INVESTOR PRESENTATION Q1 2019 31 May 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
Q1 2019 Market Environment USD/bbl RUB/USD USD/bbl Crude oil prices and exchange rates Oil products prices 120 120,00 80 110,00 70 100 100,00 90,00 60 80,00 80 70,00 50 60,00 60 40 50,00 40,00 40 30 30,00 20,00 20 20 Brent Exchange rate Naphtha Diesel fuel (Gasoil 500 ppm) Fuel oil (HSFO 180) Q1 2019 Q1 2018 Q1 2019 Q1 2018 Indicator % Indicator % average average average average Brent, USD/bbl 63.20 66.55 -5% Naphtha, USD/bbl 56.07 63.25 -11% Exchange rate, USD/RUB 66.13 56.88 +16% Diesel fuel, USD/bbl 76.38 78.36 -3% Fuel oil, USD/bbl 60.52 55.49 +9% Q1 2019 results were negatively affected by weak ruble Q-on-Q, stabilization of crude oil price had a positive impact on downstream economics 4
HIGHLIGHTS FOR Q1 2019 Indicator Q1 2019 Q1 2018 Comments Financial Results Increase primarily due to higher crude oil and oil products 936 866 Revenue, MUSD prices and volumes Increased profitability of downstream segment due to income on reverse excise tax, increase in sales prices and 119 70 EBITDA, MUSD volumes and stabilization of crude oil price purchased for refining Net profit primarily resulted from increased profitability of 82 Net Result, MUSD (18) downstream segment and FX gains 17 (19) Adjusted Result 1 , MUSD Increased profitability of downstream segment Operational Results 4.0 4.0 Production, mboe Stable volumes 9.0 9.1 Refining volumes, mbbl Stable volumes 8.8 8.9 Throughput, mbbl Stable volumes 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 Q1 2019 production: 1.2 mboe (31%) 1 Volga-Urals and Kazakhstan Tomsk Q1 2019 production: Q1 2019 production: 1.9 mboe (48%) 0.8 mboe (21%) Alliance Oil Company, consolidated 2P oil reserves: 526.9 mboe 2 2P gas reserves: 41.7 mboe Q1 2019 production: 4.0 mboe (average daily: 44,480 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 50 000 4,5 4,1 4,0 3,9 4,0 4,0 4,0 48 000 3,5 3,0 46 000 2,5 44 741 44 388 44 480 2,0 44 000 42 971 42 912 1,5 1,0 42 000 0,5 40 000 0,0 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Implemented 34 well interventions, launched 12 new wells for Q1 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 138 mln of capital commitments for Upstream segment capital construction The Group expects to further stabilize its production trend 7
UPSTREAM OPERATIONS Crude Oil Sales Crude Oil Sales, mbbl Export Domestic Produced Domestic Re-sold 6 5,8 4,6 2,2 1,0 4 1,8 1,9 2 1,8 1,7 0 Q1 2018 Q1 2019 Increase primarily due to trading in crude oil purchased from third parties, the Group's market position allows to secure favorable trading margin 8
UPSTREAM OPERATIONS Crude Oil Netbacks Crude Oil Netback Prices, USD/bbl Export Domestic 70 58,7 60 53,0 47,3 46,5 46,7 50 52,2 52,6 44,8 40 46,3 43,6 30 20 10 0 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Domestic netbacks affected by tax maneuver since Q1 2019 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 Sales, kboe Gas and Gas Liquids Prices, USD/boe Gas net price, USD/boe Gas Liquids net price, USD/boe Sold volume of gas, kboe Sold volume of gas liqids, kboe 350 60 56,5 324 54,2 46,6 300 50 44,4 41,9 250 40 222 200 30 150 20 100 8,7 7,6 7,5 7,5 7,5 54 10 33 50 0 0 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q1 2018 Q1 2019 Gas liquids prices affected by crude oil quotes 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 300 285 250 224 107 200 47 150 84 91 100 50 93 87 0 Q1 2018 Q1 2019 Revenue increased primarily due to trading in crude oil purchased from third parties and more favorable domestic netbacks as a result of tax maneuver 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: 255 Operating retail gas stations: 288 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: 15 Refining volumes: Q1 2019: 100,427 bopd (Q1 2018: 100,956 bopd ) Throughput: Q1 2019: 8.8 mbbl (Q1 2018: 8.9 mbbl ) 12
DOWNSTREAM OPERATIONS Khabarovsk Oil Refinery Refining volumes, bopd Light oil products yield,% Q1 2019 100 427 Q1 2019 59,6% Q1 2018 Q1 2018 100 956 63,5% Oil Products Breakdown in Q1 2019, % Refining throughput, mbbl Q1 2019 8,8 9,0 4% Fuel oil 19% 8,9 Q1 2018 9,0 Marine fuel 38% Gasoline Diesel fuel 20% Others 19% 13
DOWNSTREAM OPERATIONS Oil Products Sales Oil Products Sales, mbbl Export Bunkering Wholesale Retail 10 9,5 8,7 2,2 8 1,9 2,0 6 5,3 4 3,4 2 1,8 1,5 0 Q1 2018 Q1 2019 Increase in retail volumes due to strong demand The Group resumed bunkering sales in Q3 2018 (terminated in Q3 2017) 14
DOWNSTREAM OPERATIONS Oil Products Prices Oil Products Net Prices, USD/bbl Export Bunkering Wholesale Retail 120 104 97 95 94 93 100 82 88 80 73 70 65 74 64 59 67 60 63 54 40 44 39 20 0 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Retail USD prices decreased Q-on-Q due to RUB depreciation Export and bunkering prices fluctuated roughly in line with crude oil prices The Group resumed bunkering sales in Q3 2018 (terminated in Q3 2017) 15
DOWNSTREAM OPERATIONS Oil Products Sales Revenue from sales of oil products, MUSD Export Bunkering Wholesale Retail 800 641 627 600 206 194 400 178 335 200 149 107 98 0 Q1 2018 Q1 2019 Q-on-Q revenue increased due to increase in both average price and sales volumes 16
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