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3Q 2013 Financial Results

(US GAAP)

New York, November 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.

3Q 2013 Financial Highlights


Q-o-Q

Net income $3,105 million Basic earnings per share $4.11 Net income per boe of production $15.5 EBITDA $5,472 million FCF $1,578 million

+48% +48% +47% +26% +440%

Increasing Dividend Growth Rate


Dividend per share, rub.
120

CAGR 15%E

90
+20% +27%

90 75

60

59 52 38
2006

30

42

50
2009 2010

+25%

50

40
2011 2012 2013 Level that corresponds to 15% CAGR

2007 2008 Interim dividends

In October we paid the second interim dividends 50 RUB per share

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


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LUKOIL Shares Get More Attractive Due to Dividends


Dividend yield, %
5 4.2 4 3 2 2008 2009 2010 2011 2012 2.9 3.5 3.5

4.9

Dividend payout, %

16%

18%

23%

28%

2008

2010

2012

1H 2013E
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LUKOIL Presents High Financial Efficiency Among Russian Peers

9M 2013 hydrocarbon production, mln boe

9M 2013 net income, $ bln

Company 1

1,163

LUKOIL

7.8

LUKOIL

598

Company 1

6.5*

12.9

Company 2

339

Company 2

4.3

Company 3
0 200

324
400 600 800 1000 1200 1400

Company 3
0

1.8
5 10 15

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 Among Russian Peers


9M 2013 EBITDA, $ per boe 9M 2013 Net income, $ per boe

LUKOIL

24.4

LUKOIL

13.0

Company 2

21.1

Company 2

12.6

Company 1

15.4*

20.9

Company 3

5.6

Company 3
6

8.5
11 16 21 26

Company 1
4

5.5*
6 8 10

11.1
12 14 16

LUKOIL maintains leadership in financial performance in Russian oil and gas industry
* Excluding one time paper gain from assets revaluation
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Macroeconomic and Tax Environment


9M 2013 to 9M 2012
Positive factors
Fuel oil (Russia), 17.8% Diesel fuel (Russia), 9.0% High-octane gasoline (Russia), 3.2% Urals, -3.1% Diesel fuel (Europe), -4.1%

R E V E N U E

Negative factors

Gasoline (Europe), -4.8%


Fuel oil (Europe), -7.6%

E X P E N S E S T A X
-20%

Freight rates (petroleum products), -7.2%

Pipeline tariffs, -1.0%


Freight rates (crude oil), 2.0% Real ruble appreciation, 5.1% Railroad tariffs, 6.1% Crude oil export tariff ($); -3.4% Mineral extraction tax ($), 2.2% 0% 20%
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Main Operating Results


9M 2013 to 9M 2012, %
Export of refined products from Russia, 5.4%

Refined products production , 2.3%

Production of gas available for sale , 2.2%

Refining throughput, 1.9%

Domestic sales of petroleum products, 1.5%

Daily hydrocarbon production, 1.1%

Crude oil export, -11.5%

-12%

-6%

0%

6%
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Main Operating Results


Hydrocarbon production, mln boe per day

9M 2013

2.191

9M 2012

2.168

+1.1%

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

Refined products production, mln t

9M 2013

48.0 46.9

9M 2012

+2.3%

The increase in refined products production was due to increase in production volumes at Nizhny Novgorod refinery after major repair works in 2012

Crude oil export, mln bbl

9M 2013

175.6

-11.5%
198.4

The decrease of crude oil export was a result of higher sales in Russia following the increase in domestic demand and increase of throughput at our domestic refineries

9M 2012

10

$ million 10,000 7,000

8,000

9,000

8,316

9M 2012 Net income

794

Increase in revenue less purchases of oil, gas and petroleum products

184

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

85

Decrease in interest expense

9M 2013 Net Income Reconciliation

(777)

Increase in DD&A

(589)

OPEX increase

(178)

Increase in income taxes

(45)

Increase of other expense and decrease in other income

7,790

9M 2013 Net income

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Hydrocarbon Production

Hydrocarbon production, mln boe per day


2.20

2.19

2.191
+1.1%

2.18

2.17

2.169
2.16 9M 2011

2.168
9M 2012 9M 2013

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LUKOIL-KOMI (Timan-Pechora)

LUKOIL-Komi oil production, Kbpd


290

+3.3%

LUKOIL-Komi

285 280 275 270


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

2012
East-Lambeyshorskoye field oil production, Kbpd 25 20 15 10 5 0 12 Oshskoye field oil production, Kbpd 54 Usinskoye field oil production, Kbpd

2013
Yaregskoye field oil production, Kbpd

+120%

11 11 10 10 9 9

+17.9%

+4.5%

11 10 9 8
sep 1 12 sep2 13

52 50 48

+20%

sep 1 12

sep 2 13

sep 1 12

sep2 13

sep 1 12

sep 13 2

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Promising fields in Timan-Pechora


East-Lambeyshorskoye field
25 20 15 10 Oil production, Kbpd

81 mln boe proved reserves 2012 production started

5
0 jan feb mar apr may 2012 jun jul aug sep okt 2013 nov dec

Oshskoye field

Oil production, Kbpd


12 11 10

62 mln boe proved reserves 2008 production started

8
7 6 5 2012 2013

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


throughput growth resulting in additional $350-400 mln of operating cash flow
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Northern Caspian: Korchagin field


Korchagin field oil production, Kbpd

30 25 20 15 10 9M 2012 9 2013

+104%

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 was launched in 3Q 2013. By the end of 2013 wells 109 and 115 are planned to be launched and well 106 is planned to be drilled.

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Northern Caspian: Filanovsky field

LUKOIL selected contractors to construct ice-resistant stationary platform No. 2 (IRP-2 ) and living quarters module platform 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 facilities from the Northern Caspian fields will be ready for production by the end of 2015.

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Tax Initiatives
Implemented since January Korchagin field
A lowered CED is kept in force for 2Q-3Q 2013

2013
A lowered CED

Approvals expected Hard-to-reach areas

Hard-to-recover reserves
A lowered MET for low permeability collectors (Khadum, Bazhen, Abalaksk, Domanik, Tyumen) Possibility to establish a special CED for Tyumen

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

Offshore fields
A fiscal system designed for offshore projects of the 2nd category of complexity for the new Caspian projects

Gas MET formula


Taking into account export opportunities and field complexity

In discussion with government authourities 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)


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LUKOIL Increases Production of High-Octane Gasoline In Russia


2.0

Production of premium and higher quality gasoline in Russia, mln tons

Production of high-octane gasoline in Russia, mln tons


9 8 7

2.0

1.9

+10%
1.8

+20%

1.8

6 5

1.7

9M 2012

9M 2013

2008

2010

9M 2013A

2016E

Refinery throughputs at the Group and affiliated refineries increased by 1.9%, including growth of 2.8% at Russian refineries

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Financial Results
3Q 2013 36,737 2,514 2Q 2013 35,053 2,516 , % 5 0 Sales OPEX Taxes other than income tax (including excise and export tariffs) Income from operating activities Income before income tax Net income Basic EPS, $ EBITDA
$ million

9M 2013 105,560 7,480

9M 2012 103,152 6,891

, % 2 9

9,255

9,183

27,322

27,506

(1)

3,657 3,853 3,105 4.11 5,472

2,856 2,843 2,104 2.79 4,359

28 36 48 48 26

9,891 10,070 7,790 10.32 14,606

10,695 10,348 8,316 10.91 14,249

(8) (3) (6) (5) 3


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Operating Expenses
3Q 2013 1,103 540 113 307 160 79 212 2,514 17,176 2Q 2013 1,078 555 130 335 172 73 173 2,516 16,462 9M 2013 3,190 1,603 364 980 524 231 588 7,480 48,741 9M 2012 2,821 1,108 736 914 463 230 619 6,891 47,127

, % 2 (3) (13) (8) (7) 8 23 0 4

$ million

, % 13 45 (51) 7 13 0 (5) 9 3
20

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 cost of processing operations at ISAB

$ million

6,891

9M 2012 OPEX

6,000
7.1% Increase in refining expenses at own refineries Increase in hydrocarbon extraction expenses 5.3% 1.8% ost of processing operations at ISAB Increase in expenses for crude oil transportation to refineries 1.0%

7,000

8,000

9,000

Operating Expenses

LUKOIL is at a highly competitive position based on lifting cost, which was $5.5 per boe for 9M 2013
Increase in power generation and petrochemicals expenses Decrease in refining expenses at third parties and affiliated refineries Decrease in other operating expenses 9M 2013 OPEX 21 0.9% (7.1%) (0.5%)

7,480

Lifting Costs

Lifting cost per boe, $ 6 4 2 0


4Q 2012 1Q 2013 2Q 2013 3Q 2013
5.4 5.3 5.6 5.7

Power consumption constitute significant share of lifting cost

LUKOIL shows high efficiency in cost management: while power


Russian average power tariff for industrial consumers, $/kWh 0.20 0.18 0.16 0.14 0.12
9 2012
Source: Federal Service for Tariffs of Russia 22

tariffs increased by 33% y-o-y,

+33%

lifting cost in 9M 2013 was


0.19

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

0.14
9 2013

SG&A and Transportation Expenses


Transportation Expenses (3q 2013 to 3q 2012)
8% 4% 0% -4% -8%
0

SG&A expenses, $ million


1,200

6%
2%

1,090 904 866

972

979

900

-3%

-1%

-1%

-1%

600

300

3Q 2012

4Q 2012

1Q 2013

2Q 2013

3Q 2013

Transportation volume

Tariff

3Q 2013

2Q 2013 1,562 972 2,534

, % (4) 1 (2)

$ million

9M 2013

9M 2012 4,625 2,665 7,290

, % 2 6 3

1,503 979 2,482

Transportation expenses Selling, general and administrative expenses Total

4,715 2,817 7,532

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Robust Financial Position


4 2 0 -2 -4 -6 -8

Total debt and net debt, $ bln

LUKOIL net debt remains low 3.2 3.4 In 2Q 2013 LUKOIL successfully issued $3 bln of eurobonds LUKOIL net debt decreased by $141 mln (-2%) for 3q 2013

6.0 6.2
6 2013
9 2013

Cash & Cash equivalents

Net debt

60
50

Debt-to-capital ratio, %
1,0

Net debt to EBITDA

0,8
0,6

40
30

20
10 0 2007
Majors

0,4
0,2

2008

2009

2010
LUKOIL

2011

2012
Average

9M 2013

0,0 2007

2008

2009
LUKOIL

2010

2011
Majors

2012

9M 2013

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

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CAPEX
3Q 2013 2,788 1,947 841 766 487 279 19 2Q 2013 , % (4) (5) (4) 57 51 68 (41)
$ million

9M 2013 8,243 5,866 2,377 1,885 1,281 604 54

9M 2012 6,367 5,128 1,239 1,219 829 390 63

, % 29 14 92 55 55 55 (14)

2,918 2,045
873 489 323 166 32 31 1 52 136 3,627

Exploration and production Russia


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

18
1 86 96 3,755

(42)
0 65 (29) 3

52
2 201 345 10,728

47
16 312 179 8,140

11
(88) (36) 93 32

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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

Environmental spending, bln USD


5

4.5
4

3.6

Recultivation

2.3
2

1.5

1995-2003

2004-2008

2009-2013

2014-2018

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Environmental Safety is Our Priority


2014-2018 Environmental Safety Program: Air Water
Reduction of air emissions Additional produced water conditioning Reduction of water usage Waste disposal Including those accumulated before privatization Remediation of disturbed and contaminated lands Liquidation of waste pits Maintenance overhaul and replacement Diagnostics Inhibitory protection by 100 th. t 7 mcm by 8 mcm 900 th. t 580 th. t 115 km 1 th. 4 th. km 31 th. km 20 th. km

Land

Pipelines

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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

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