Table of Contents 1. PJSOC Bashneft: Alexey Teksler Successful and Transparent 2. Strategy Overview Alexander Korsik 3. Upstream Sergey Zdolnik Yury Krasnevsky 4. Downstream Denis Stankevich 5. Financials Alexey Lisovenko…
1. PJSOC Bashneft: Successful and Transparent Alexey Teksler Chairman of the Board of Directors of PJSOC Bashneft
Bashneft Is a Successfully Developing Company Steady growth of operating and financial results; Efficient brownfield management and successful development of assets in new operating regions; High-technology refining complex with…
Commitment to High Corporate Governance Standards GENERAL MEETING OF SHAREHOLDERS Board of Directors President Alexey Teksler Chairman Management Board Vitaly Sergeychuk Anthony Considine Alexander Korsik Non-executive…
2. PJSOC Bashneft: Strategy Overview Alexander Korsik President, Chairman of the Management Board of PJSOC Bashneft
Highly Professional Management Team with Strong Track Record Alexander Korsik President, Chairman of the Management Board 20 years in the industry Previously First Vice President at Sibneft, President of ITERA and Chairman of the…
Bashneft at a Glance Efficient vertically-integrated oil company, an industry leader in terms of shareholder returns Strong production growth since 2009, kbpd Sizeable oil reserves and resource base in three major Russian 356 385 309…
Bashneft: Unique Investment Proposition High quality, high return asset base 2 1 Robust, sustainable sector 3 leading production growth Extensive reserve and resource Best-in-class integrated base combined with downstream…
High Quality / High Return Asset Base Strong production growth and reserve replacement in Bashkortostan. The Trebs and Titov fields and assets of Burneftegaz drive medium-term production growth. Strong performance of the downstream…
Sector Leading Profitability and Cash Flow Generation Consistently high shareholder returns reflect our commitment to creating shareholder value for all shareholders CAPEX / Operating cash flow (average for 2010-2014) High…
One of the Highest Shareholder Returns in Russia Consistently delivering the highest shareholder Dividend yield(2) returns in Russia TSR(1) in 2010-2015, % +277% +248% 6,6% 5,9% 4,5% +141% 3,6% 3,4% 2,3% +75%…
Effective Implementation of Stated Strategic Initiatives Tasks in the Tasks in the Outcome Status Downstream Outcome Status Upstream segment segment Production at brownfields increased to 16.3 To cease production of fuel oil…
Key Priorities for 2016-2020 Include Growth of Financial Results and Guaranteed Dividend Yield 1. Stronger financial results and performance 6. Socially responsible 2. Guaranteed dividend company yield ACHIEVEMENT OF THE…
3. PJSOC Bashneft: Upstream Sergey Zdolnik Yury Krasnevsky Vice President, Oil and Vice President, Geology Gas Production and Development
Upstream Development as a Basis for the Companys Value Maximization Goals Tasks 1 To minimize To reduce the number of industrial To reduce the accident To improve the HSE management negative Best-in-class HSE performance injuries…
Balanced Portfolio With Significant Growth Potential Unconventional Resources and Gas Production in Volga- Exploration in Timan- Urals Pechora and Western Volga-Urals Siberia Potential for long- Appraisal and term growth of…
Balanced Portfolio of Upstream Assets in Key Russian Oil and Gas Provinces 1 Volga-Urals Reserves (1+2 / 3)* as of December RUSSIA Production*, 2014 31, 2014 Oil: 446 mmt (3.29 bn bbl)/ 16.3 mmt (326 kbpd) 451 mmt (3.29 bn bbl)…
Systematic Approach to Forming the Resource Base and High Replacement Rates for Proved Oil Reserves Combined with Cost Control Projects in Russia: Reserves and resources, mmbbl/mmboe 1. Republic of Bashkortostan, Comprehensive…
Volga- Geological Exploration in Bashkortostan: Potential for Replenishment of Urals Resources Despite a long history of oil production, the Republic of Bashkortostan is underexplored; Conventional geological exploration regions…
Timan- Pechora Increase in Reserves at the Trebs and Titov Fields as a Result of Geological Exploration Licence for prospecting, exploration and production valid from 2012 to 2036, total (3P) reserves of 271.7 mmbbl, (1+2) reserves of…
Timan- Geological Exploration at 7 Licence Areas in the Nenets Autonomous District: Potential for Future Pechora Production in the Region Licence for prospecting, exploration and production valid from 2012 to 2037 Areas immediately…
Western Siberia LLC Burneftegaz Successfully Replenishes the Resource Base 4 licences (Vostochno-Vuemskiy, Tortasinskiy, Severo-Ityakhskiy 3 and Vostochno-Unlorskiy areas). Total (3) reserves of 230.1 mmbbl, 1+2 reserves of 56 mmt…
International Assets 2011 2012 2013 2014 2015 2016-2017 JSOC Bashneft has no Participation in the 4th Participation in the 2nd The Production Sharing Ongoing work on Iraq: drilling of 1 well international operations. Licensing Round in…
Development and Introduction of Innovative Technologies in the Upstream Segment 1 State-of-the-art Drilling Support Center In 2013 the Drilling Support Center was commissioned in cooperation with Schlumberger; it successfully uses…
Sector Leading Upstream Growth Under the current management, production recovered from 240 kbpd in Production evolution in key regions, kbpd (mmtpa) 2009 to 385 kbpd in 1H 2015; Brownfields: the aim is to maintain a production plateau…
Stable Production at Brownfields in the Short Term Volga- Urals The Volga-Urals province is a mature oil-producing region; Production plateau in the Volga-Urals has already production started in1932; cumulative production totals 1.7…
Volga- Urals Focus on Production Efficiency Wellstock has been significantly optimized since 2009 by focusing on more profitable wells; Number of producing wells Watercut has been declining since 2009 mainly due to systematic work with…
Volga- Urals Focus on Production Efficiency (continued) The average output of one well is expected to be maintained at 23.0 bpd due to interventions and optimization of the system for brownfield development A range of interventions is…
Volga- Urals Focus on Production Efficiency (continued) Evolution of interventions has resulted in a shift of focus from easy Breakdown of incremental production measures (enhanced oil recovery) to technically complex ones 1H 2015…
Volga- Urals Stable Efficiency of Low-Cost Interventions Optimization technique Description Initial well production rate, bbl/d 468 392 299 298 CAPEX Drilling of new production wells, conversion of other wells into 107 115…
Timan- Pechora Trebs and Titov Fields: An Important Growth Driver in the Medium Term Reserves and resources 3P reserves: 272 mmbbl C1+C2 : 140 mmt Barents Sea Project participants Bashneft (74.9%) / Lukoil (25.1%) Prospecting,…
Timan- Achievement of Production Targets at the Trebs and Titov Fields Will Make It Possible Pechora to Reach the Level of 100 kbpd in 2019 Projected production at the Trebs and Titov fields, Production plateau to be reached through:…
Western Siberia Burneftegaz: Fast-Growing Asset 3P reserves: 230.1 mmbbl Reserves and resources 1+2: 64 mmt Size of licence area 319 km2 Tortasinskiy, Severo- Prospecting, exploration and Ityakhskiy 3, Vostochno- 2032…
Burneftegaz to Reach Peak Production as Early as in 2016 Western Siberia Project implementation Projected production at Burneftegaz, kbpd (mmtpa) In 2015 development of a formation pressure maintenance system continued; 50 In…
Low-cost Production Growth Focus on operational and economic efficiency resulting in high cost Upstream CAPEX and OPEX, 2009 1H 2015, RUB/boe efficiency; Among the lowest per-barrel upstream CAPEX and overall cost base in the Russian…
Cost Management System as a Mechanism for Performance Improvement Category of expenses TOOLS O Lifting Costs Analysis and use of best practices; Systematic monitoring and predicting of the key metrics; Revex P (well workover)…
Long-Term Cost Optimization Measures Tasks To increase the rate of To conduct effective well To improve the To improve the efficiency Energy efficiency Programme to increase penetration by 5% per interventions efficiency of field of…
Strategy for Cooperation with Oilfield Service Companies GOALS: To demonopolize the oilfield services market To promote competition among oil and gas service companies 2015-2020 To improve the quality of provided services and 100%…
Key Takeaways Balanced portfolio of assets in key Russian oil and gas provinces: Volga-Urals, Timan-Pechora and Western Siberia; Massive reserve and resource base with strong track record of reserve replacement; Sector leading…
4. PJSOC Bashneft: Downstream Denis Stankevich First Vice President, Refining and Commerce
Strategic Objectives of the Downstream Segment for 2015 - 2020 Goals Tasks 1 To reduce the negative environmental impact To minimize the risk of industrial To enable utilization of To ensure that wastewater Best-in-class HSE…
Best-In-Class Fully Integrated Refining Complex with Significant Growth Potential and an Efficient Product Distribution System Expansion of Retail Sales Niche Products Efficient Supply of Expansion of the Feedstock to retail…
Balance Achieved between the Upstream / Downstream Segment Upstream and downstream capacities are balanced due to production growth in Timan-Pechora, Western Siberia and Bashkortostan Crude oil production growth potential Development…
Focused Integrated Business Model (as of 1H 2015) Purchased crude oil and Outside the Customs Crude oil production condensate Union 9.54 mmt (69.6 mmbbl) 4.34 mmt (31.7 mmbbl) 3.0 mmt (22.7 mmbbl) Export 3.4 mmt (24.5 mmbbl) To the…
Overview of the Integrated Refining and Petrochemical Complex* Integrated refining complex consisting of three interconnected refineries and one petrochemical plant Total installed Petrochemical Petroleum product Share of light…
Overview of Bashnefts Refining Business One of the highest shares of light products in No. 1 in Russia and above European average in terms of Russias oil and gas industry (1H 2015) the Nelson Complexity Index 75,10% 68,5% 68,6% 65,2%…
Downstream Strategy Aimed at Maximization of the Share of High-Margin Products Indicative spread between prices for Products petroleum products and oil price as of Product group Comments the end of 1H 2015, US/t(1) 271 Gasoline…
Value Creative Downstream Investment Programme The Company has ensured full compliance with current and new Russian standards in fuel production while keeping additional required investments to a minimum. The key aim of further investment…
Delayed Coker Construction: Example of an Efficient Large-Scale Investment Project Management System What has been done A project team has been formed; A site for the units facilities has been selected on the premises of UNPZ; The…
Value Creation through Maximization of the Share of High-Margin Products in the Product Mix Output of low-margin products will be ...while the share of high-margin Comments minimized by 2020... products will increase significantly The…
Highly Efficient Refining Sector Average Downstream CAPEX and refining costs, Technologically advanced refining capacities enable Bashneft to 2011 1H 2015, RUB/bbl (1) produce a wide range of high-quality petroleum products at a low…
Competitive Advantage: Close Integration between Refineries and the Petrochemical Complex Priorities in the development of the petrochemical Production cooperation of petrochemical enterprises complex until 2020: To specialize in the…
Focused Expansion of the Retail Network Successful track record of development of the retail network The retail network covers a large part of the Central Russia and plans for further expansion 1000 764 802 798 800 732 690 220 220…
Large-Scale Rebranding Programme Rebranding programme highlights In 2011 Bashnefts retail brand was developed; In 2012 Bashenft launched the Filling Station Rebranding Programme; From 2013 through 1H 2015, 34% of Bashnefts own…
Performance Drivers in the Downstream Segment Tasks To increase the value of To increase operational To increase energy efficiency at To streamline the structure and to petroleum product mix availability of refineries refineries…
Key Takeaways Best-in-class fully integrated refining complex complying with all current Russian technical standards in fuel production; Bashneft will further improve its crude oil supply structure to efficiently provide refineries…
Goals of the Companys Financial Policy We aim to remain a leader in terms of operational efficiency and cost control, profitability and shareholder returns Remain a leader in terms of operational efficiency through control of operating…
Analysis of Key Financials Strong financial performance enabled by a high quality and high return asset base despite unfavourable macroeconomic environment Average oil price (Brent), RUB/bbl, US/bbl EBITDA, RUB bn 3 802 3 472 3…
Sector Leading Cash Flow Generation and Profitability Strong free cash flow generation and returns supported by an efficient investment programme and a balanced M&A strategy CAPEX / Operating cash flow (2014) High profitability in the…
Investment Programme An efficient upstream investment programme and a disciplined and value-creative approach to downstream investment enable strong free cash flow generation CAPEX (2016-2020), RUB bn Key elements of the investment…
Industry Leader in Terms of Dividend Payments Historically, Bashneft has been a leader in Russias oil sector in terms of dividend payments. We will remain committed to maintaining a high level of dividend payments going forward Total…
Debt portfolio Net debt ratios Debt breakdown as of the end of 2Q 2015 PXF 5% 1,27x 1,17x 1,13x 1,08x Loans 0,96x 0,97x 54% US* 5% 127,6 129,2 114,0 107,1 113,6 106,0 RUB 95% 1Q 2014 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q…
Efficient Debt Management (continued)(1) Changes in sources of funding in 2015, RUB bn 200 (2) 15 2 180 9 0 160 140 120 100 80 168 168 159 159 159 172 172 60 40 20 0 Debt as of December 31, 2014 Borrowings in 1Q 2015 Early…
6. PJSOC Bashneft: Management incentive system Alexander Korsik President, Chairman of the Management Board of PJSOC Bashneft
Achievement of Strategic Goals as the Basis for Management Incentives KPI PYRAMID Clear and transparent KPI system TSR RRR Long-term incentives To ensure that the management is efficient at 5 years Shareholder goals EBITDA…
Thanks for your attention 5, 1st Tverskaya-Yamskaya St. Moscow 125047, Russia Tel: +7 495 228 22 20 Fax + 7 495 228 15 97 irbashneft.ru
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