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Bank of America Merrill Lynch Russia & CIS Conference – Bashneft

Bashneft · Nov 11, 2013 · 57 slides

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Slides

  1. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 1
    Bashneft Group Investor presentation Bank of America Merrill Lynch Russia & CIS Conference November 11-12, 2013, London
  2. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 2
    Table of Contents Section Page 1. Business Overview and Key Achievements 4 2. Bashkiria: Extraordinary Results on Brownfields 19 3. Start of pilot production at the R. Trebs and A. Titov fields 28 4. Bashneft financial…
  3. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 3
    1. Business Overview and Key Achievements
  4. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 4
    Bashneft key strengths Extensive reserve base combined with top-industry Large-scale vertical replacement results and Top-industry production integration from crude oil lowest F&D costs growth rates backed by production to sales of…
  5. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 5
    Bashneft at a Glance Efficient vertically-integrated oil company and an TREBS AND TITOV FIELDS industry leader in refining depth One of the largest undeveloped SIGNIFICANT RESERVES oil field in Russia5 C1+C2 reserves 140.1 mmt, Proved…
  6. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 6
    Vertically-integrated Value Chain: from Oil Well to Petrol Tank Exploration Production Refining Marketing: Wholesale & Retail Three interconnected Reserve life of 18 Petroleum products Intensively Sustainable refineries in…
  7. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 7
    Strong Track-Record of Reserves Replacement on Brownfields RESERVES DYNAMICS*, mmbbl RESERVES REPLACEMENT, mmt 3 192 123% 2 987 164% 2 947 19,0 657 24,8 626 583 15,1 15,4 420 528 410 120 176 188 27 25 17 1 791 1 808 1 819…
  8. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 8
    New oil production cluster: Trebs and Titov in Timano-Pechora PLANS FOR 2013 300 thousand tonnes oil production at reentered wells at the R.Trebs field; New exploration wells drilled in 2012 and 2013 to be put into operation;…
  9. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 9
    Sustainable production growth GROWING PRODUCTION DYNAMICS Index of changes in average daily production (1Q 10 = 1) mn t 1,20 Rosneft* 1,15 Lukoil 1,10 SurgutNG Gazprom Neft 15,1 15,4 15,6 1,05 14,1 Tatneft 12,0 11,8 11,7…
  10. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 10
    New oil production cluster: other projects LICENSE INFORMATION E&P license 2012-2037 License area 6,209 sq.km License Seismic exploration: Exploration drilling: commitments 2D 1,500 linear km 10 exploration wells PROJECT…
  11. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 11
    Expanding opportunities in the exploration and production of hydrocarbons in 2012 Bashneft entered the first international project on exploration, LICENSE BLOCKS IN IRAQ development and production in Block 12 in Iraq On November 8,…
  12. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 12
    Top positions in refining REFINING THROUGHPUT REFINING DEPTH LIGHT YIELD NELSON INDEX mln t % Russia average (2012) = 75% % Russia average (2012) = 54% 86,3 85,9 84,9 21,19 21,06 20,77 8,55 8,3 8,3 61,8 59,7 59,9 2010 2011…
  13. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 13
    Solid and flexible business model Proved reserves PRMS Export (1) 282 mln t 4.5 mln t +1.3% +24.5% y-o-y Crude oil sale 4.9 mln t +5.7% y-o-y Crude oil production Domestic sale 15.4 mln t +2.2% 0.4 mln t y-o-y Crude oil…
  14. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 14
    Marketing and Sales PRODUCTION AND SALES CHAIN 2012 Crude oil balance Own crude Sales product mix* Distribution over channels 4,9 Refinery oil sold Other 2,6 2,2 0,4 throughput VGO 1,6 1,6 Crude oil Fuel oil 2,8 1,9 produced…
  15. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 15
    Growing regional presence RETAIL NETWORK COVERAGE 6 33% 3 2 40% Bashkiria 8 12 1 1 8 Orenburg 8 49 9 31 Udmurtia 35 13 2 44 Sverdlovsk 21 27 88 3% 293 44 26 5% Kurgan 7% 12% Other Notes: Upstream regions 2 Regional…
  16. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 16
    Strategy Expand upstream assets through organic growth and acquisitions; Upstream Continue development of the Trebs and Titov fields and implement an extensive geological study in the Republic of Bashkortostan. Upgrade refinery…
  17. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 17
    Strong Management Team with years of experience in the oil and gas industry in Russia Alexander Korsik Viktor Gantsev President, Chairman of the Management Board Senior Vice President, Oil Refining and Petrochemicals 20062007…
  18. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 18
    2. Bashkiria: Extraordinary Results on Brownfields
  19. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 19
    For the three consecutive years Bashneft was a leader in terms of oil production growth among Russian peers Steady growth of oil production Index of changes in average daily production (1Q 10 = 1) During 3 years from 2009 the Company…
  20. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 20
    Historical production chart in Bashkortostan 50 Production started in 1932; Yugomashevskoye field was 15.4 15.1 Peak production totalled about 50 million tonnes; Peak production was achieved in 1967; launched in 1966 14.1 Since 2000,…
  21. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 21
    The Groups wells have high water cut and low flow rate Since 2008, unprofitable wells have been abandoned. Current production wells of JSOC Bashneft, units The number of production wells decreased from 18 thousand 20 000 in 2008 to 15.3…
  22. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 22
    The growth of oil production from 2008 till present was achieved through the efficiency of geological and engineering operations Geological and engineering operations key characteristics Changes in the number of geological and…
  23. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 23
    Highly efficient geological and engineering operations ADDITIONAL PRODUCTION BREAKDOWN IN 2012 1 512 5% 84 84 9% 130 130 19% 289 289 14% 210 210 14% 207 207 15% 235 235 24% 358 358 Total, % Enhanced oil Hydraulic…
  24. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 24
    First results of an innovative approach of the development: fold increase in the efficiency of drilling new wells Annual average increase in production rate resulting Commissioning of new wells, No.of wells from commissioning new…
  25. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 25
    Efficient drilling of new wells: record production rate at the Ilishevskoye oilfield In March of 2012 Bashneft successfully drilled horizontal well No. 7024g at the Ilishevskoye oilfield. The total length of the horizontal well is 300…
  26. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 26
    Bashneft opens in Ufa a state-of-the-art Drilling Support Centre designed by Schlumberger Unique Drilling Support Centre (DSC) opened in May 2013 will provide professional real-time drilling support maximizing operational and economic…
  27. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 27
    3. Start of pilot production at the R. Trebs and A. Titov fields
  28. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 28
    Pilot production at the R. Trebs and A. Titov fields is a new stage in developing a large-scale project in the strategic region of exploration and production KEY FACTS C1+C2: 140.1 million tonnes RUSSIA The area including 1 reserves…
  29. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 29
    Average daily oil output performance since the beginning of 2013 46,9 thds. tonnes 46,4 45,9 Start of pilot production at the R. Trebs and A. Titov fields in the Nenets Autonomous District 45,4 44,9 44,4 43,9 43,4…
  30. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 30
    Key stages of the T&T project development April 2011 September 2011 February 2012 2011-2012 Bashneft and Lukoil signed an The Central Development Commission of the Federal Subsoil The first exploration well over 4.2 All projects…
  31. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 31
    Start-up oil production facilities: constructing facilities at exploration wells and connecting oil-gathering pipelines In 2011-2013, as part of preparing for pilot production at the R. Trebs and A. Titov fields, LLC Bashneft-Polyus,…
  32. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 32
    Start-up crude oil distillation facilities: the first stage of the Central Gathering Station (CGS) at the R. Trebs field The project is aimed at gradual development of the CGS at the R. Trebs field, where all oil produced at the T&T…
  33. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 33
    Start-up facilities at the R. Trebs field: the metering station in Varandey External transport and product loading facilities a high-pressure pipeline between the CGS at the R. Trebs oilfield and the metering station in Varandey…
  34. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 34
    4. Bashneft financial results
  35. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 35
    Bashnefts key achievements in the second quarter of 2013 Operating results Average daily oil production increased by 1.0% to 314.8 thousand bbl/d; Average daily refining reached the level of 424.0 thousand bbl/d; Refining depth…
  36. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 36
    Macro indicators, 2Q2013* 2Q2013 1Q2013 , % Indicator 1H2013 1H2012 , % 31.6 30.4 3.9% Average RUB/USD exchange rate 31.0 30.6 1.3% 1.6% 1.9% -0.3 p.p. Inflation for the period, % 3.5% 3.2% 0.3 p.p. 24.2 24.0 1.0% Diesel fuel…
  37. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 37
    Bashneft Groups key indicators for 2Q2013 2Q2013 1Q2013 , % Indicator 1H2013 1H2012 , % Urals price, thousand roubles/barrel 3.24 3.38 -4.2% 3.31 3.43 -3.7% . Crude oil production, thousand tonnes 3,924 3,844 2.1% 7,768 7,651…
  38. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 38
    Changes in revenue Revenue factor analysis, thousand tonnes, 2Q2013 vs. 1Q2013 In the second quarter of 2013, the revenue of Bashneft Group +10.7% 6 400 totalled 134,903 million roubles, which is 7.4% higher than in 40 6 200 the…
  39. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 39
    Factor analysis of EBITDA and operating expenses EBITDA factor analysis, million roubles, 2Q2013 vs. 1Q2013 32 500 +7,1% 30 000 (991) (1 981) 27 500 (309) (793) 9 323 25 000 (2 842) (460) (440) 22 500 20 000 17 500 15 000 12…
  40. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 40
    Changes in operating expenses 2Q2013 1Q2013 , % Operating expenses, billion roubles 2Q2013 2Q2012 , % 15.3 12.5 22.8% Production and operating expenses 15.3 13.8 10.6% 29.7 28.7 3.5% Cost of purchased crude oil, gas and petroleum…
  41. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 41
    Unit costs Unit production costs, roubles/bbl 250 202.3 205.0 246* In the second quarter of 2013, unit costs for production of crude oil roubles/bbl roubles/bbl 240 231* increased by 20.0% as compared to the first quarter of 2013 and…
  42. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 42
    CAPEX and investments in the acquisition of property, plant and equipment In the second quarter of 2013, capital expenditures increased by 45.4% as compared CAPEX breakdown in 2Q 2013 to the first quarter of 2013 and totalled 8,462…
  43. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 43
    Debt portfolio optimization DEBT DYNAMICS WEIGHTED AVERAGE Internal threshold:…
  44. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 44
    5. Reorganization and assets divestment
  45. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 45
    Optimization of Group Structure The historical complexity of the corporate structure had prevented the Group from fully achieving strategic goals; Transition to a single share As part of streamlining its corporate structure, in 2012…
  46. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 46
    Reorganization Overview Carried Out within the Announced Timeframe, in Compliance with the Russian Law and Market Practices March 2012 April 2012 October 2012 November 2012 End of February 2013 Conversion ratios and Extraordinary…
  47. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 47
    Current Group structure 50.59% * (50.59% **) Minority Sistema - Invest Sistema shareholders 50.10% * (57.26% **) 25.24% * (30.24% **) 49.41% * (49.41% **) 21.01% * (10.68% **) Bashneft Bashneft-Polyus 74.9% Upstream…
  48. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 48
    Investments in petrochemical segment dont meet strategic goals of Bashneft The buyer and Rationale for the transaction the structure Structure of the UPC sale of a transaction Petrochemical business is a Bashneft sells its…
  49. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 49
    Bashneft sells oilfield service assets: strategy for divesting the Companys non-core assets LLC Bashneft-Service Assets, the oilfield service holding company, holds 11 oilfield service companies which have a market development…
  50. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 50
    Appendix: Corporate Governance
  51. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 51
    Commitment to Highest Governance Standards OVERVIEW OF COMMITTEES GENERAL SHAREHOLDER MEETING Nomination and Remuneration Committee discusses major questions concerning the motivation and compensation systems for employees, provides…
  52. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 52
    Experienced Board of Directors Felix Evtushenkov Vitaliy Artyukhov Aleksey Buyanov Chairman of the Board of Directors of JSOC Bashneft Independent director, Member of the Budget and Audit Non-executive director, Member of the Audit…
  53. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 53
    Experienced Management Team Alexander Korsik Viktor Gantsev President, Chairman of the Management Board Senior Vice President, Oil Refining and Petrochemicals 20062007 President of Itera 20062009 General Director, Ufaneftekhim…
  54. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 54
    Bashnefts strategic goal in the sphere of HSE is to become an industry leader among Russian companies The HSE committee, which The Company assumed Bashneft has adopted consists of eight members of Bashneft issued a responsibility…
  55. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 55
    Dividend policy According to the dividend policy adopted in 2011, the recommended amount of dividends is determined by BoD and must be at least 10% TOTAL DIVIDENDS VS. OCF AND NET INCOME of the net profit; 1800,0 3500 3146 1600,0…
  56. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 56
    Tax and Duty Regime BASHNEFT MINERAL EXTRACTION TAX EXEMPTIONS MINERAL EXTRACTION TAX, RUB/BBL Relief on depleted fields with level of reserve depletion 80%; Relief on small fields with initial recoverable reserves of…
  57. Bank of America Merrill Lynch Russia & CIS Conference – Bashneft – slide 57
    Thanks for your attention 5, 1-st Tverskaya-Yamskaya, Moscow, 125047, Russia Tel: +7 495 228 15 96 Fax + 7 495 228 15 97 irbashneft.ru

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