INVESTOR PRESENTATION 1Q 2018 30 May 2018
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
1Q 2018 Market Environment Crude Oil Prices and Exchange Rate USD/bbl USD/bbl RUB/USD Oil Products Price 120,00 80 100 110,00 70 100,00 80 90,00 60 80,00 60 70,00 50 60,00 40 40 50,00 40,00 20 30 30,00 20,00 20 0 Brent Exchange rate Naphtha Diesel Fuel (Gasoil 500 ppm) Fuel Oil (HSFO 180) 1Q 2018 1Q 2017 1Q 2018 1Q 2017 Indicator % Indicator % average average average average Brent, USD/bbl 66.55 53.78 +24% Naphtha, USD/bbl 63.25 54.24 +17% Exchange rate, USD/RUB 56.88 58.84 -3% Diesel fuel, USD/bbl 78.36 64.96 +21% Fuel oil, USD/bbl 55.49 47.16 +18% 1Q 2018 results were positively affected by higher crude oil and oil products quotes, with a negative impact on downstream segment from increased prices for crude oil purchased for refining and increased excise tax on gasoline and diesel fuel 4
HIGHLIGHTS FOR 1Q 2018 Indicator 1Q 2018 1Q 2017 Comments 866 697 Revenue, MUSD Increase primarily due to higher crude oil and oil products prices Decreased profitability of downstream segment due to increase in 70 87 EBITDA, MUSD the cost of crude oil purchased for refining and excise tax rates (18) 47 Net Result, MUSD Decreased FX income and profitability of downstream segment Decrease in capital expenditures in 2016-2017 due to negative macro 4.0 4.5 Production, mboe parameters 9.1 9.2 Refining volumes, mbbl Stable volumes 8.9 8.9 Throughput, mbbl Stable volumes 5
UPSTREAM OPERATIONS Crude Oil and Gas Reserves and Production Timano-Pechora 1Q 2018 production: 1.0 mboe (25%) 1 Volga-Urals and Kazakhstan Tomsk 1Q 2018 production: 1Q 2018 production: 2.0 mboe (51%) 0.9 mboe (24%) Alliance Oil Company, consolidated 2P oil reserves: 551.5 mboe 2 2P gas reserves: 46.9 mboe 1Q 2018 production: 4.0 mboe (average daily: 44,388 boepd ) Notes : (1) Percentage in consolidated Alliance Oil Company production. (2) As per DeGolyer & MacNaughton as of 31 December 2017. 6
UPSTREAM OPERATIONS Crude Oil and Gas Production Hydrocarbon Production, boepd Hydrocarbon Production, mboe 55 000 5,0 4,5 4,5 4,4 4,5 4,2 4,0 52 000 4,0 50 318 3,5 49 146 49 000 3,0 48 354 2,5 46 153 46 000 2,0 1,5 44 388 43 000 1,0 0,5 40 000 0,0 1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018 1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018 Implemented 21 well interventions, launched 2 new wells in 1Q 2018 7
UPSTREAM OPERATIONS Crude Oil Sales Crude Oil Sales, mbbl Export Domestic 6,0 4,6 4,2 4,0 1,7 2,8 2,0 2,5 1,8 0,0 1Q 2017 1Q 2018 Increase due to trading in crude oil purchased from third parties 8
UPSTREAM OPERATIONS Crude Oil Netbacks Crude Oil Netback Prices, USD/bbl Export Domestic 47,3 46,7 50 40,0 38,3 44,8 40 43,9 34,8 36,3 35,8 30 32,8 20 10 0 1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018 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 tr ansportation, export duty, brokers’ commission and certain other costs (for export sales). 9
UPSTREAM OPERATIONS Gas Sales and Price Gas and Gas Liquids Sales, kboe Gas and Gas Liquids Prices, USD/boe 50 500 46,0 42,9 440 42,6 450 40 400 41,9 39,2 324 350 30 300 250 20 200 150 8,3 8,3 8,7 8,4 8,1 10 100 67 54 50 0 0 1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018 1Q 2017 1Q 2018 Sold volume of gas, kboe Sold volume of gas liqids, kboe Gas net price, USD/boe Gas Liquids net price, USD/boe Gas and gas liquids prices fluctuated in line with RUB/USD exchange rate and market demand 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 250 224 200 176 131 150 69 100 107 50 93 0 1Q 2017 1Q 2018 Revenue increased primarily due to more favorable netbacks in both destinations and trading in crude oil purchased from third parties 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: 246 Operating retail gas stations: 278 Oil depots: 20 (including 8 oil Oil depots: 20 (including 8 oil depots conserved) Marine terminals: 2 depots conserved) Marine terminals: 3 Railway tankers: 1,451 Jet fuel depot: 1 Railway tankers: 1,451 The Republic of Buryatia Khabarovsk Oil Refinery Retail gas stations: 14 Refining volumes: 1Q 2018: 100,956 bopd (1Q 2017: 102,194 bopd ) Throughput: 1Q 2018: 8.9 mbbl (1Q 2017: 8.9 mbbl ) 12
DOWNSTREAM OPERATIONS Khabarovsk Oil Refinery Refining volumes, bopd Light oil products yield,% 1Q 2018 63,5% 1Q 2018 100 956 1Q 2017 61,9% 1Q 2017 102 194 Oil Products Breakdown in 1Q 2018, % Refining throughput, mbbl 5% 1Q 2018 8,9 9,0 Fuel oil 34% 21% Marine fuel 1Q 2017 8,9 9,0 Gasoline Diesel fuel 21% Others 20% 13
DOWNSTREAM OPERATIONS Oil Products Sales Oil Products Sales, mbbl Export Bunkering Wholesale Retail 10 8,7 8,7 8 1,4 1,9 6 2,6 5,3 4 2,7 2 2,0 1,5 0 1Q 2017 1Q 2018 Increase in retail volumes due to strong demand No export bunkering sales in 1Q 2018 Reallocation of shipments from export and bunkering to wholesale market to avoid sanctions risks 14
DOWNSTREAM OPERATIONS Oil Products Prices Oil Products Net Prices, USD/bbl Export Bunkering Wholesale Retail 120 104 102 99 97 96 100 77 80 65 65 60 57 60 63 59 58 55 55 40 37 33 20 27 0 1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018 Q-on-Q prices increased due to overall price increase in the domestic market and higher quotes for export sales. There was decrease in wholesale net price since Q3 resulted from reallocation of shipments from export and bunkering to wholesale market and therefore change in the product mix. No export bunkering sales since 4Q 2017 15
DOWNSTREAM OPERATIONS Oil Products Sales Revenue from sales of oil products, MUSD Export Bunkering Wholesale Retail 800 700 627 600 523 194 500 138 400 300 168 335 200 101 100 116 98 0 1Q 2017 1Q 2018 Q-on-Q revenue increased as a result of increase in prices in all destinations 16
FINANCIALS 1Q 2018 1Q 2017 Macro RUB/USD exchange rate, average 56.88 58.84 Brent, average 66.55 53.78 Revenue 866 697 Operating income 21 39 Profit or EBITDA 70 87 loss, EBITDA Margin 8% 13% MUSD F Х gain from financing activities 2 62 (Loss)/Profit for the period (18) 47 Total assets 3,948 3,783 Financial Cash and cash equivalents position, 238 176 MUSD Total debt 2,082 2,132 Total cash generated from operating activities 109 95 Cash Total cash used for investments flows, (39) (35) MUSD Total cash used in financing activities (19) (26) 17
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