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TNK-BP International Ltd.Presentation for investors
October 2012
2
Important noticeNOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY IN OR INTO THE UNITED STATES OF AMERICA
THE INFORMATION CONTAINED HEREIN DOES NOT CONSTITUTE OR FORM PART OF AND SHOULD NOT BE CONSTRUED AS, AN OFFER TO SELL OR ISSUE OR THE
SOLICITATION OF AN OFFER TO BUY OR ACQUIRE SECURITIES OF TNK-BP LTD (THE "COMPANY") OR ANY OF ITS SUBSIDIARIES IN THE UNITED STATES OF AMERICA
OR ANY JURISDICTION OR AN INDUCEMENT TO ENTER INTO INVESTMENT ACTIVITY. NO PART OF THIS DOCUMENT, NOR THE FACT OF ITS DISTRIBUTION, SHOULD
FORM THE BASIS OF, OR BE RELIED ON IN CONNECTION WITH, ANY CONTRACT OR COMMITMENT OR INVESTMENT DECISION WHATSOEVER. NO REPRESENTATION,
WARRANTY OR UNDERTAKING, EXPRESS OR IMPLIED, IS MADE AS TO, AND NO RELIANCE SHOULD BE PLACED ON, THE FAIRNESS, ACCURACY, COMPLETENESS OR
CORRECTNESS OF THE INFORMATION OR THE OPINIONS CONTAINED HEREIN. NONE OF THE COMPANY OR ANY OF ITS AFFILIATES, ADVISORS OR
REPRESENTATIVES SHALL HAVE ANY LIABILITY WHATSOEVER (IN NEGLIGENCE OR OTHERWISE) FOR ANY LOSS HOWSOEVER ARISING FROM ANY USE OF THIS
DOCUMENT OR ITS CONTENTS OR OTHERWISE ARISING IN CONNECTION WITH THE DOCUMENT.
THIS DOCUMENT CONTAINS "FORWARD-LOOKING STATEMENTS", WHICH INCLUDE ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS, INCLUDING,
WITHOUT LIMITATION, ANY STATEMENTS PRECEDED BY, FOLLOWED BY OR THAT INCLUDE THE WORDS "TARGETS", "BELIEVES", "EXPECTS", "AIMS", "INTENDS",
"WILL", "MAY", "ANTICIPATES", "WOULD", "COULD“ OR SIMILAR EXPRESSIONS OR THE NEGATIVE THEREOF. SUCH FORWARD-LOOKING STATEMENTS INVOLVE
KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER IMPORTANT FACTORS BEYOND THE COMPANY'S CONTROL THAT COULD CAUSE THE ACTUAL RESULTS,
PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED
OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS, INCLUDING, AMONG OTHERS, THE ACHIEVEMENT OF ANTICIPATED LEVELS OF PROFITABILITY, GROWTH,
COST AND SYNERGY OF RECENT ACQUISITIONS, THE IMPACT OF COMPETITIVE PRICING, THE ABILITY TO OBTAIN NECESSARY REGULATORY APPROVALS AND
LICENSES, THE IMPACT OF DEVELOPMENTS IN THE RUSSIAN ECONOMIC, POLITICAL AND LEGAL ENVIRONMENT, VOLATILITY IN STOCK MARKETS OR IN THE PRICE
OF OUR SHARES, FINANCIAL RISK MANAGEMENT AND THE IMPACT OF GENERAL BUSINESS AND GLOBAL ECONOMIC CONDITIONS.
SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON NUMEROUS ASSUMPTIONS REGARDING THE COMPANY'S PRESENT AND FUTURE BUSINESS STRATEGIES
AND THE ENVIRONMENT IN WHICH THE COMPANY WILL OPERATE IN THE FUTURE. BY THEIR NATURE, FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND
UNCERTAINTIES BECAUSE THEY RELATE TO EVENTS AND DEPEND ON CIRCUMSTANCES THAT MAY OR MAY NOT OCCUR IN THE FUTURE. THESE FORWARD-
LOOKING STATEMENTS SPEAK ONLY AS AT THE DATE AS OF WHICH THEY ARE MADE, AND THE COMPANY EXPRESSLY DISCLAIMS ANY OBLIGATION OR
UNDERTAKING TO DISSEMINATE ANY UPDATES OR REVISIONS TO ANY FORWARD-LOOKING STATEMENTS CONTAINED HEREIN TO REFLECT ANY CHANGE IN THE
COMPANY'S EXPECTATIONS WITH REGARD THERETO OR ANY CHANGE IN EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENTS ARE
BASED.
NEITHER THE COMPANY, NOR ANY OF ITS AGENTS, EMPLOYEES OR ADVISORS INTENDS OR HAS ANY DUTY OR OBLIGATION TO SUPPLEMENT, AMEND, UPDATE OR
REVISE ANY OF THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS DOCUMENT.
THE INFORMATION CONTAINED IN THIS DOCUMENT IS PROVIDED AS AT THE DATE OF THIS DOCUMENT AND IS SUBJECT TO CHANGE WITHOUT NOTICE.
Table of contents
3
Introduction to TNK-BP
TNK-BP at a glanceStrong competitive position
Business Update
1H12 HighlightsHealth, Safety & EnvironmentUpstreamDownstream
Financial Performance
Financial HighlightsIFRS Business Environment Net Income – 1H12 v 1H11RevenuesCostsTaxes Net income - 2Q12 v 1Q12Sources and Uses of CashDebt and Liquidity
Outlook
4
TNK-BP at a glance
RUSSIABELARUS
UKRAINE
VIETNAM
VENEZUELA
BRAZIL
Russia’s top 3 largest oil company*
• 1H12 production 2,035 mboe/d with affiliates
• Brownfield assets in West Siberia and Orenburg
• Producing greenfields in Uvat and Verkhnechonskoye
• Yamal: a new generation of greenfield projects
• Growing gas business
Truly international player
• Ranking in the world’s top 10 non-state-owned oil producers*
• Venezuela: stakes in heavy and light oil projects
• Vietnam: stakes in offshore gas and pipeline projects
• Brazil: stake in high potential exploration project
• Ukraine and Belarus: downstream business
World class reserve base
• 39 bn boe of PRMS 3P reserves
• Reserve life of 21 years of 1P and 59 years of PRMS 3P reserves
• Industry-leading F&D costs and exploration success rate
Strong financial profile
• Investment grade credit ratings
• Strong credit metrics
• Robust financial performance
Fully integrated business
• Four refineries and 50% stake in YANOS refinery in Russia
• Refining capacity of 698 mb/d, refining cover of 38.4% in 1H12
• Extensive retail network with 1,274 retail sites in Russia, Ukraine and Belarus** * - based on total oil production
** - at the end of 1H12
Strong competitive position
5
0.9
1.0
0.8
0.9
0.9
1.7
1.8
1.2
2.4
2.2
1.8
1.7
2.4
2.2
2.3
0.2
0.1
0.7
0.7
0.8
0.2
0.3
1.1
0.2
0.5
0.8
1.5
1.0
1.3
2.2
0 1 2 3 4 5
Sinopec
Gazprom Neft
ENI
Statoil
ConocoPhilips
TNK-BP
Lukoil
Total
Rosneft
Petrobras
Chevron
Shell
PetroChina**
BP
ExxonMobil
2011
oil
and
gas
pro
du
ctio
n (
incl
. eq
uit
y af
filia
tes)
, mm
bo
e p
er d
ay
Oil Gas
Source: company reports. *PetroChina production as of 2010RRR - reserve replacement ratioF&D – finding and development
3Y
av
era
ge
SE
C L
OF
RR
R (
200
9-2
011
)
World class reserve replacement and F&D costsAmong top 10 oil producers globally
Best capital efficiency among Russian peers
1H
12 C
AP
EX
/ b
oe
, U
SD
Source: Consolidated Financial Statement, MD&A reports of companies
0 2 4 6 8 10 12 14 16
0%
50%
100%
150%
200%
250%
300%
Rosneft
Gazprom Neft
TNK-BPExxonMobil
3Y average F&D costs (2009-2011), USD/boe
TNK-BP Rosneft Lukoil Gazprom neft02468
1012141618
7.1
16.5
14.2 13.8
1H12 highlights
6
Continued robust operational performance
• 2,035 mboe/d - total oil and gas production*, up 4.1%
• 18% greenfields contribution to liquids production, up from 12% in 1H11
• 2.0 mln tons retail volumes in Russia, up 19%
• Continued refinery modernization with share of Euro-4 and 5 fuels up from 42% to 66%
• USD 5.9 bn EBITDA, down 21% on export duty lag, tax and tariff increases and one-offs
• USD 3.9 bn free cash flow, up 9% despite EBITDA decline
Note: All data in this presentation are for 1H12 and comparisons are 1H12 v 1H11, unless otherwise noted
* Including affiliates
7
Health, Safety and Environment
Health and Safety
• The reduction of TRIFR* by 20%
• The reduction of DAFWC by 10%
Environment
• Spills frequency continuously improving:– The number of spills per thousand tons
produced down 13%
– Spilt tons per thousand tons produced down 45%
* Total Recordable Injury Frequency Rate (TRIFR) comprises the total number of fatalities, lost time injuries, restricted work cases and medical treatment cases as per OSHA definitions.
** The International Association of Oil and Gas Producers
Total Recordable Injury Frequency Rate – 12 Month Rolling Average
Spills Frequency – 12 Month Rolling Average
2008
Feb-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
2009
Feb-09
Mar-09
Apr-09
May-09
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09
Nov-09
Dec-09
2010
Feb-10
Mar-10
Apr-10
May-10
Jun-10
Jul-10
Aug-10
Sep-10
Oct-10
Nov-10
Dec-10
2011
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
2012
Feb-12
Mar-12
Apr-12
May-12
Jun-12
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
0.048
0.021
0.122
0.006
spills per ths. tons produced spilt tons per ths. tons produced
1H12
2008
Feb-08
Mar-08
Apr-08
May-08
июн
авг
сен
окт
ноя
Dec-08
2009
фев
мар
апр
май
июнь
авг
сент
окт
нояб
дек
2010
фев
мар
апр
май
июнь
июль
август
сентябрь
октябрь
ноябрь
декабрь
2011
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
2012
Feb-12
Mar-12
Apr-12
May-12
Jun-12
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.63
0.20
0.35
TRIFR 2011 OGP ** average
1H12
8
Upstream: 1H12 overviewStrategy: Resources Reserves Production
USD 4.7 bn Upstream EBITDA
1,760 mb/d liquids production*, up 2.6%
275 mboe/d gas sales*, up 14.3 %
82.5% associated petroleum gas utilization
13.8 bn boe proved reserves on PRMS basis**
Focus areas:
brownfields stabilization new greenfields challenged reserves
* Including affiliates
** As of 31 December 2011
Reserves
9
Strategy: Resources Reserves Production
• Large reserve base: 39 bn boe 3P reserves
• An established track record of successful reserve replacement:
145% SEC LOF
203% PRMS
• Best-in-class efficiency:
72% average exploration success rate for 2009-2011
USD 4.4/bbl F&D costs (SEC LOF) in 2011
137 mmboe of resource adds with new discoveries mainly in Yamal 1H12
1P 2P 3P0
5
10
15
20
25
30
35
40
Proved Proved Proved
Probable Probable
Possible
bn boe
Reserve life 21 years
Reserve life 42 years
Reserve life 59 years
Reserve base (PRMS)
Reserve replacement ratio
2004 2005 2006 2007 2008 2009 2010 20110%
50%
100%
150%
200%
250%
300%
350%
127149
129
179
82
177
134 145
104126
156
297
146
329 322
203
SEC-LOF PRMS
10
Upstream: Liquids production in 1H12
• 1,760 mb/d liquids production incl. affiliates, up 2.6%
• VCNG production at 139 mb/d, up 60%
• Uvat production at 126 mb/d, up 28%
• Share of greenfields in total liquids production at 18%,
up from 12% in 1H11
• Orenburg liquids production down 0.6% - operational issues at
Sorochinsk in 1Q12
• West Siberia liquids production down 5.6% (6.5% in 1H11)
Production – continued growth
Greenfields – increasing contribution
Brownfields – target to stabilize production
mb/d
Changes in liquids production, including affiliates
1H 2011
West Siberia
Orenburg
VCNG
UVAT
Vietnam
Venezuela
Slavneft
1H 2012
1,715
1,760
(51)
(3)
(4)
+52
+28
+1
+22
1H12
1H11
Upstream: West Siberia
11
Effective Waterflood Management• New water shut-off technologies
being piloted and scaled up
• Plan to reduce water extraction in 2012 by 1% (4.5 mln tons)as result of new technologies moving forward
• Organizational capability improvementproject underway including skills assessment, training, peer review from external consultants
Improved drilling efficiency
• Mean Time Between Failure (MTBF) of electric submersible pumps increased to 630 days (from 615 in 2011)
• Low cost access drilling projects with Baker Hughes, Schlumberger and Halliburton
Innovative technologies in place
• 56 pilot projects (425 jobs) are expected to be completed in 2012
• “Asset of the future” concept of online monitoring of the field performance – to be scaled up in 2012
Successful application of multistage fracturing in horizontal wells:
up to 7 stage fracs
40 jobs performed in 1H12
over 100 jobs planned for 2012
tests in difficult layers with 2-3x higher flows than conventional frac
advanced completion technology with fully controlled stage frac in cemented liner
Production decline lowered by 0.9% in 1H12 v 1H11
TNK-BP – 600 mln tons of challenged reserves in 7 top fields in West Siberia
12
Technology pilots in 2012-2015 to scale-up and bring in production
Multi-stage frac
Multi-stage frac at Kamennoye licence area (LA) Pilots at Central Ryabchik of Samotlor field
Effective drilling and development
Drilling project for Pad 118 of Severo-Khokhryakovskoye field PK1-2 Van-Egan - Pilot for viscous oil Pilot at Em-Yegovsky LA
Waterflood management and water shutoff – integral part of West – Siberia program for 2012-14
Reconfiguration of waterflood system at Severo-Varyeganskoye field
Reconfiguration of waterflood system at South Talinskoye LA
Tyumen formation – priority project for challenged reserves development
Yamal – major new oil province with 5.5 bn barrels of 3P reserves
Suzun 2016
Russkoye 2018
Intrafield pipeline
Messoyakha (50% share) 2016-18
Tagul 2019
Russko-Rechenskoe 2019
13
• Drilling of 7 pilot wells started in June to determine base development scenario
• The optimal field infrastructure concept prepared
• Reserves: 2.22 bn bbl 3P PRMS
• Field engineering survey completed for oil treatment facility and gas-turbine power plant
• Reserves: 0.32 bn bbl 3P PRMS
• Intrafield pipeline forecast for completion by end 2015
• Agreement with Transneft on oil transportation signed
• 2012 E&A program is aimed at viscous oil reserves confirmation
• Reserves: 1.14 bn bbl 3P PRMS
• Pilot 1 under way, initial rates confirmed for horizontal wells
• E&A program under way to prove reserves in least understood zones
• 2D/3D seismic to cover oilfield frontier zones
• Reserves: 1.7 bn bbl 3P PRMS
• Considerable gas reserves discovered (>50 bcm)
14
Upstream: Gas sales in 1H12
mboe/d
Changes in gas sales, including affiliates
• 275 mboe/d gas sales incl. affiliates, up 14.3%
• Increasing APG utilisation in West Siberia
(+4.5%) and Orenburg (+19.3%)
• 20 mboe/d gas sales from assets in Vietnam
and Venezuela
1H 2011
Rospan
West Siberia
Orenburg
Vietnam
Slavneft
Venezuela
1H 2012
240
275
+1
+8
+6
+18
+2
0
1H12
1H11
15
International Projects: Vietnam, Venezuela, Brazil
• Drilling of the 2nd Lan Do production well completed safely in April, plan to deliver first gas from Lan Do in 4Q12
• TNK-BP net share of JVs production up 6% on 1Q12 to 28 mboe/d following successful drilling campaign
• Current negative effect on EBITDA due to impact of discounting of outstanding payments from PDVSA
Vietnam
Venezuela
Brazil
• Joint Operating Agreement Governance structure implemented; first OpsCom and ManCom in May
• Drilling operations: 2 wells completed in 2Q12, oil and gas shows in HRT-6, appraisal well HRT-7D dry, drilling of HRT-8 and HRT-9 ended in 3Q12 with hydrocarbons discovery
• Exploration program being optimized
Key performance indicators, 1H12 (TNK-BP share)
Production, mmboe
EBITDA,USD mln
Capex, USD mln
Vietnam 3.5 116 53
Venezuela 5 -29 73
Brazil 0 -30 16
Downstream: overview 1H12
16
USD 1.2 bn Downstream EBITDA
654 mb/d refining throughput
4 oil refineries and 50% stake in YANOS refinery in Russia
USD 12/bbl refining margin in 2Q12
High-margin retail sales in Russia:
BP site daily throughput 4x European average
Strategy: Maximization of integrated business value of production
Downstream: Refining 1H12
17
• Throughput of 618 mb/d at Russian refineries in 1H12 v 651 mb/d in 1H11 due to turnarounds
• Healthy refining margins of USD 12/bbl in 2Q12 v USD 6/bbl in 1Q12
• Focus on Euro-4 and Euro-5 product delivery
• Turnarounds at Yanos and Ryazan (RNPK) refineries completed successfully
• Transition completed to a 3 year turnaround cycle for AT-6 crude distillation complex at RNPK
• LINIK refinery operations are still suspended
Increasing share of Euro-4 and Euro-5 fuels
1H11 1H120
10
20
30
40
50
60
70
41.9%
66.3%
Note: Share of Euro-4 and Euro-5 fuels in total gasoline and diesel output of TNK-BP Russian refineries
Downstream: Retail and B2B 1H12
18
Retail
• Expansion to new regions continues with 3 sites purchased in Samara, 8 in Orel and 3 land plots acquired in Volgograd
• Launch of 7 new BP sites in Moscow and St.-Petersburg and commissioning of 2 BP and 11 TNK sites after reconstruction
• The number of Carbon loyalty program participants reached 650,000
B2B
• Share of jet fuel sales directly to airlines in 1H12 increased to 73% v 45% in 1H11
• Jet deliveries started to air companies Tatarstan and I-Fly
• Development of TNK-Alfabit continues with bitumen laid at M1 federal highway, Rublevsky highway and F1 race track in Volokolamsk
• Distribution agreement for Valvoline lubricants signed with sales starting in July
BP brand TNK brand0
200
400
600
800
1,000
1,200
1,400
1,600
510
1,162
607
1,385
Retail volumes in Russia
1H11 1H12
th.tons
,,,
,
,
Financial highlights
19
IFRS 1H12 1H11 % Change
EBITDA 5.9 7.4 -21%
Net Income 3.0 4.8 -38%
Cash flow from Operations 6.6 6.1 9%
Capex (organic) 2.4 2.2 8%
Gearing 23% 22%
USD bn
1H11 under IFRS
20
• 1H11 and 2Q11 numbers have been restated for comparative purposes
• The main change relates to deferred tax, with higher forex driven volatility under IFRS:
(0%)
4.5 4.8
7%
(1%)
-
1
2
3
4
5
6
1H11US GAAP
DT recalculation
Replacement accounting
Other 1H11IFRS
1H11 Net Income IFRS v US GAAPUSD bn
(1%)
2.4 2.6
6%
(1%)
-
1
2
3
2Q11US GAAP
DT recalculation
Replacement accounting
Other 2Q11IFRS
2Q11 Net Income IFRS v US GAAPUSD bn
Business environment
21
Weak environment both y-o-y and q-o-q, with severe negative duty lag affecting performance
1H12 v 1H11:
• Urals up 3% to USD 111.7/bbl
• Negative duty lag: USD 9.0/bbl
2Q12 v 1Q12:
• Urals down 9% to USD 106.5/bbl
• Negative duty lag: USD 20.0/bbl
1H12 v 1H11 and 2Q12 v 1Q12: negative impact of weaker rouble on deferred tax partly offset by costs benefit
• 1H12 average rouble rate at 30.6, 7% down
• 2Q12 average rouble rate at 31.0, 2% down
60
80
100
120
Price
1Q11 2Q11 3Q11 4Q11 1Q12
USD/bbl
$111.7/bbl
Urals
Duty reference price
$108.1/bbl
$116.9/bbl
$106.5/bbl
Duty lag: +$7/bbl Duty lag:-$13/bbl
2Q12
Net income – 1H12 v 1H11
22
Environment:• Price & Duty lag: negative duty lag – USD 9.0/bbl,
partly offset by 3% higher Urals and 60/66 duty regime benefit
• Forex: negative impact on deferred tax partly offset by forex benefit on rouble denominated costs
• Tariffs & Tax: primarily increases in MET and excise (USD 0.5 bn) rates and transportation tariffs (USD 0.1 bn)
Performance:• Operations: total TNK-BP oil and gas production
up 79 mboe/d (+4.1%), MET relief utilization offset by costs increase and lower petroleum production volumes
• One-offs: primarily due to 1Q12 Linik impairment (USD 0.2 bn) vs. 1Q11 Kovykta disposal gains (USD 0.2 bn)
(0.5) (0.1)
(0.8) (0.4)4.8
3.0
0.1
(0.1)
-
1
2
3
4
5
1H11 Price & Duty lag
Forex Tarif fs & Tax rates
Operations One-of fs Other 1H12
USD bn
118
5860
63
79
Crude - Export Crude - Domestic and CISProducts - Export Products - Domestic and CISGas, Gas Products and Condensate
Revenues
23
• Price: 2% sales growth, on the back of a 3% Urals price increase
• Volume and Mix:
- 4 mmboe volume increase in crude and products due to 2.3% own crude production growth;
- sales mix: products share decreased primarily due to a turnaround at the Ryazan refinery in 2Q and suspension of crude refining at Linik since March that were partly offset by processing at Mozyr
• Other sales:
Primarily 8 mmboe increase in sales of gas, condensate and gas products as a result of production growth (incl. 4 mmboe Vietnam contribution)
1H11 1H12
• Sales volumes up 12 mmboe, or 3%
• Products share* 41% in 1H12 vs 47% in 1H11
366 mmboe 378 mmboe
* Share from combined crude and oil products sales
104
5480
57
71
5
10
15
20
25
30
35
1H11 Crude Products Crude Products Gas & Other 1H12
USD
Price(+2%)29.2
Volume & Mix (+1%)
0.3
30.3
0.41.7
(1.4)0.1
Other(+1%)
Costs
24
Transportation costs:
• 7% weighted-average increase in Transneft and rail tariffs partly offset by forex (6%)
• Changes in routes and in sales mix resulted in costs growth by 1% due to increased crude export volumes via higher margin routes
Opex & SD&A dynamics reflecting inflationary pressure mitigated by a weaker rouble:
• Costs down by 7% due to a weaker rouble• Volume & Mix factor reflecting production
growth• One-offs: legacy environmental provision in
1H11 (USD 0.1bn)
2.1 2.1
0
1
2
3
1H11 Forex Tariff Routes 1H12
USD bn Transportation
1%7%(6%)
3.5 3.5
4%
0
1
2
3
4
1H11 Forex Inflation Volume& Mix
One-offs Other 1H12
USD bn OPEX & SD&A
(7%) 4% 2% (3%)
Taxes
25
Export duties and Taxes other than income tax up 16% to USD 15.6 bn primarily due to higher Urals price and negative duty lag• Increase in MET and excise rates starting
1 January 2012• MET reliefs: sustaining production at
depleted fields in Orenburg and increase in non-taxable VCNG production
• Volume&Mix, other: primarily increase in crude export leading to growth in export duties
Income tax increased by 15% to USD 1.3 bn primarily through the foreign exchange impact on the deferred tax charge, non-deductible LINIK impairment and operating losses in Ukraine• 1H12 effective tax rate was 27.1%, above
the 20% statutory rate primarily due to the foreign exchange impact on deferred tax and non-deductible costs
13.4
15.6
10
11
12
13
14
15
16
1H11 Price Duty lag MET & Excise rate
60/66 regime Export duty MET Volume&Mix, other
1H12
Export duties, Taxes other than Income TaxUSD bn
ReliefsLegislationEnvironment
17.5%27.1%
05
1015202530
1H11 eff ective rate
Forex LINIK non-deductible expenses
Deferred tax valuation provision
1H11 Kovykta disposal
Other permanent diff erences
1H12 eff ective rate
% Income Tax Rate
Net income – 2Q12 v 1Q12
26
Environment:• Price: Urals down USD 10/bbl (9%)• Duty lag: negative duty lag - USD 20.0/bbl• Forex: primarily negative impact on deferred
tax
Performance:• Operations: increased liquids production by 6
mb/d, partly offset by changes in mix in favor of oil
• One-offs: largely due to 1Q12 Linik impairment
(0.7)
(0.6)
0.1
2.2
0.8
(0.4)
0.2
-
1
2
3
1Q12 Price - Market Price - Duty lag Forex Operations One-of fs 2Q12
USD bn
Income statement – 2Q12 v 2Q11
27
USD bn %2Q12 2Q11 Change
Revenues 14.3 15.4 -7% Primarily lower Urals price
Export Duties (4.7) (4.2) 12% Primarily negative duty lag partly offset by 60/66 regime
MET & Excise (2.9) (3.0) -3%Lower Urals price and decrease of excisable products,
partly offset by increase in MET and excise rates
Costs (2.8) (3.0) -6%11% rouble depreciation and legacy environmental provision in 2Q11
Other (1.7) (1.8) -10%Primarily decrease in purchased crude and products volumes
EBITDA 2.2 3.4 -34%
DD&A (0.6) (0.5)
Income tax & other (0.8) (0.7)
Net Income* 0.8 2.2 -63%
*Profit for the period attributable to Group shareholders
Sources and Uses of Cash
28
• Cash from operations (before WC and income tax paid) of USD 6.2 bn is net oftaxes other than income tax and export duties payment of USD 15.6 bn
• Capex: field development, associated gas, refinery and retail network modernization• Acquisitions: exploration assets in Brazil and jet fueling complex Koltsovo • Net Borrowings: decrease primarily due to $0.5 bn Eurobond and other debt
repayment
1.32.4
6.2 1.5
(1.1)
(2.7)(0.4)
(1.0)
(1.4)
-
2
4
6
8
Cash & deposits as
of 31.12.2011
Cash f rom operations before WC
Income tax paid
Change in Working Capital
Capex Free Cash Flow
Acquisitions& Other
Net Borrowings
Dividends Cash & deposits as
of 30.06.2012
USD bnOperating activities Investing activities Financing activities
1.3
3.9
Debt and liquidity
29
Borrowing• No new borrowings in 2Q12• Two committed lines for the total amount
of USD 200 mln renewed • Gearing level at 23%• Average portfolio life at 3.53 years
Liquidity• Strong cash balances maintained• Five undrawn committed lines in the total
amount of USD 420 mln• Smooth repayment profile
Ratings• Investment grade ratings maintained, however
negative outlook assigned by Moody's to Baa2 rating (related to shareholder ownership uncertainty)
• Strong credit metrics maintained(1) Financial Indebtedness and Gearing are calculated based on IFRS(2) Finance Debt includes outstanding indebtedness under loan agreements and Eurobonds(3) Represents deferred payment obligation in favor of HRT related to Brazil assets acquisition(4) 2Q2012 and 1Q2012 calculation includes the letter of credit; 2Q2011 Gearing calculated
based on US GAAP amounts to 22%
TNK-BP Financial indebtedness(1)
30.06.2012 31.03.2012 30.06.2011
Financial indebtedness, incl.:
$8.0 bn $8.4 bn $6.9 bn
- Finance debt(2) $7.2 bn $7.4 bn $6.9 bn
- Letter of credit(3) $0.8 bn $1.0 bn -
Gearing(4) 23% 29% 22%
Fixed / Floating 62% / 38% 61% / 39% 79% / 21%
USD denominated 99% 99% 96%
LT / ST debt 84% / 16% 85% / 15% 77% / 23%
Unsecured / Secured 100% / 0% 100% / 0% 100% / 0%
Portfolio average life 3.53 years 3.72 years 3.86 years
Financial indebtedness maturity profile as of 30 June 2012
H2 2012
2013 2014 2015 2016 2017 2018 2019 20200
200,000,000
400,000,000
600,000,000
800,000,000
1,000,000,000
1,200,000,000
1,400,000,000
1,600,000,000
244,444,444
586,904,762
1,217,460,317
642,857,143
200
400 200
600,000,000 500,000,000
1,000,000,000800,000,000
1,100,000,000
500,000,000
1332
Other Letter of credit Bank debtEurobonds
$ mln
,
,
,
,
Outlook
30
Margin
enhancementReserves Production
Gas monetization
International diversification
Lower production decline in West Siberia
Pilot development of challenged reserves
Prepare to launch Yamal fields in 2016-2019
Progress with refinery modernization program
Increase retail presence in core markets
Launch new products and promote the new highway offer
Prepare for Rospan full field development
Negotiate long-term sales agreements for Rospan gas
Increase associated gas utilization
Health, Safety and Environment: continues as a top priority
Portfolio: pursue select M&A opportunities
Progress with exploration program in Brazil with focus on oil prone areas and gas monetization
Consider additional expansion opportunities in Vietnam
TNK-BP Holding – public subsidiary with leading investor returns
31
¾ of 44 bn USD 2005 market cap returned to shareholders as of end August 2012
USD 1.63 bn attributable to non-controlling interest since 2005
16% dividend yield – highest in the industry*
98% - average dividend payout ratio based on RAS net income amounts
* Cash returns are calculated as the share buyback, dividends and change in net debtSource: Bloomberg; Troika estimates
* Amounts are stated in years to which dividends are attributable. Dividend calculation based on Company and registrar data
mln USD
* Source: Troika Dialog research, report dt. 21/09/12
TNK-BP Holding
Exxon Mobil
Chevron BP Royal Dutch Shell
LUKoil Gazprom0%
10%
20%
30%
40%
50%
60%
70%63%
50% 48%
24% 23%20%
4%
Cash returns 2006-11 as a share of Mcap at end 2005*
2005 2006 2007 2008 2009 2010 20110
50
100
150
200
250
300
350
246228
104
152
256
324 319
TNK-BP Holding dividends attributable to non-controlling interest*
32
Board of Directors
Viktor VekselbergChairman, Renova Group
Brian GilvaryGroup CFO, BP
David PeattieHead of BP Russia
Michael TownshendPresident of BP Iraq
Len Blavatnik Chairman, Access Industries
Alex KnasterChairman of Pamplona Capital
Management
Mikhail Fridman
Chairman
The Rt Hon Lord (George) Robertson
of Port Ellen
Deputy Chairman
Evert Henkes Independent Director
Alexander ShokhinIndependent Director
TBCIndependent Director
representatives of BP
independent directors
representatives of AAR
33
TNK-BP corporate structure1
Upstream Refining Marketing
95%
c.50%
TNK-BP Ltd (BVI)
Slavneft
(JV withGazprom Neft)
TNK-BP Finance S.A. (Luxembourg)
Lisichansk Refinery(Ukraine)
c.95%
100%
TNK-BP Holding
TNK-BP Management
100%
TNK-BP Commerce (Ukraine)
TNK-BP International Ltd (BVI)
100%
100%
50% 50%Alfa, Access/Renova BP
TNK Overseas Ltd
100%
34
Management structure of TNK-BP
Chairman of the Management Board
Vacant
Executive Director – Vice President
UpstreamA. Dodds
Executive Director – Vice PresidentDownstreamA. Barrios
Chief Financial OfficerJ. Muir
Executive DirectorG. Khan
Executive Vice President
Support ServicesA. Tyomkin
Executive Vice President Strategy and New
Business DevelopmentM. Slobodin
Executive Vice President
LegalI. Maydannik
Executive Director –Advisor to the Chairman
of the MBV. Vekselberg
members of the Management Board