lukoil 2002 earnings

8/13/2019 Lukoil 2002 Earnings

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3Q 2013

Financial Results(US GAAP)

New York, November 2013


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Forward-Looking Statements

Certain statements in this presentation are not historical facts and are forward-looking. Examples of suchforward-looking statements include, but are not limited to:

projections or expectations of revenues, income (or loss), earnings (or loss) per share, dividends, capitalstructure or other financial items or ratios;

statements of our plans, objectives or goals, including those related to products or services;

statements of future economic performance; and

statements of assumptions underlying such statements.

Words such as believes, anticipates, expects, estimates, intends and plans and similar expressions areintended to identify forward-looking statements but are not the exclusive means of identifying such statements.

By their very nature, forward-looking statements involve inherent risks and uncertainties, both general andspecific, and risks exist that the predictions, forecasts, projections and other forward-looking statements will notbe achieved. You should be aware that a number of important factors could cause actual results to differmaterially from the plans, objectives, expectations, estimates and intentions expressed in such forward-lookingstatements, including our ability to execute our restructuring and cost reduction program.

When relying on forward-looking statements, you should carefully consider the foregoing factors and otheruncertainties and events, especially in light of the political, economic, social and legal environment in which weoperate. Such forward-looking statements speak only as of the date on which they are made, and we do not

undertake any obligation to update or revise any of them, whether as a result of new information, future eventsor otherwise. We do not make any representation, warranty or prediction that the results anticipated by suchforward-looking statements will be achieved, and such forward-looking statements represent, in each case, onlyone of many possible scenarios and should not be viewed as the most likely or standard scenario.


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3Q 2013 Financial Highlights

Net income$3,105million +48%

Basic earnings per share$4.11 +48%

Net income per boe of production$15.5 +47%

EBITDA$5,472 million +26%

FCF$1,578 million +440%

Q-o-Q


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40

50

38 42

50

52

59

75

90

30

60

90

120

2006 2007 2008 2009 2010 2011 2012 2013

Dividend per share, rub.

Interim dividends Level that corresponds to 15% CAGR

Increasing Dividend Growth Rate

In October we paid the second interim dividends50 RUB per share

LUKOIL is to increase dividend payout ratio to 30% in the mid-term

CAGR15%E

+27%

+20%

+25%


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LUKOIL Shares Get More Attractive Due to Dividends

2.9

3.5 3.5

4.2

4.9

2

3

4

5

2008 2009 2010 2011 2012

Dividend yield, %

2008 2010 2012 1H 2013E

Dividend payout, %

16% 18% 23%

28%


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LUKOIL Presents High Financial Efficiency AmongRussian Peers

324

339

598

1,163

0 200 400 600 800 1000 1200 1400

Company 3

Company 2

LUKOIL

Company 1

9M 2013 hydrocarbon production, mln boe

1.8

4.3

7.8

6.5*

0 5 10 15

Company 3

Company 2

Company 1

LUKOIL

9M 2013 net income, $ bln

12.9

LUKOIL maintains leadership in financial performance in Russian oil

and gas industry

* Excluding one time paper gain from assets revaluation


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LUKOIL Presents High Financial Efficiency AmongRussian Peers

LUKOIL maintains leadership in financial performance in Russian oil

and gas industry

8.5

15.4*

21.1

24.4

20.9

6 11 16 21 26

Company 3

Company 1

Company 2

LUKOIL

9M 2013 EBITDA, $ per boe

5.5*

5.6

12.6

13.0

11.1

4 6 8 10 12 14 16

Company 1

Company 3

Company 2

LUKOIL

9M 2013 Net income, $ per boe

* Excluding one time paper gain from assets revaluation


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Mineral extraction tax ($),2.2%

Crude oil export tariff ($);-3.4%

Railroad tariffs, 6.1%

Real ruble appreciation,5.1%

Freight rates (crude oil),2.0%

Pipeline tariffs, -1.0%

Freight rates (petroleumproducts), -7.2%

Fuel oil (Europe), -7.6%

Gasoline (Europe), -4.8%

Diesel fuel (Europe), -4.1%

Urals, -3.1%

High-octane gasoline(Russia), 3.2%

Diesel fuel (Russia), 9.0%

Fuel oil (Russia), 17.8%

-20% 0% 20%

9M 2013 to 9M 2012

Macroeconomic and Tax Environment

RE

VENU

E

EXPEN

SES

TAX

Positive factors

Negative factors


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Main Operating Results

Crude oil export, -11.5%

Daily hydrocarbon production,1.1%

Domestic sales of petroleumproducts, 1.5%

Refining throughput, 1.9%

Production of gas available forsale , 2.2%

Refined products production ,2.3%

Export of refined products fromRussia, 5.4%

-12% -6% 0% 6%

9M 2013 to 9M 2012, %


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Main Operating Results

2.168

2.191

9M 2012

9M 2013

Hydrocarbon production, mln boe per day

+1.1%

46.9

48.0

9M 2012

9M 2013

Refined products production, mln t

+2.3%

The increase in refined products productionwas due to increase in production volumes atNizhny Novgorod refinery after major repairworks in 2012

198.4

175.6

9M 2012

9M 2013

Crude oil export, mln bbl

-11.5%

The decrease of crude oil export was a result ofhigher sales in Russia following the increase indomestic demand and increase of throughputat our domestic refineries

The increase in hydrocarbon production was due toacquisitions of new upstream properties,development in the Caspian Sea, increase inproduction wells and successful employmentof EOR methods in Komi and Urals regions


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9M 2013 Net Income Reconciliation

8,316

7,790

794

18485 (777)

(589)

(178)

(45)

7,000

8,000

9,000

10,000

9M

2012Net

income

Increaseinrevenue

lesspurchasesof

oil,gasand

petroleump

roducts

Decreaseintaxes

otherthanincome

taxes(including

exciseandexport

tariffs)

Decreaseininterest

expense

IncreaseinDD&A

OPEXincrease

Increaseinincome

taxes

Increaseofother

expenseand

decreaseinother

income

9M

2013Net

income

$m

illion


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Hydrocarbon Production

2.169 2.168

2.191

2.16

2.17

2.18

2.19

2.20

9M 2011 9M 2012 9M 2013

Hydrocarbon production, mln boe per day

+1.1%


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1

265

270

275

280

285

290

jan

feb

mar

apr

may

jun

jul

aug

sep

okt

nov

dec

jan

feb

mar

apr

may

jun

jul

aug

sep

2012 2013

LUKOIL-Komi oil production, Kbpd

LUKOIL-KOMI (Timan-Pechora)

LUKOIL-Komi

+3.3%

0

5

10

15

20

25

1 2

East-Lambeyshorskoye field oilproduction, Kbpd

9

9

10

1011

11

12

1 2

Oshskoye field oil production,Kbpd

sep 12 sep 13

+17.9%

48

50

52

54

1 2

Usinskoye field oil production,Kbpd

sep 12 sep 13

+4.5%

sep 12 sep 13

+120%

8

9

10

11

1 2

Yaregskoye field oilproduction, Kbpd

sep 12 sep 13

+20%


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1

Promising fields in Timan-Pechora

Oshskoye field

East-Lambeyshorskoye field

81mln boeproved reserves

2012 production started

62mln boeproved reserves

2008 production started

Production growth in Timan-Pechora will provide Haryaga-Y.Hylchuyu pipeline

throughput growth resulting in additional $350-400 mln of operating cash flow

0

5

10

15

20

25

jan feb mar apr may jun jul aug sep okt nov dec

Oil production, Kbpd

2012 2013

5

6

7

8

9

10

11

12

Oil production, Kbpd

2012 2013


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1

Northern Caspian: Korchagin field

In 9M 2013 production wells 105, 117 and 122 were launched and contributed to doubling of production

Drilling and launching of extra long horizontal wells is in progress. Well 122 with flow rate 4 Kbpd waslaunched in 3Q 2013. By the end of 2013 wells 109 and 115 are planned to be launched and well 106 isplanned to be drilled.

10

15

20

25

30

9M 2012 9 2013

Korchagin field oil production, Kbpd

+104%


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1

Northern Caspian: Filanovsky field

LUKOIL selected contractors to construct ice-resistant stationary platform No. 2 (IRP-2 ) and living quarters moduleplatform No. 2 (LQP-2 ) for second construction stage of Filanovsky field. The platforms to be commissioned in the

autumn of 2016.

LUKOIL selected contractors to construct onshore facilities for the Northern Caspian fields. Onshore oil-intake facilitiesfrom the Northern Caspian fields will be ready for production by the end of 2015.


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1

Tax Initiatives

Implemented since January Approvals expected2013

Korchagin field

A lowered CED is kept in force for 2Q-3Q 2013

Hard-to-recover reserves

A lowered MET for low permeability collectors (Khadum,Bazhen, Abalaksk, Domanik, Tyumen)

Possibility to establish a special CED for Tyumen

Offshore fields

A fiscal system designed for offshore projects of the 2ndcategory of complexity for the new Caspian projects

Hard-to-reach areas

A lowered CED

Excise taxes

Retaining in 2014-2015 the differential between EURO-5 andEURO-3 motor fuels RUB 4,000

Gas MET formula

Taking into account export opportunities and field complexity

Tax holiday extension for MET in Nenets region

Export duty rates for petroleum products: Lower gasoline export duties to the level of other petroleum products (66% of CED)

Differentiation between export duties for fuel oil and other heavy finished oil products (coke, bitumen, etc.)

Not increasing export duties for fuel oil since 2015

Practical approval of the financial result tax (FRT)

In discussion with government authourities


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1

LUKOIL Increases Productionof High-Octane Gasoline In Russia

Refinery throughputs at the

Group and affiliated refineries

increased by 1.9%, includinggrowth of 2.8% at Russian

refineries

1.8

2.0

1.7

1.8

1.9

2.0

9M 2012 9M 2013

Production of premium and higher quality gasoline inRussia, mln tons

4

5

6

7

8

9

2008 2010 9M 2013A 2016E

Production of high-octane gasoline in Russia, mln tons

+20%+10%


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1

Financial Results

3Q

2013

2Q

2013

, % $ million9M

2013

9M

2012

, %

36,737 35,053 5 Sales 105,560 103,152 2

2,514 2,516 0 OPEX 7,480 6,891 9

9,255 9,183 1Taxes other than income tax

(including excise and export tariffs)27,322 27,506 (1)

3,657 2,856 28 Income from operating activities 9,891 10,695 (8)

3,853 2,843 36 Income before income tax 10,070 10,348 (3)

3,105 2,104 48 Net income 7,790 8,316 (6)

4.11 2.79 48 Basic EPS, $ 10.32 10.91 (5)

5,472 4,359 26 EBITDA 14,606 14,249 3


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2

Lifting Costs

Power consumption constitute

significant share of lifting cost

LUKOIL shows high efficiency in

cost management: while power

tariffs increased by 33% y-o-y,

lifting cost in 9M 2013 was

$5.5 per boe(+12% y-o-y)

5.4 5.35.6 5.7

0

2

4

6

4Q 2012 1Q 2013 2Q 2013 3Q 2013

Lifting cost per boe, $

Source: Federal Service for Tariffs of Russia

0.14

0.19

0.12

0.14

0.16

0.18

0.20

9 2012 9 2013

Russian average power tariff for industrial consumers,$/kWh

+33%


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2

SG&A and Transportation Expenses

-3%-1% -1%-1%

6%

2%

-8%

-4%

0%

4%

8%

Transportation Expenses(3q 2013 to 3q 2012)

Transportation volume Tariff

3Q

2013

2Q

2013, % $ million

9M

2013

9M

2012, %

1,503 1,562 (4) Transportation expenses 4,715 4,625 2

979 972 1Selling, general and administrativeexpenses

2,817 2,665 6

2,482 2,534 (2) Total 7,532 7,290 3

904

1,090

866

972979

0

300

600

900

1,200

3Q 2012 4Q 2012 1Q 2013 2Q 2013 3Q 2013

SG&A expenses, $ million


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2

3.2 3.4

6.2

6.0

-8

-6

-4

-2

0

2

4Total debt and net debt, $ bln

Cash & Cash equivalents Net debt

Robust Financial Position

Source: Companies financial statements. O&G majors include: ExxonMobil, Royal Dutch Shell, Chevron, BP, ConocoPhillips, Total, Eni.

6 2013 9 2013

LUKOIL net debt remains low

In 2Q 2013 LUKOIL successfully issued

$3 bln of eurobonds

LUKOIL net debt decreased by $141 mln(-2%) for 3q 2013

0,0

0,2

0,4

0,6

0,8

1,0

2007 2008 2009 2010 2011 2012 9M 201

Net debt to EBITDA

LUKOIL Majors

0

10

20

30

40

50

60

2007 2008 2009 2010 2011 2012 9M 2013

Debt-to-capital ratio, %

LUKOIL AverageMajors


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2

CAPEX

3Q

2013

2Q

2013, % $ million

9M

2013

9M

2012, %

2,788 2,918 (4) Exploration and production 8,243 6,367 29

1,947 2,045 (5) Russia 5,866 5,128 14

841 873 (4) International 2,377 1,239 92

766 489 57 Refining and marketing 1,885 1,219 55

487 323 51 Russia 1,281 829 55

279 166 68 International 604 390 55

19 32 (41) Chemicals 54 63 (14)

18 31 (42) Russia 52 47 11

1 1 0 International 2 16 (88)

86 52 65 Power generation 201 312 (36)

96 136 (29) Other 345 179 93

3,755 3,627 3 Total (cash and non-cash) 10,728 8,140 32


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2

Environmental Safety is Our Priority

LUKOIL presented a draft 2014-2018 Environmental Safety Program

Main goals:

Utilization of newly generated waste in a ratio of at least 1:1

95-percent utilization of associated petroleum gas by 2015

Increased production of Euro-5-compliant eco-friendly fuel

Introduction of automated systems of industrial environmental monitoring

Compliance with national and international environmental requirements

1.5

2.3

3.6

4.5

1

2

3

4

5

1995-2003 2004-2008 2009-2013 2014-2018

Environmental spending, bln USD

Recultivation


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2

2014-2018 Environmental Safety Program:

Reduction of air emissions by 100 th. t Additional produced water conditioning 7 mcm

Reduction of water usage by 8 mcm

Waste disposal 900 th. t

Including those accumulated before privatization 580 th. t

Remediation of disturbed and contaminated lands 115 km

Liquidation of waste pits 1 th.

Maintenance overhaul and replacement 4 th. km

Diagnostics 31 th. km

Inhibitory protection 20 th. km

Environmental Safety is Our Priority

Air

Water

Land

Pipelines


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2

Conclusion

- Value creation and accelerating growth of dividends

- Increasing efficiency of operating activities

- ost control, and OPEX optimization

- Maintaining conservative financial policy

- Maintaining strong financial discipline

lukoil 2002 earnings

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