You are on page 1of 27

1Q 2013 Financial Results

(US GAAP)

Vice-President Leonid Fedun


Moscow, May 2013

Forward-Looking Statements

Certain statements in this presentation are not historical facts and are forward-looking. Examples of such forward-looking statements include, but are not limited to: projections or expectations of revenues, income (or loss), earnings (or loss) per share, dividends, capital structure 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 are intended 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 and specific, and risks exist that the predictions, forecasts, projections and other forward-looking statements will not be achieved. You should be aware that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements, 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 other uncertainties and events, especially in light of the political, economic, social and legal environment in which we operate. 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 events or otherwise. We do not make any representation, warranty or prediction that the results anticipated by such forward-looking statements will be achieved, and such forward-looking statements represent, in each case, only one of many possible scenarios and should not be viewed as the most likely or standard scenario.

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
3

LUKOIL Presents High Financial Efficiency Among Russian Peers

1Q 2013 Hydrocarbon production, mln boe

1Q 2013 Net income, $ bln


Rosneft

Rosneft

278

1.7*
2,6

3,3

LUKOIL

198

LUKOIL

Novatek

114

Gazprom Neft

1,3

Gazprom Neft
0 50 100

112
150 200 250 300

Novatek
0

0,7
1 2 3 4

LUKOIL is the leader in financial efficiency in Russian Oil & Gas industry
* Excluding gain from revaluation of non-controlling interest in OJSC Verkhnechonskneftegaz to its fair value. 4

LUKOIL Presents High Financial Efficiency Among Russian Peers

1Q 2013 EBITDA per boe, $

1Q 2013 Net income per boe, $

LUKOIL

24

LUKOIL

13

Rosneft

15.3*

21

Rosneft

6.3*

12

Gazprom Neft

20

Gazprom Neft

12

Novatek
5

10
10 15 20 25 30

Novatek
5

7
7 9 11 13 15

LUKOIL is the leader in financial efficiency in Russian Oil & Gas industry
* Excluding gain from revaluation of non-controlling interest in OJSC Verkhnechonskneftegaz to its fair value. 5

Robust Competitive Position in the Industry Globally


45 40 35 30 25 20 15 10 5 0 2003
2004 2005 2006 2007 2008 2009 2010
LUKOIL

ROACE*, %

Lifting costs per boe, $


20 18 16 14 12 10 8 6 4 2 0 2006

2011

2012

Oil & Gas Majors

1Q 2013

2007

2008

2009

2010

2011
LUKOIL

2012

1Q 2013

Oil & Gas Majors

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

35 30 25 20 15 10

Net income per boe, $

Total

Exxon

Shell

40 35 30 25 20 15 10 5 0
Chevron Conoco Phillips

BP

LUKOIL

ENI

5 2003

2004

2005

2006

2007

2008

2009

2010
LUKOIL

2011

2012

Oil & Gas Majors

1Q 2013

* Source: Companies financial statements. Oil & Gas majors include ExxonMobil, Chevron, Shell, ConocoPhillips,Total, Eni. 6

Macroeconomic and Tax Environment


1Q 2013 to 1Q 2012
Positive factors
Fuel oil (Russia); 18,4% Diesel fuel (Russia); 8,4% High-octane gasoline (Russia); 6,3% Gasoline (Europe); -2,0% Diesel fuel (Europe); -3,7% Urals; -5,3% Fuel oil (Europe); -10,6%

R E V E N U E E X P E N S E S

Negative factors

Railroad tariffs; 9,4% Freight rates (crude oil); 3,3% Transneft tariffs; -1,4% Real ruble appreciation; 6.6% Freight rates (petroleum products); -2,8%

T A X
-20%

Mineral extraction tax ($); -1,0% Crude oil export tariff ($); 1,4%
Dynamics of rouble exchange rate for FX differences; -11,2%

0%

20%

$ million 2 000 2 500 3 000 3 500 4 000

3,789*

1Q 2012 Net income

171

Decrease in taxes other than income taxes (including excise and export tariffs)

(422)

Increase in income tax expense

(274)

DD&A growth

1Q 2013 Net Income Reconciliation

(235)

OPEX increase

(226)

Net decrease in revenue (less purchases of oil, gas and petroleum products)

(199)

Increase of other expenses

(23)

*1Q 2012 results were affected by leap year effect and currency translation gain
Decrease of equity share in income of affiliates

2 581

1Q 2013 Net income

Main Operating Results


1Q 2013 to 1Q 2012
Crude oil export; -13.4%

Positive factors Negative factors

Petroleum product export; -5.5%

Average daily liquid hydrocarbon production; -0.3% Average daily hydrocarbon production; -0.1%

Average daily refining throughput; 0.7%

Average daily marketable gas production; 0.9%

Domestic sale of petroleum products; 13.6% -18% -12% -6% 0% 6% 12% 18%

Dynamics of operating results was affected by the leap year effect


9

Hydrocarbon Production

Hydrocarbon production, mln boe per day


2,20

+2.5%
2,18

2,16

2,14

2,12

1Q 2012

2Q 2012

3Q 2012

4Q 2012

1Q 2013

After stabilization in 2012 LUKOIL hydrocarbon production continues to show a steady growth in 1Q 2013
10

Increasing drilling efficiency

th. m
12 10 8

Average commercial rate of drilling for one drilling unit per month (exploration & production drilling)
17% 16% 75%

Mln m 5 4 3 2 1 0

Drilling (exploration & production drilling)


17% 32% 2013A 2011 2012 1Q 2013
11

9%

6 4 2 0 2010 2011 2012 1Q 2013

2010

An increase in drilling rate of one drilling unit under per-day payment leads to decreased cost of one meter drilled

LUKOIL Increases Production of High-Octane Gasoline In Russia


Production of high-octane gasoline in Russia, mln tons
1,8

1,7

+7.3%
1,6

1,7

1,6

1,5

1Q 2012

1Q 2013

Production of high-octane gasoline in Russia, mln tons


8

Daily refinery throughputs at the Group and affiliated refineries increased by 0.7%, including growth of 1.1% at Russian refineries

CAGR 10%

2008

2009

2010

2011

2012

12

Gasoline quality in Russia


Transition to European quality standards in Russia
180 160 140 120

Excise tax savings, $/tons


EURO-5 - EURO-2 EURO-5 - EURO-3 EURO-5 - EURO-4

EURO-5

Diesel
EURO-4

100 80 60
Regulations

Gasoline
EURO-3

40 20 0 2011 2012
Gasoline

2013

2014
Diesel fuel

2015

LUKOIL has a competitive advantage in fuel quality


Excise tax differentiation due to quality lets us monetize it today
Euro

13

Financial Results
1Q 2013 33,770 (2,450) 4Q 2012 36,019 (2,468) , % (6) (1) Sales OPEX Taxes other than income tax (including excise and export tariffs) Income before income tax Net income Effective income tax rate (4) 2 Basic EPS, $ EBITDA
$ million

1Q 2013 33,770 (2,450)

1Q 2012 35,261 (2,215)

, % (4) 11

(8,884)

(8,996)

(1)

(8,884)

(9,055)

(2)

3,374 2,581 23% 3.42 4,775

3,375 2,688 20% 3.56 4,666

0 (4)

3,374

4,020

(16)

2,581

3,789

(32)

23%
3.42 4,775

9%*
4.90 5,346 (30) (11)
14

* 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

Operating Expenses
1Q 2013 1,009 508 121 338 192 79 203 2,450 15,103 4Q 2012 1,040 561 126 327 156 73 185 2,468 17,021 1Q 2013 1,009 508 121 338 192 79 203 2,450 15,103 1Q 2012 906 315 263 287 178 74 192 2,215 16,368

, % (3) (9) (4) 3 23 8 10 (1) (11)

$ million

, % 11 61 (54) 18 8 7 6 11 (8)
15

Hydrocarbon extraction expenses Own refining expenses Refining expenses at third parties and affiliated refineries Expenses for crude oil transportation to refineries Power generation and distribution expenses Petrochemical expenses Other operating expenses Total Cost of purchased crude oil, gas and products

* Including processing expenses at ISAB

$ million

2,215

1Q 2012 OPEX

Operating Expenses

Increase in hydrocarbon extraction expenses

2 050

2 100

2 150

2 200

2 250

2 300

2 350

2 400

2 450

2 500

1Q 2013 Hydrocarbon extraction

+4.7% +2.3%

to 4Q 2012 and reached $5.3 per boe

expenses decreased by 1.5% compared

Increase in expenses for crude oil transportation to refineries

Increase in cost of processing operations at ISAB

+2.0%

4,0

4,5

5,0

5,5

6,0

+0.8%

Increase in power generation, distribution and petrochemicals expenses

4,7

1Q 2012

5,0

2Q 2012

+0.5%

Increase in other operating expenses

5,1

3Q 2012
+0.3%

Lifting costs per boe, $

Increase in refining expenses at own, third parties and affiliated refineries

5,4

4Q 2012

2,450

1Q 2013 OPEX

5,3

1Q 2013

16

SG&A and Transportation Expenses


Transportation expenses, $ million
2 000 1 200

SG&A expenses, $ million


1 090 932
900

1 600
1 200

1 605

1 497

1 523

1 546

1 650
829

904

866

600 800 400 0 300

1Q 2012

2Q 2012

3Q 2012

4Q 2012

1Q 2013

1Q 2012

2Q 2012

3Q 2012

4Q 2012

1Q 2013

1Q 2013

4Q 2012

, %

$ million

1Q 2013

1Q 2012

, %

1,650 866 2,516

1,546 1,090 2,636

7 (21) (5)

Transportation expenses Selling, general and administrative expenses Total

1,650 866 2,516

1,605 829 2,434

3 4 3

17

Robust Financial Position


4 3 2 1 0 -1

Total debt and net debt, $ bln

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 10year $1.5 bln of 4.6% notes.

2,9

2,7

-2
-3 -4

3.7
2012

3.9
1Q 2013

-5

Cash & Cash equivalents

Net debt

50 40 30 20 10
0 2007

Debt-to-capital ratio, %

Net debt to EBITDA


1.0 0.8 0.6 0.4 0.2 0.0 2007

2008

2009

2010
LUKOIL

2011

2012

1Q 2013

2008

2009
LUKOIL

2010

2011
Majors average

2012

1Q 2013

Oil & Gas majors

Majors average

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

18

CAPEX Breakdown
1Q 2013 4Q 2012 , %
$ million

1Q 2013

1Q 2012

, %

2,537 1,874
663 630 471 159 3 3 0 121 113 3,404

2,606 1,957
649 788 610 178 27 15 12 191 98 3,710

(3) (4)
2 (20) (23) (11) (89) (80) (100) (37) 15 (8)

Exploration and production Russia


International Refining and marketing Russia International Chemicals Russia International Power generation Other Total (cash and non-cash)

2,537 1,874
663 630 471 159 3 3 0 121 113 3,404

2,007 1,634
373 346 167 179 10 6 4 57 42 2,462

26 15
78 82 182 (11) (70) (50) (100) 112 169 38

19

Oil pipeline Kharyaga Yuzhnoye Khylchuyu has been Launched

Barents Sea

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

20

Acquisition of Samara-Nafta

Reserves C1+C2 : Acquisition cost :


600 mln bbl $2.05 bln ($3.4 per bbl)

Exploration and development licenses for more than 60 fields within 23 license blocks LUKOIL refining, petrochemical and transportation capacities in the region will create visible synergies

Samara region

Samara-Nafta oil production, th. bbl per day

50

CAGR 10%

40

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

30

2009

2010

2011

2012
21

Kama-Oil
In April 2013 LUKOIL acquired 49.99% of Kama-oil increasing ownership to full control

Kama-Oil was created in 2007 as an oil exploration and production operator in Perm region Owns 6 licenses Reserves C1+C2: 175 mln bbl Currently 3 oilfields are producing and 3 license areas are being explored and prepared for production
Kama-Oil oil production, th. bbl per day

4 3 2 1 0

2010

2011

2012

1Q 2013
22

Northern Caspian
Oil production in Northern Caspian, th. bbl per day

90
Korchagin Filanovsky

60 30 0

2011

2012

Caspian Sea

1Q 2013

2013E 2014E 2015E

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 per day
23

International projects: Iraq West Qurna-2


Currently: 15 wells were drilled, drilling is being completed by 5 oil rigs

Mishrif Early Oil

30 km of Pipeline Completed

Mishrif Early Oil

Oil Treatment Plant and Gathering System Over 50% Completion

Construction of oil preparation unit and oil gathering system, gas-turbine power plant was completed by 70%, export pipeline was completed by more than 40%

Mishrif Early Oil

Power Plant Over 50% Completion Construction completion - November, 2013

First development stage - realization of Early oil Mishrif project is according to the schedule. Commercial production is planned for the end of 2013. Compensation oil in 2014 is expected to amount to 70 mln bbl depending on price
24

International projects: Uzbekistan


Marketable gas production in Uzbekistan, mcm per day 25 20 15 10

5
0 2011
Net income per boe in 1Q 2013, $

2012

1Q 2013

2014E

2015E

20 18 16 14 12 10 8 6 4 2 0 Western Siberia Uzbekistan Uzbekistan

Gissar Wells 45, 55 and 56 at Gambulak field and well 7 at Dzharkuduk field are completed Contractation of equipment construction within Full development project is on track Kandym Drilling of 8 wells is completed Kandym gas treatment plant projecting works are underway 4 wells are completed at Shady field
25

Increasing Dividend Growth Rate


Dividend per share, rub.
100
+27% 20% CAGR 2012-2021: 15%E

80
+13% +4%

90 75

60 59 40 33 38 50 42 52
First-ever interim dividends

20

40

2005

2006

2007

2008

2009

2010

2011

2012

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

26

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

27