Highly Professional Management Team with Strong Track Record Alexander Korsik Maxim Andriasov President, Chairman of the Management Board First Vice President, Refining and Commerce 19 years in the industry 15 years in the industry…
Bashneft at a Glance Efficient vertically-integrated privately owned oil company, an industry leader in terms of shareholder returns Sizeable oil reserve and resource base in three major Russian oil producing regions: RUSSIA 1P of…
What We Have Achieved So Far Since acquisition by Sistema in 2009, we have Established meaningful presence in all major Russian oil producing regions Increased production and Increased oil production by 31% and our reserve base (1P)…
High Quality, High Return Asset Base Strong production growth and reserves replacement in Bashkiria. Trebs & Titov delivering strong medium term growth. Best- in-class downstream business Oil reserves replacement ratio (1P)(1) Oil…
Sector Leading Profitability, Cash Flow Generation and Unique Dividend Play Strong track record of cash return demonstrates focus on shareholder value for all shareholders Leading profitability in Russian oil sector(1) Capex /…
Consistently Delivered Some of the Highest Shareholder Returns in the Russian Market Bashneft is one of few Russian oil and gas companies without State ownership allows full focus on financial returns for its shareholders and ensures…
Bashneft Offers A Unique Investment Proposition High quality, high return asset base 2 1 Robust, sustainable sector 3 leading production growth High quality reserve and resource base combined with Best-in-class integrated…
Key Strategic Initiatives and Targets Strategic objectives 2014-2020 Increase upstream production through organic growth and select acquisitions Continue development of Volga-Urals (brownfields and exploration), Timan-Pechora fields…
2. Upstream Mikhail Stavskiy Oleg Mikhaylov First Vice President, Upstream Vice President, Production
Balanced Portfolio of Assets in Key Russian Hydrocarbon Provinces 1 Volga-Urals(1) PRMS Reserves & Resources as of 2014E Production RUSSIA 31.12.2013 Oil 3,000 mmbbl 314 kbpd Gas 33 bcm High margin, low capex, low risk region…
Key Achievements and Strategic Initiatives What we have achieved Reinvigorated production and exploration and optimised costs in legacy regions, current production levels of c. 300kbpd 2009-2014 Acquired Trebs & Titov license in…
Balanced Portfolio With Significant Growth Potential and Upsides Volga-Urals Unconventional Timan-Pechora and Western Siberia Exploration Long-term Volga-Urals Gas resources growth Development potential Over 9,100 km2 in…
Massive Reserve and Resource Base and Strong Track Record of Reserves Replacement Reserves and resources, mmbbl/mmboe Proved reserves life of 18 years First reserves at Trebs & Titov and gas reserves booked in 2013 Organic proved…
Sector Leading Upstream Growth Production rejuvenated under current management from c. Production evolution in new clusters, kbpd 240 kbpd in 2009 to c. 350 kbpd in 2014E By 2020 more than third of total oil production to come from…
Volga- Urals Strong Production Performance Production Development Appraisal / Exploration Volga-Urals is a mature oil region, production since 1932 Volga-Urals production in historical context, kbpd 400 Low natural decline rates…
Volga- Urals Robust Production Outlook Production Development Appraisal / Exploration Growth in 20102014 primarily achieved through optimization techniques, fracking, sidetracking and drilling of new wells Production expected to…
Volga- Urals Focus on Production Efficiency Production Development Appraisal / Exploration Wellstock significantly optimized since 2009 by focusing on Number of producing wells more profitable wells Watercut declined every year…
Volga- Urals Focus on Production Efficiency (contd) Production Development Appraisal / Exploration Average well production rate, bpd Range of interventions applied with strong focus on operational and cost efficiency 20,4 21,2…
Volga- Urals Focus on Production Efficiency (contd) Production Development Appraisal / Exploration Consistently stable / improving efficiency of low cost well interventions Optimization Description Initial Flow Rate Increase,…
Low-cost Production Growth Volga- Appraisal / Production Development Urals Exploration Focus on operational and cost efficiency reflected in strong cost Upstream capex and operating costs 2009 - 2013, US/boe performance Among…
Volga- Urals Drilling Efficiency Production Development Appraisal / Exploration Radically increased drilling efficiency through the utilization of Drilling Support Centre advanced drilling technology (e.g. establishment of…
Volga- Urals SarBer Gas Development and Gas Exploration Potential Production Development Appraisal / Exploration Key facts Reserves 3P gas reserves: 24.5 bcm 162 mmboe Perm 3P condensate reserves: 7.8 mmbbl C1 reserves: 52 bcm…
Volga- Urals Exploration Substantial Potential Production Development Appraisal / Exploration Underexplored regions in Bashkiria Although Bashkiria is a mature province it remains underexplored Limited use of modern seismic,…
Volga- Urals Exploration Substantial Potential (contd) Production Development Appraisal / Exploration 3D seismic in Bashkiria, km2 Case study: Afanasyevskoe field 3 158 In December 2012 , following seismic surveys and drilling…
Volga- Urals Unconventional Resources Substantial Upside to Reserves Production Development Appraisal / Exploration Unconventional resource potential identified to date Programme in place to evaluate Bashkirias significant…
Timan- Trebs & Titov Significant Source of Mid-Term Growth Appraisal / Production Development Pechora Exploration Launched in 18 months from license acquisition and within budget Barents Sea Demonstrates Bashnefts ability to…
Timan- Pechora Trebs & Titov Significant Source of Mid-Term Growth (contd) Production Development Appraisal / Exploration Development divided into three stages in order to optimize capex and minimize execution risks Development…
Timan- Vostok NAO Long-term Growth Potential Appraisal / Production Development Pechora Exploration Vostok NAO JV with Lukoil (50/50%) to develop 7 licenses in Timan-Pechora formed in April 2014 Barents Sea Kara Sea Area of…
New Oil Production Cluster Western Appraisal / Production Development Siberia Exploration Vostochno-Vuemskiy area (Sorovskoye field) Licence area 319 km2 Licence valid until 2032 Current status Commercial production Number of…
International Assets Iraq Myanmar Baghdad Samawah 12 Naypyitaw EP-4 License areas Gas pipeline Oil pipeline Yangon City Iraq Myanmar Partners Premier Oil (30%) Sun Apex Holding (10%) Block size 8,000 km2 841…
Key Takeaways Balanced portfolio of assets in key Russian hydrocarbon provinces: Volga-Urals, Timan-Pechora and Western Siberia Massive reserve and resource base with strong track record of reserves replacement Sector leading…
3. Downstream Maxim Andriasov Yakov Polunkin First Vice President, Refining General Manager, and Commerce Ufa Refinery
Best-In-Class Integrated Downstream Business with Significant Upsides Expansion in Retail Niche Products Expansion of retail chain to over 700 own stations by 2017 Further Upgrade Significant increase in retail Significant…
Focused Integrated Business Model (data as of 2013) Purchased crude oil and Outside the Customs Crude oil production condensate Union 16.1 mmt (117 mmbbl) 10.5 mmt (76.7 mmbbl) 4.1 mmt (30.0 mmbbl) Exports 4.7 mmt (33.9 mmbbl) To…
Reduction of Upstream / Downstream Portfolio Disbalance Bashneft will further balance its upstream and downstream segments as a result of production growth in Timan Pechora, West Siberia and Bashkiria Crude oil production growth…
Key Achievements and Strategic Targets What we have achieved Best-in-class integrated downstream business compliant with all current Russian fuel 2014 quality specifications More than doubled the size of our retail network 2013…
Overview of the Single Refinery Complex Single refinery complex consisting of three interconnected units(1) Total installed Utilization rate: Total refinery output: Refining depth: Light product yield: Nelson Index: capacity:…
Bashneft Refining Business Overview Highly profitable oil product mix One of the highest light product yields in Russian oil and gas sector Gasoline 77.4% 13% 61.6% 60.4% 25% Diesel 55.6% 53.5% 54.4% 9% 44.5% 41.4% Fuel oil…
Cost - Efficient Refinery Business Technologically advanced refining capacities allow Bashneft to produce Downstream capex and refining costs 2011 2013 average, a wide range of high quality petroleum products at low cost US/boe (1)…
Downstream Strategy Aimed at Maximization of High Margin Products Share Indicative spread between oil Group of Products product prices and oil price as Comments products of YE2013, US / t(1) Gasoline 304 High margin products…
Focused and Value Creative Downstream Investment Programme By the end of 2014 we will be fully compliant with all future Russian fuel standards with minimal additional investments required. Key objective of subsequent investment programme…
Value Creation by Maximization of High Margin Products Share in the Product Slate Low margin products to be ..and share of high margin products will Comments eliminated by 2019.. be significantly increased Downstream development…
High Value Niche Products Output Growth Niche products output growth, mmt Niche products sales strategy Optimization of current structure of filled and packed lubricants business Key focus area is sales increase via own channels,…
Focused Expansion of Retail Network Successful track-record of development of the retail network Retail network covers large part of Central Russia and plans for further expansion 800 - 900 Moscow 764 100 - 200 732 690 547 259…
Ambitious Rebranding Programme Rebranding programme highlights In 2013-2015 Bashneft plans to invest approximately US200 mm in retail network rebranding The new concept and designs were developed by Minale Tattersfield, a world-…
Impact of the Rebranding Programme on a Filling Station Performance Bashneft positions its rebranded / reconstructed stations as a modern retail complex that is both customer friendly and can be built by local contractors with…
Key Takeaways Best-in-class integrated downstream business compliant with all current Russian fuel technical standards Bashneft will further balance its Upstream and Downstream segments on the back of Burneftegas acquisition and…
Financial Policies and Objectives We aim to continue to be a leader in operational and cost efficiency, profitability and shareholder returns among our peers Maintain leading sector profitability and returns through control of…
Summary Financials at a Glance Strong financial performance generated by high quality, high return asset base and efficient management despite the lacklustre macroeconomic environment Muted macroeconomic trends Strong financial…
Sector Leading Cash Flow Generation and Returns Strong free cash flow generation and returns supported by conservative, efficient investment program and focused M&A strategy Operating cash flow, US mm Capex / Operating cash flow…
Moderate Capex Program Conservative, efficient upstream investment program and disciplined, value-creative downstream investment program are a key strength of Bashneft, and will continue to drive strong free cash flow generation Capex…
Sector Leading Dividends We have historically been the Russian oil & gas sector leader in terms of dividend payments and are committed to maintaining them at a high level Total dividends paid & share buybacks(1), US mm 2013 Dividend…
Efficient Debt Management Debt breakdown as of the end of 1Q2014 As of March 31, 2014, total debt amounted to US 4.1 bn compared to US 2.8 bn as of December 31, 2013 PXF 16% In March 2014 Bashneft formed liquidity reserves in the…
Efficient Debt Management (cont.) Latest changes in funding in 2014, US bn (1) 1,7 (1) 1,2 (1) 0,03 0,2 1,6 4,1 4,1 4,1 4,7 4,5 4,6 2,8 2,8 Total debt as of Borrowings 1Q2014 External debt of Total debt as of Borrowings…
Key Takeaways High quality, high return asset base and efficient management have generated strong financial performance despite the lacklustre macro economic environment Conservative and efficient upstream investment program, and…
5. Corporate Governance Alexander Korsik President, Chairman of the Management Board JSOC Bashneft
Simplification of Corporate Structure and Streamlining of Business Recently completed reorganization has streamlined Bashnefts shareholding and management structure and monetized non- core assets Corporate structure pre reorganization…
Alignment of Interests Management and Shareholders KPI framework which measures managements performance on both operational and financial basis, complemented by ESOP program 50% 50% 100% Base salary KPI-based Long term…
Thank you for your attention Question and Answers
Appendix
Commitment to Highest Governance Standards GENERAL SHAREHOLDER MEETING Candidates for the Board of Directors Felix Evtushenkov CEO Acting Chairman (President) Alexander Korsik Alexander Management Vsevolod Rozanov Board…
Simplification of Corporate Structure and Streamlining of Business Sistema Invest Structure 2014 pre reorganisation Bashneft-Invest spin-off Final structure 2014 post reorganisation Bashneft-Invest JSFC Sistema Minorities (100%…
Operations Under Standard Russian Fiscal Regime without Company-Specific Tax Benefits Bashneft benefits from certain standard tax breaks, put in place for all producers to encourage key Mineral extraction tax, US/bbl government aims in…
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