Growth of Hydrocarbon Production by 2.5%, Free Cash Flow of 25 Billion Rubles for Q2 2012

Rosneft published its consolidated IFRS financial results for Q2 2012 and H1 2012 on August 1, 2012.

Key financial and operating results

In H1 2012, hydrocarbon production (including production by subsidiaries and share in production by affiliates) increased by 2.5% compared to H1 2011, reaching 2,628 th. boepd. Crude oil production rose 2.0%, while commercial gas output grew 7.3%. The growth in crude oil production reflects an increase in production at Vankorneft and Verkhnechonskneftegaz fields. Gas production grew as a result of the launch of a compressor station at Purneftegaz in September 2011.

Refinery throughput at Russian and overseas refineries totalled 29.58 mln tonnes. The increase in refinery throughput by 12.4% in H1 2012 stems from the acquisition of a 50% stake in Ruhr Oel GmbH in May 2011.
Revenues from sales grew 18.3% in H1 2012 to reach 1,466 bln rubles thanks to increased sales volumes and higher oil and petroleum product prices.

Rosneft’s EBITDA in H1 2012 fell 26.6% on H1 2011 to 254 bln rubles. The figure was down largely because the Company began paying standard-rate mineral extraction tax (MET) and export duties for crude oil produced at the Vankor field. The impact of these changes is estimated at 96 bln rubles. EBITDA was also negatively affected by indexation of the base MET rate (minus 12 bln rubles) and a time lag on export duties (minus 19 bln rubles), which is expected to be offset in Q3 due to duty reduction. The 8% increase in pipeline tariffs on H1 2011 and 6% higher rail transport tariffs also had a negative impact on the Company’s financial results.

Net profit for H1 2012 fell 45.3% to 104 bln rubles. This larger decrease in net profit compared to EBITDA is mainly due to foreign exchange losses of 13 bln rubles due to significant exchange rate volatility in H1 2012.

Despite the challenging macroeconomic environment in Q2 2012, the Company generated free cash flow of 25 bln rubles, supported by lower working capital thanks to a reduction in accounts receivable and the sale of reserves built up in Q1 2012.

Commenting on the results, Rosneft President Igor Sechin said:

“Financial results of the first half of 2012 reflect the current economic situation, which is characterised by falling oil prices, higher export duties and considerable exchange rate volatility. To minimise the negative impact of this, we launched efforts to improve our corporate structure and boost efficiency in marketing and procurement.
We continued to focus on creating shareholder value by maintaining sustainable growth rates of oil production. We achieved higher-than-planned production growth at Vankor and stable production in our traditional regions. Based on our figures for the first half of 2012, we expect to exceed our initial crude production plan for the year.
In Q2, we also took a number of strategic steps to expand partnerships with international companies in hard-to-recover oil and offshore operations and stepped up cooperation with the Russian government to create a favourable tax regime for such projects.”

Rosneft Information Division
Tel.: +7 (495) 411 54 20
Fax: +7 (495) 411 54 21
August 1, 2012

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