakhstan Tomsk 1H 2019 production: 1H 2019 production: 3.9 mboe (48%) 1.7 mboe (21%) 2Q 2019 production: 2Q 2019 production: 2.0 mboe (48%) 0.9 mboe (21%) Alliance Oil Company, consolidated 2P oil reserves: 526.9 mboe 2 2P gas reserves: 41.7 mboe 1H 2019 production: 8.1 mboe (average daily: 44,787 boepd ) 2Q 2019 production: 4.1 mboe (average daily: 45,091 boepd ) Notes : (1) Percentage in consolidated Alliance Oil Company production. (2) As per DeGolyer & MacNaughton as of 31 December 2018. 6
UPSTREAM OPERATIONS Crude Oil and Gas Production Hydrocarbon Production, boepd Hydrocarbon Production, mboe 4,5 50 000 4,1 4,1 4,0 4,0 3,9 4,0 48 000 3,5 3,0 46 000 45 091 2,5 44 741 44 480 2,0 44 000 42 971 42 912 1,5 1,0 42 000 0,5 40 000 0,0 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 Implemented 62 well interventions, launched 31 new wells for 1H 2019 Due to successful interventions oil production has stabilized. Previous decrease in production explained by minimal capital expenditures in 2016-2017 due to negative macro parameters The Group has USD 103 mln of capital commitments for Upstream segment capital construction 7
UPSTREAM OPERATIONS Crude Oil Sales Crude Oil Sales, mbbl Export Domestic Produced Domestic Re-sold Export Domestic Produced Domestic Re-sold 11,5 12 6 5,6 4,6 9,2 4,0 1,8 2,2 8 4 1,2 4,0 2,1 3,5 1,7 4 2 3,5 3,5 1,7 1,7 0 0 1H 2018 1H 2019 2Q 2018 2Q 2019 Increase due to trading in crude oil purchased from third parties and higher production volumes 8
UPSTREAM OPERATIONS Crude Oil Netbacks Crude Oil Netback Prices, USD/bbl Export Domestic Export Domestic 70 70 58,7 60 60 53,0 52,8 51,2 48,8 46,7 46,5 50 50 52,2 52,6 50,5 48,6 48,4 40 40 46,3 43,6 30 30 20 20 10 10 0 0 1H 2018 1H 2019 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 Netbacks in all destinations fluctuated roughly in line with crude oil prices Notes: The netback prices are calculated by deducting VAT, railway and pipeline transportation costs (for Russian domestic sales) or transportation, export duty, brokers’ commission and certain other costs (for export sales). 9
UPSTREAM OPERATIONS Gas Sales and Price Gas and Gas Liquids Prices, USD/boe Gas and Gas Liquids Sales, kboe 60 800 49,0 637 50 44,1 600 40 438 400 30 20 200 7,6 101 8,1 65 10 0 0 1H 2018 1H 2019 1H 2018 1H 2019 Sold volume of gas, kboe Sold volume of gas liqids, kboe Gas net price, USD/boe Gas Liquids net price, USD/boe 54,2 60 400 56,5 53,6 350 46,6 314 50 44,4 300 40 250 216 200 30 150 20 100 47 33 10 50 7,6 7,5 7,5 7,5 7,7 0 0 2Q 2018 2Q 2019 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 Sold volume of gas, kboe Sold volume of gas liqids, kboe Gas and gas liquids prices fluctuated in line with market demand, affected by RUB/USD exchange rate 10 Notes: The net prices are calculated by deducting VAT.
UPSTREAM OPERATIONS Crude Oil and Gas Sales Revenue from Sales of Crude Oil, Gas and Gas Liquids, MUSD Export Domestic Produced Domestic Re-sold Export Domestic Produced Domestic Re-sold 296 600 300 581 265 489 500 250 94 202 66 112 400 200 92 300 150 105 177 196 200 100 107 100 200 50 97 183 0 0 1H 2018 1H 2019 2Q 2018 2Q 2019 Revenue increased primarily due to trading in crude oil purchased from third parties and higher production volumes 11
DOWNSTREAM OPERATIONS Assets and Refining volumes Kamchatka region Retail gas stations: 18 Marine terminals: 1 Jet fuel depot: 1 Far East: Amur, Primor and Khabarovsk regions TOTAL Retail gas stations: 256 Operating retail gas stations: 289 Operating oil depots: 12 Operating oil depots: 12 Marine terminals: 2 Marine terminals: 3 Railway tankers: 1,449 Jet fuel depot: 1 Railway tankers: 1,449 The Republic of Buryatia Khabarovsk Oil Refinery Retail gas stations: 15 Refining volumes: 1H 2019: 87,540 bopd (1H 2018: 94,416 bopd ) 2Q 2019: 74,794 bopd (2Q 2018: 87,947 bopd ) Throughput: 1H 2019: 15.3 mbbl (1H 2018: 16.7 mbbl ) 2Q 2019: 6.5 mbbl (2Q 2018: 7.9 mbbl ) 12
DOWNSTREAM OPERATIONS Khabarovsk Oil Refinery Refining volumes, bopd Light oil products yield,% 1H 2019 1H 2019 87 540 57,5% 94 416 1H 2018 1H 2018 63,4% 74 794 2Q 2019 2Q 2019 54,6% 2Q 2018 87 947 2Q 2018 63,3% Oil Products Breakdown in 1H 2019, % Refining throughput, mbbl 1H 2019 15,3 13% 4% 1H 2018 Fuel oil 16,7 Marine fuel 17% 2Q 2019 43% 6,5 Gasoline Diesel fuel 2Q 2018 7,9 Others 23% 13
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