Volga Gas plc INVESTOR UPDATE 17 April 2018 Disclaimer This - PowerPoint PPT Presentation

Volga Gas plc INVESTOR UPDATE 17 April 2018

Disclaimer This presentation is for information only and does not constitute an offer or invitation for the sale or purchase of securities. Any information or documentation provided as part of the presentation is intended solely for use during the presentation and as a personal record thereafter. Any information or documentation provided as part of the presentation may not be reproduced or circulated or used for any other purpose. This presentation and the information contained herein is restricted and is not for release, publication or distribution, in whole or in part, directly or indirectly, in or into any jurisdiction in which it would be unlawful to do so. In particular, no information provided during the presentation may be taken, transmitted or distributed, directly or indirectly, in or into the United States of America, its territories or possessions or passed to US Persons (as defined in Regulation S of the United States Securities Act of 1933 (as amended)), United States residents, corporations or other entities, save pursuant to an applicable exemption. Distribution of this information in the United States may constitute a violation of Unites States securities law. Certain forward-looking statements may be contained in the Presentation Materials. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to be accurate. Accordingly, results could differ from those projected as a result of, among other factors, changes in economic and market conditions, changes in the regulatory environment and other business and operational risks. The information provided during the presentation has not been independently verified. No representation or warranty, express or implied, is given as to the accuracy, fairness or completeness of the information or opinions contained in the presentation and no liability is accepted for any such information or opinions (which should not be relied upon) or for any loss howsoever arising, directly or indirectly, from any use of the information provided. 1

Where we operate Dobrinskoye Urozhainoye-2 Dobrinskoye Source: Incotec Source: Incotec 2

Business overview Production  Gas & condensate production in two fields: Vostochny Makarovskoye (“VM”) and Dobrinskoye  2017 average production down 24% to 4,948 boe/d (2016: 6,507 boe/d)  Gas production 25% lower at 4,346 boepd in 2017 (2016: 5,801 boepd) as the gas plant throughput was reduced during implementation of Redox based gas sweetening.  Production running at 4,084 boepd Jan-Mar 2018 Gas Processing Plant  Successfully implemented Redox based gas sweetening in June 2017, resulting in significant savings in chemicals costs and disposal of waste materials.  Construction of the LPG extraction plant was commenced during 2017 and is now close to completion. Test production is to commence in Q2 2018. Field development  Uzen field shallower reserves developed with horizontal well. Production from this well commenced in December 2017  New reserve report was completed 12 April 2018 and was commissioned because of formation water detected in certain production wells on the VM field from late 2017.  To mitigate the impact of future formation water production on the VM field , a follow on reservoir study is underway on the VM field to commence actions including workovers and reperforations of the well bores with the objectives of maximising the extraction of in-place gas reserves, increasing the recovery factor and expanding gas production. 3

Updated Reserve Report Oil & Condensate Gas LPG Total (mmbbl) (bcf) (tonnes '000) (mmboe) As at 31 December 2016 Proved reserves 10.951 98.5 277.0 30.620 Proved plus probable reserves 12.153 131.5 367.0 38.405 Production: 1 Jan-31 Dec 2017 0.667 7.0 0.0 1.831 Revisions : Proved reserves (0.457) (34.2) (129.0) (7.664) Proved plus probable reserves (0.361) (46.9) (162.0) (10.104) As at 31 December 2017 Proved reserves 9.827 57.4 148.0 21.125 Proved plus probable reserves 11.125 77.6 205.0 26.470 Revision as % of 2016 reserves less 2017 production Proved reserves (4%) (37%) (47%) (27%) Proved plus probable reserves (3%) (38%) (44%) (28%) Reserve estimates as at 31 December 2017 independently assessed by OOO Geostream Assets Management. Details and the latest report can be found on the following page: www.volgagas.com/our-operations/oil-gas-and-condensate-reserves 4

Financial overview of 2017  Revenue US$37.1 million (2016: US$39.4 million) 24% lower sales volumes offset by recovery in oil prices and RUR   Reduced export sales as the local market functioned well throughout 2017.  Netback revenues (after selling costs) steady at US$34.8m (2016: US$35.4m)  EBITDA US$8.8 million (2016 : US$9.6 million)  Operating costs were 25% of revenues (2016: 28%)  Mineral Extraction Taxes were 30% of revenues (2016: 26%) Selling expenses (export taxes and transport) were 6% of revenues (2016: 10%)   Pre-tax profit of US$168k (2016: US$1.9 million) DD&A of US$8.6 million (2016: US$5.0 million)  Unit DD&A driven by higher depletion pool and reduction in reserves to US$5.11 per boe (2016: US$2.11 per  boe)  Operating cash flow before working capital US$9.1 million (2016: US$10.4 million) Cash generation before working capital movements reflecting EBITDA   Working capital outflow of US$2.3m (2016: inflow of US$2.9m) due to settlement of capex payables  Cash US$8.6 million at 31 Dec 2017 (31 Dec 2016 : US$19.7 million). Borrowings unchanged at US$4.0m .  Dividend payments  Paid US$5.0m dividend in 2017 (2016: nil)  Decision on 2017 dividend at the Interims Board policy to link distributions to free cash flow, subject to maintaining financial position.  5

Update to 31 March 2018  Total production averaged 4,084 boepd January-March 2018 Gas and condensate in line with current plan to control water inflow into production wells.  Reservoir study in progress to optimise future production   Oil production benefiting from horizontal well Uzen #101.  Oil and gas realisations stable at higher levels  Oil/condensate sales netback of ~$45 per barrel (FY 2017: $38.79/bbl average)  Gas sales price in RUR increased to > 4,000/mcm net of VAT  Cash margins per barrel higher than 2017  Higher prices Material cost savings of chemicals costs.  6

Vostochny – Makarovskoye gas/condensate field  Five production wells drilled, completed and hooked up to the Dobrinskoye gas plant, 5 km from the field site  Production to be maintained at 3,800 boe/d  Flow rates constrained to minimise water production from the wells  Reservoir study to develop intervention plan (sidetrack, acid treatment) to optimise extraction of reserves  Reserve reduction based on revised estimate of recovery factor  No revision to geological model or in gas/condensate initially in place VM field site office VM#4 wellhead and flow line installation Drilling rig on VM#3 7

Dobrinskoye gas plant Gas Processing Unit used to process gas from the VM and Dobrinskoye fields  Originally constructed solely for the Dobrinskoye field, the GPU has been upgraded to process the gas from VM and to increase its throughput capacity  Establishment of Redox-based gas sweetening  Processing gas solely with Redox since June 2017  Gradually increased throughput rates from 230 mcm/day to ~500 mcm/day  Estimate 70% cost saving on chemicals per mcm of gas processed  Eliminates the need to handle chemical waste products  Additional reaction vessel constructed in Q1 2018 – improves operational efficiency and uptime  Construction of LPG plant  Capture of propane/butane flared from condensate stabilisation or included in sales gas stream  Construction completed and production testing is under way  Increment of ~400 barrels or oil equivalent per day of high margin sales volumes 8

New Redox treatment system commissioning

LPG Project Status: • Construction is completing in April 2018 • Pressure tests are ongoing

Oil production from shallow supra-salt fields UZENSKOYE FIELD  Produced over 2 million barrels to date  Current production capacity 800 bopd – doubled since 1 January 2016 with successful workover operations  Shallower (Albian) reservoir developed with horizontal wells  Well # 101 horizontal well spudded on 27 April 2017 and put on production in December 2017 11

Uzen Drilling Activity Well 101 – Horizontal Albian: sequential development from the horizontal well Albian main section – drilled and completed in 2017 1. 2. ST 700 m, western portion 3. ST 600 m, upper layer of Albian eastern portion 4. ST 250 m, lower Albian layer 12

Exploration: Karpenskiy Licence Karpensky Geology Project – • (licence extended to 2031) • Seismic re-interpretation 2D - 2614 km: 1 phase (south) - 1127, 9 km - Mar-Dec 2017; 2D depth migration in progress • 2 phase (north) - 1486,1 km - Jul 17 – Jun-18 - 2D re-interpretation to get final temporary layers 2D interpretation of Karpensky • Southern block work commenced on 15/03/2018 13

Monthly average production rates Jan 2016 – Mar 2018 (boepd) 14