lukoil good gaap

7/29/2019 Lukoil Good GAAP

1/27

1Q 2013

Financial Results(US GAAP)

Vice-PresidentLeonid Fedun

Moscow, May 2013


2/27

2

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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3

1Q 2013 Financial Highlights

Net income $2,581 million

Basic earnings per share$3.4

Net income per boe of production$13.1

EBITDA$4,775 million

Net Debt$3,935 million


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4

LUKOIL Presents High Financial Efficiency AmongRussian Peers

112

114

198

278

0 50 100 150 200 250 300

Gazprom Neft

Novatek

LUKOIL

Rosneft

1Q 2013 Hydrocarbon production, mln boe

0,7

1,3

2,6

3,3

0 1 2 3 4

Novatek

Gazprom Neft

LUKOIL

Rosneft

1Q 2013 Net income, $ bln

LUKOIL is the leader in financial efficiency in Russian Oil & Gas

industry

1.7*

* Excluding gain from revaluation of non-controlling interest in OJSC Verkhnechonskneftegaz to its fair value.


5/27 5

LUKOIL Presents High Financial Efficiency AmongRussian Peers

10

20

21

24

5 10 15 20 25 30

Novatek

Gazprom Neft

Rosneft

LUKOIL

1Q 2013 EBITDA per boe, $

7

12

12

13

5 7 9 11 13 15

Novatek

Gazprom Neft

Rosneft

LUKOIL

1Q 2013 Net income per boe, $

LUKOIL is the leader in financial efficiency in Russian Oil & Gas

industry

6.3*

* Excluding gain from revaluation of non-controlling interest in OJSC Verkhnechonskneftegaz to its fair value.

15.3*


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Robust Competitive Position in the Industry Globally

0

5

10

15

20

25

30

35

40

45

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1Q2013

ROACE*, %

LUKOIL Oil & Gas MajorsOil & Gas Majors

*

0

2

4

6

8

10

12

14

1618

20

2006 2007 2008 2009 2010 2011 2012 1Q 2013

Lifting costs per boe, $

LUKOIL

5

10

15

20

25

30

35

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1Q2013

Net income per boe, $

LUKOILOil & Gas Majors

Oil & Gas majors include ExxonMobil, Chevron, Shell, ConocoPhillips,Total, Eni.Source: Companies financial statements.

05

10

152025303540

Total

Chevron

Exxon

Conoco

Phillips

Shell

ENI

BP

LUKOIL

E&P Capital expenditures in 1Q 2013, $ per boe


7/27 7

Dynamics of roubleexchange rate for FXdifferences; -11,2%

Crude oil export tariff ($);1,4%

Mineral extraction tax ($);-1,0%

Freight rates (petroleumproducts); -2,8%

Real ruble appreciation;6.6%

Transneft tariffs; -1,4%

Freight rates (crude oil);3,3%

Railroad tariffs; 9,4%

Fuel oil (Europe); -10,6%

Urals; -5,3%

Diesel fuel (Europe); -3,7%

Gasoline (Europe); -2,0%

High-octane gasoline(Russia); 6,3%

Diesel fuel (Russia); 8,4%

Fuel oil (Russia); 18,4%

-20% 0% 20%

1Q 2013 to 1Q 2012

Macroeconomic and Tax Environment

RE

VENU

E

EXPENS

ES

TAX

Positive factors

Negative factors


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1Q 2013 Net Income Reconciliation

3,789*

2 581

171 (422)

(274)

(235)

(226)

(199)

(23)

2 000

2 500

3 000

3 500

4 000

1Q2012Netincome

Decreasein

taxes

otherthanincome

taxes(including

exciseand

export

tariffs

)

Increaseinincome

taxexpe

nse

DD&Agrowth

OPEXin

crease

Netdecreasein

revenue(less

purchasesofoil,gas

andpetroleum

products)

Increaseo

fother

expenses

Decreaseof

equity

shareinincomeof

affiliates

1Q2013Netincome

$million

*1Q 2012 results were affected by leap year effect and currency translation gain


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Main Operating Results

Domestic sale of petroleumproducts; 13.6%

Average daily marketable gas

production; 0.9%

Average daily refiningthroughput; 0.7%

Average dailyhydrocarbon production;

-0.1%

Average daily liquidhydrocarbon

production; -0.3%

Petroleum product export;-5.5%

Crude oil export;-13.4%

-18% -12% -6% 0% 6% 12% 18%

1Q 2013 to 1Q 2012

Positive factors

Negative factors

Dynamics of operating results was affected by the leap year effect


10/2710

Hydrocarbon Production

After stabilization in 2012 LUKOIL hydrocarbon production

continues to show a steady growth in 1Q 2013

2,12

2,14

2,16

2,18

2,20

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

Hydrocarbon production, mln boe per day

+2.5%


11/2711

Increasing drilling efficiency

0

2

4

6

8

10

12

2010 2011 2012 1Q 2013

Average commercial rate of drilling for onedrilling unit per month

(exploration & production drilling)

75%

16%

17%

th. m

0

1

2

3

4

5

2010 2011 2012 1Q 2013

Drilling(exploration & production drilling)

9%

32%

17%

Mln m

An increase in drilling rate of one drilling unit under per-day payment

leads to decreased cost of one meter drilled

2013A


12/2712

LUKOIL Increases Productionof High-Octane Gasoline In Russia

Daily refinery throughputs at the

Group and affiliated refineries

increased by 0.7%, includinggrowth of 1.1% at Russian

refineries

1,6

1,7

1,5

1,6

1,7

1,8

1Q 2012 1Q 2013

Production of high-octane gasoline in Russia, mln tons

+7.3%

4

5

6

7

8

2008 2009 2010 2011 2012

Production of high-octane gasoline in Russia, mln tons

CAGR10%


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13

Gasoline quality in Russia

Excise tax savings, $/tonsTransition to European quality standards in Russia

LUKOIL has a competitive advantage in fuel quality

Excise tax differentiation due to quality lets us monetize it today

EURO-4

EURO-5

EURO-3

Diesel

Gasoline Regulations

Euro

0

20

4060

80

100

120

140

160

180

2011 2012 2013 2014 2015

Gasoline Diesel fuel

EURO-5 - EURO-2 EURO-5 - EURO-3 EURO-5 - EURO


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14

Financial Results

1Q

2013

4Q

2012

, % $ million1Q

2013

1Q

2012

, %

33,770 36,019 (6) Sales 33,770 35,261 (4)

(2,450) (2,468) (1) OPEX (2,450) (2,215) 11

(8,884) (8,996) (1)Taxes other than income tax

(including excise and export tariffs)(8,884) (9,055) (2)

3,374 3,375 0 Income before income tax 3,374 4,020 (16)

2,581 2,688 (4) Net income 2,581 3,789 (32)

23% 20% Effective income tax rate 23% 9%*

3.42 3.56 (4) Basic EPS, $ 3.42 4.90 (30)

4,775 4,666 2 EBITDA 4,775 5,346 (11)

* Low effective income tax rate in 1Q 2012 was achieved as a result of foreign exchange differences in the accounts for taxation purposes that lead to reduction of taxable income


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Operating Expenses

1Q

2013

4Q

2012 , % $ million1Q

2013

1Q

2012 , %

1,009 1,040 (3) Hydrocarbon extraction expenses 1,009 906 11

508 561 (9) Own refining expenses 508 315 61

121 126 (4)Refining expenses at third parties andaffiliated refineries 121 263 (54)

338 327 3Expenses for crude oil transportation torefineries 338 287 18

192 156 23Power generation and distributionexpenses 192 178 8

79 73 8 Petrochemical expenses 79 74 7

203 185 10Other operating expenses

203 192 6

2,450 2,468 (1) Total 2,450 2,215 11

15,103 17,021 (11)Cost of purchased crude oil, gas andproducts 15,103 16,368 (8)

* Including processing expenses at ISAB


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Operating Expenses

2,215

2,450

2 050

2 1002 150

2 200

2 250

2 300

2 350

2 400

2 450

2 500

1Q2012OPEX

Increasein

hydrocarbon

extractionexpenses

Increasein

expensesforcrude

oiltransportationto

refineries

Increaseincostof

processing

operationsatISAB

Increaseinpower

generation,

distributionand

petrochemicals

expenses

Increaseinother

operatingexpenses

Increaseinrefining

expensesatown,

thirdpartiesand

affiliatedrefineries

1Q2013OPEX

$million +4.7%

+2.3%

+0.8%+0.5% +0.3%

+2.0%

1Q 2013 Hydrocarbon extraction

expensesdecreased by 1.5% compared

to 4Q 2012 and reached $5.3 per boe4,7

5,0 5,1

5,4

5,3

4,0

4,5

5,0

5,5

6,0

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

Lifting costs per boe, $


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17

SG&A and Transportation Expenses

1Q

2013

4Q

2012, % $ million

1Q

2013

1Q

2012, %

1,650 1,546 7 Transportation expenses 1,650 1,605 3

866 1,090 (21)Selling, general and administrativeexpenses

866 829 4

2,516 2,636 (5) Total 2,516 2,434 3

829

932 904

1 090

866

0

300

600

900

1 200

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

SG&A expenses, $ million

1 6051 497 1 523 1 546

1 650

0

400

800

1 200

1 600

2 000

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

Transportation expenses, $ million


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18

0

10

20

30

40

50

2007 2008 2009 2010 2011 2012 1Q 2013

Debt-to-capital ratio, %

LUKOIL Majors average

Robust Financial Position

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

0.0

0.2

0.4

0.6

0.8

1.0

2007 2008 2009 2010 2011 2012 1Q 201

Net debt to EBITDA

LUKOIL Majors average

2,9 2,7

3.7 3.9

-5

-4

-3

-2

-1

0

1

2

3

4 Total debt and net debt, $ bln

Cash & Cash equivalents Net debt

2012 1Q 2013

Oil & Gas majors

The Company net debt remains low.

In 2Q 2013 LUKOIL successfully issued

$3 bln of eurobonds . The offering consists

of 5-year $1.5 bln of 3.4% notes and 10-

year $1.5 bln of 4.6% notes.


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CAPEX Breakdown

1Q

2013

4Q

2012, % $ million

1Q

2013

1Q

2012, %

2,537 2,606 (3) Exploration and production 2,537 2,007 26

1,874 1,957 (4) Russia 1,874 1,634 15

663 649 2 International 663 373 78

630 788 (20) Refining and marketing 630 346 82

471 610 (23) Russia 471 167 182

159 178 (11) International 159 179 (11)

3 27 (89) Chemicals 3 10 (70)

3 15 (80) Russia 3 6 (50)

0 12 (100) International 0 4 (100)

121 191 (37) Power generation 121 57 112

113 98 15 Other 113 42 169

3,404 3,710 (8) Total (cash and non-cash) 3,404 2,462 38


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Oil pipeline Kharyaga Yuzhnoye Khylchuyu

has been Launched

Length: 158 km

Throughput capacity 4 mln tons per year

0.9 mln tons were pumped in 1Q 2013

Expected growth of EBITDA is about

$500 mln per year

Capital expenditures were about $230 mln

Barents Sea


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21

Acquisition of Samara-Nafta

Reserves C1+C2 : 600 mln bblAcquisition cost : $2.05 bln ($3.4 per bbl)

Exploration and development licenses for more than60 fields within 23 license blocks

LUKOIL refining, petrochemical and transportationcapacities in the region will create visible synergiesSamara region

30

40

50

2009 2010 2011 2012

Samara-Nafta oil production, th. bbl per day

12thplace for the oil production in Russia(2nd place in Samara region)

CAGR10%


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Kama-Oil

In April 2013 LUKOIL acquired 49.99% of Kama-oil increasingownership to full control

Kama-Oil was created in 2007 as an oilexploration and production operator in Permregion

Owns 6 licenses

Reserves C1+C2: 175 mln bbl

Currently 3 oilfields are producing and 3 licenseareas are being explored and prepared forproduction

0

1

2

3

4

2010 2011 2012 1Q 2013

Kama-Oil oil production, th. bbl per day


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Northern Caspian

V. Filanovsky field Supporting blocks are designated for the ice-resistant

stationary platform Building of infrastructure for the field

Yu. Korchagin field Drilling was completed in May and there were testing

works of 117 well with oil flow rate of 6,2 th. bbl perday

Caspian Sea

Filanovsky

Korchagin

0

30

60

90

2011 2012 1Q

2013

2013E 2014E 2015E

Oil production in Northern Caspian, th. bbl per day


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International projects: Iraq

West Qurna-2

Currently:

15 wells were drilled, drilling is beingcompleted by 5 oil rigs

Construction of oil preparation unit andoil gathering system, gas-turbine powerplant was completed by 70%, export

pipeline was completed by more than40%

First development stage - realization ofEarly oil Mishrif project is according tothe schedule. Commercial production isplanned for the end of 2013.

Compensation oil in 2014 is expected toamount to 70 mln bbl depending onprice

Mishrif Early OilPower PlantOver 50% CompletionConstruction completion- November, 2013

Mishrif Early Oil

Oil Treatment Plant andGathering SystemOver 50% Completion

Mishrif Early Oil30 km of PipelineCompleted


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International projects: Uzbekistan

0

5

10

15

20

25

2011 2012 1Q 2013 2014E 2015E

Marketable gas production in Uzbekistan, mcm per day

0

2

4

6

810

12

14

16

18

20

Western Siberia Uzbekistan

Net income per boe in 1Q 2013, $

Uzbekistan

GissarWells 45, 55 and 56 at Gambulak field and well 7 atDzharkuduk field are completedContractation of equipment construction within Fulldevelopment project is on track

KandymDrilling of 8 wells is completedKandym gas treatment plant projecting works are underway

4 wells are completed at Shady field


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3338

42

50 52

59

75

90

0

20

40

60

80

100

2005 2006 2007 2008 2009 2010 2011 2012

Dividend per share, rub.

Increasing Dividend Growth Rate

+13%

+27%

CAGR2012-2021:

15%E

40

+4%

First-ever interimdividends

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

20%


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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 good gaap

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