PRESENTATION TO INVESTORS
Copyright © Tatneft, 2016
JUNE 2016
2
! Growth of oil production to 30 million tonnes (216 million barrels) per year
! Expansion of oil processing to 14 million tonnes per year with high-quality products output (diesel fuel, naphtha/gasoline, kerosene, etc.)
! Increase in retail sales of oil and gas products through our own network by 1,5 times
! Strengthening of the petrochemical segment: upgrade existing and develop new production, collaboration via joint projects
! Optimization and reduction of operating costs, high efficiency of production, sales and management; continuous improvement system
! Maintaining the leading positions in the area of development and introduction of new technologies, identification of potential areas for development and modernization (innovation activities)
! Human capital development, involvement of all employees of the company into the process of development and implementation of decisions
! High level of environmental and social responsibility, commitment to a sustainable development
Key Strategic Objectives to 2025
Doubling Company’s Value by 2025
3
Review of Production Base (2015)
Oil and Gas Reserves Refining and Marketing
Licenses and Production Assets (RR bn), IFRS
! Refining capability: ! TANECO is the most modern oil refinery in
Russia with the capacity up to 9 Mtpa. ! Yelkhovskiy NPU – production 168 Ktpa ! Tatneftegaspererabotka – efficient processing
of APG и NGL (991 и 285 Ktpa, respectively) ! Number of petrol (gas) stations– 692 units in
Russia, Ukraine and Belarus ! Tire production facilities including solid steel
cord tires (SSC-tires)
! 98 E&P licenses ! Unique Romashkinskoye field ! Producing well stock: 20191 - producing and
9871 - injection wells
! Average well flow rate of new wells - 10 tpd (71.2 bblpd); an average well flow rate of all wells - 3,9 tpd (27.8 bblpd)
2013
2014
2015
Net Reserves Reserves Category
Crude and Condensate, MBbls.
Gas, MMcf
Proved Developed Producing 3,508,667 1,015,734 Proved Developed Nonproducing 2,314,874 682,888
Proved Undeveloped 372,177 109,792 Total Proved 6,195,719 1,808,414
Probable 2,467,176 726,855 Possible 392,216 38,764 Total 3P 9,055,111 2,574,033
298 339
32131
280 295
30128
281 260
30
103
UpstreamDownstream
Petrochemical
Corporate & Other
Source: 2015 Reserves Report by Miller & Lents, Ltd.
4
Results of Operations
5
Oil Production
2015 Results
! Highest level of production for 23 years
! Growth in comparison to 2014 – 2.7%
! Production in Tatarstan – 26.7 million tns (including 15.5 million from the Romashkinskoye field), outside of Tatarstan – 532 thousand tns
! Drilling rate – 738.5 thousand meters
! 352 new production wells, including 129 horizontal and 4 multilateral horizontal wells
Technologies
! Wide application of advanced modern technologies in drilling and production, many of them developed in-house
! 649 hydraulic fracturing jobs in 2015, including 62 on new wells
! Dual completions – 1641 wells (222 wells in 2015)
! The chain drives the oil-well pumps – 2027 units at the beginning of 2016
! 44% of total production through the use of tertiary methods
516 518532
188.2189.0
194.1
300
350
400
450
500
550
600
2013 2014 2015170
180
190
200
Average Daily Production, kbpd Total prodiction, mln barrels per year
Production Dynamics
6
Operational Results of TANECO
Key Results ! Crude refining throughput:
! 2015: 8.65 mln tonnes (61.6 mln barrels)
! 1Q2016: 2.17 mln tonnes (15.5 mln barrels)
! Current depth of refining – 74.4% (Russia’s average – 71.5%)
! Output of light products – 71.87%
Process units in operations (nameplate capacity)
Refined products output (thousand tonnes)
фото Татнефть
! GDU-VDU-7 (7 Mtpa); Hydrocracking Unit (2.9 Mtpa); Visbreaker Unit (2.4 Mtpa); Naphtha Stabilization Unit (1.1 Mtpa); Base Oil (Lubes) Production Unit (250 Ktpa); Combined Sulfur Recovery Unit (139 Ktpa); Hydrogen Production Unit (99 Ktpa)
2015 1Q2016 Middle Distillates 2,586 610 Fuel Oil 2,250 539 Naphtha 1,827 436 Diesel Fuel 1,378 414 Vacuum Gasoil (VGO) 150 18 Kerosene 147 36 Other 558 224 TOTAL 8,895 2,275
7
2013 2014 2015 3m2015 3m20160
2
4
6
8
10
12
Sales and Logistics Refined Products Sales by Destination Market
2013 2014 2015 3m2015 3m20160
5
10
15
20
Volu
mes
, mln
tonn
es
Volu
mes
, mln
tonn
es
Crude Oil Sales by Destination Market
Non-CIS
CIS Domestic
4.8 2.6 65%
3%
32%
18.5
52%
3%
45%
10.3
2013 2014 2015 3m2015 3m2016
0.7 1.40.60.3
1.7
Crude Oil Purchased
Volumes, mln tonnes
Refined Products Purchased
2013 2014 2015 3m2015 3m2016
1.3 1.1
0.20.31.2
Volumes, mln tonnes
18.0
49%
4%
47%
11.1
40%
5%
55%
20.0
54%
7%
39%
43%
6%
51%
11.1
5.3
51% 7%
42%
2.6
44% 3%
53%
58% 7%
35%
51% 6%
43%
8
Highly Viscous Oil (HVO) Production
9
HVO Production at Ashalchinskoye field
Information on the Project
Well cluster at Ashalchinskoye field, photo by Tatneft
! 376,4 thousand tonnes (approx. 2.45 mln barrels) of bitumen from Ashalchinskoye field produced in 2015 and 119.4 thousand tonnes (approx. 0.77 mln barrels) in 2016*
! 332 horizontal wells and 1 vertical well drilled in 2015 and 56 horizontal wells – in 2016*. At 31.03.2016 - 60 production wells are in operation
! Average daily production at Ashalchinskoye field reached 1,400 tonnes per day (approx. 9,120 bbls per day)*
! Currently 1,061.5 thousand tonnes (approx. 6.92 mln barrels) of HVO produced from Ashalchinskoye field from the beginning of production*
! 65 horizontal wells planned in 2016
! Dedicated infrastructure for production, treatment and transportation of HVO is being built and expanded: boilers, collection and treatment facilities, and resources management systems.
! Production plans: 531 thousand tonnes (3.46 mln barrels) in 2016 and 1,105 thousand tonnes (7.2 mln barrels) in 2017
! Tax incentives:
• A zero MET rate on highly viscous oil production
• 10% from crude oil export duty (“10-10-10” regime)
* As of 1 April 2016 Rack drilling unit, photo by Tatneft
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TANECO Development
11
Delayed Coking Unit
Delayed Coking Unit and Products
фото Татнефть
! In 2017, upon completion of respective construction, planned refined products output (in % from total volume): up to 48% of diesel fuel and middle distillates, approx. 17% of gasoline (straight-run and automobile) and approx. 8% of jet fuel.
! Delayed Coking Unit – processing of vacuum residue (full 95% depth conversion within the complex) with the production of naphtha, light and heavy coker gas oils and petroleum coke
! Nameplate capacity of the unit – processing of 2
Mtpa of feedstock ! Launch in operation is planned in Summer 2016 ! Heavy Coker Gas Oil will be used as feedstock for
further processing at the hydrocracker unit and in the future, upon launch of the heavy coker gas oil hydrotreating, at the catalytic cracking unit
! Light Coker Gas Oil in the future will be used at the
diesel fuel hydrotreating unit ! Petroleum Coke wil l be used as fuel at
Nizhnekamsk Heat and Power Plant for power generation upon completion of recently launched upgrading at the plant (a part of Tatneft group and generates electricity for, inter alia, TANECO and other group entities in the region)
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The Refining Complex Development Plan
Current Works
Planned Refined Products Output*
! Completion of construction of units for naphtha and heavy coker gasoil hydrotreating, isomerization, catalytic reforming and catalytic cracking – improvement of product quality and production of automobile gasoline
! Increase in nameplate capacity up to 14 Mtpa – construction of the GDU-VDU-6 unit (completion is expected in 2018)
! Implementation of new locally developed technologies of oil refining – installation of hydroconversion unit for heavy petroleum feedstock refining. This project has been assigned a National Project status
! Annual investments for 2016-2018 works are projected at the level of 2015
in mln tonnes
Crude refining throughput 14.00
Auxiliary raw materials & condensate 0.55
Total Refining: 14.55
Output: 14.55 %Diesel Fuel 7.00 48%
Petrol Fuel 3.01 21%
Jet Fuel 1.05 7%
Fuel gas 1.05 7%
Petroleum Coke 0.69 5%
Other 1.75 12%
* Upon completion might differ
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IFRS Financial Results Overview
14
2014 2015 3m2015 3m2016 Chg %, 3m2016/ 3m2015
Operating Cash Flow 136.5 140.5 21.8 30.4 39%
Capital Expenditures (62.6) (92.9) (13.2) (22.1) 67%
Free Cash Flow 73.9 47.6 8.6 8.3 -4%
Net Debt Repayments (33.8) (12.8) (4.4) (0.8) -81%
Dividends (20.5) (26.0) (0.3) (0.0) -99%
Consolidated Financial Statements: P&L and Cash Flow
(*) We define EBITDA as net revenue less (a) costs and other deductions plus (b) amortization and depreciation, according to our consolidated financial statements.
Consolidated P&L, RR bn
2014 2015 3m2015 3m2016 Chg %, 3m2016/ 3m2015
Sales, gross 646.3 657.4 165.7 136.4 -18%
Less export duties & excise tax (169.9) (104.7) (30.7) (15.4) -50%
Revenues, net 476.4 552.7 135.1 121.0 -10%
Costs and other deductions 369.8 422.2 96.3 95.7 -1%
EBITDA (*) 127.7 155.6 44.5 30.6 -31%
EBITDA margin 27% 28% 33% 25%
Profit for the year 97.7 105.8 28.1 17.6 -37%
Net Profit (attributable to Group shareholders)
92.2 98.9 26.6 17.6 -34%
Net Profit (attributable to Group shareholders) before One-Off change in group structure
26.6 26.4 -1%
Free Cash Flow, RR bn
15
2013 2014 2015 3m2015 3m2016
Other Costs
Transportation expenses
Selling, General andAdministrative Expenses
Operating Expenses
Taxes other than income taxes
251.9245.6
265.6 269.9
238.7
020406080100120140160180200220240260280
2013 avg 2014 avg 2015 avg 3m2015 avg 3m2016 avg
Lifting Costs, RR per bbl
Cost Dynamics
Lifting Costs Y-o-Y, RR/bbl
10.50.3
8.40.2
R&M, TANECO construction R&M, other
Exploration & Production Petrochemical
3m2016 Capital Expenditures* by Segments, RR bn
1,867
* Cost of purchased products is not included. Taxes other than income taxes exclude export duties and excise taxes.
+1.6%
1,799
Cost per Barrel Breakdown*, RR/bbl
* Including non-cash additions but excluding changes in decommissioning provision
1,596
38%
30%
13%
8% 11%
43%
26%
12%
10%
9%
37%
30%
15%
10% 8%
+5.4%
1,669
37%
33%
14%
7% 9%
27%
34%
12%
9%
18%
1,678
+2.9%
16
96.3 95.7
8.56.0
(0.7)(1.2)(13.2)
Costs 3m2015 MET Operating Transportation SGA Other Costs 3m2016
135.1 121.0
0.39.8
15.3
(9.0)(30.5)
Revenue, net 3m2015
Export Duties &Excise taxes
Crude Oil Prices Refined ProductsPrices
Sales Volumes Petrochemicalsand Other Sales
Revenue, net 3m2016
Revenue and Costs: 3m2016 vs 3m2015
Revenue
Costs
RR bn
Decrease by RR 14.1 bn
Decrease by RR 0.6 bn
17
567.9356.9
41.47.613.9
24.9270.1
(147.1)(121.4)
(15.3)(285.1)
Net Profit 3m2015
Revenue,net
Purchases Taxes Transport OPEX SGA DDA FX IncomeTax &Other
Net Profit3m2016
950.4
619.8
13.924.9270.1
(217.7)
(121.4)
(15.3)(285.1)
EBITDA 3m2015
Revenue, net Purchases Taxes Transport OPEX SGA Other EBITDA3m2016
EBITDA and Net Profit per bbl: 3m2016 vs 3m2015
EBITDA, RR/bbl
Net Profit,
RR/bbl Decrease by 37.2%
Decrease by 34.8%
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