Q1 2017 OPERATING RESULTS

• AVERAGE DAILY HYDROCARBON PRODUCTION AT 5.79 MMBOE
• LIQUIDS PRODUCTION INCREASED TO 4.62 MMBOED
• DEVELOPMENT DRILLING GROWTH BY 9% Y/Y
• GAS PRODUCTION INCREASE BY 2.9% Y/Y TO 17.2 BCM
• LIGHT PRODUCT YIELD REACHING 58.7%, REFINING DEPTH UP TO 74.0%
• FURTHER GROWTH IN SUPPLIES TO EASTERN ROUTES

 Upstream

The Company produced 70.3 mmtoe (5.79 mmboed) of hydrocarbons in Q1 2017. The growth in average daily production amounted to 11.1% y/y on the back of the acquisitions and greenfields launching.

Average daily liquids production decreased in Q1 2017 by a little more than 70 kboed vs. October 2016 due to external limitations for the Russian oil producers and unfavorable weather conditions. Nevertheless, the integration of acquired assets and the launch of new projects in the second half of 2016 let the Company increase the average daily output of liquid hydrocarbons in Q1 2017 by 13% y/y (2.2% growth assuming Bashneft consolidation starting January 1, 2016).

In Q1 2017, the Company increased the development drilling by 9% compared to Q1 2016 to 2.3 mln m in accordance with the annual targets. The share of in-house drilling service amounted to about 60%. New wells commissioning increased by 23% vs. Q1 2016 with maintaining horizontal wells share at 32%.

The main contribution to the organic production growth came from the Vankor cluster (+10.1%), Yuganskneftegaz (+0.7%), Samaraneftegaz (+3.2%), Rospan (+14.8%) and the start of production at the East Messoyakhskoye field in September 2016.

The Company continues active developing the Suzun and the East Messoyakhskoye fields. Cumulative output at the Suzunskoye field reached 2.7 mmt (1.3 mmt in Q1 2017). The field's infrastructure at 1^st and 2^nd OTF StartUp Complexes, the Suzun-Vankor oil pipeline, well pads and associated infrastructure facilities construction works are under way.

The cumulative output at the East Messoyakhskoye field reached 1.4 mmt (0.7 mmt in Q1 2017). It was supported by effective well interventions and modern production enhancement methods for hard-to-recover reserves.

As a part of pilot development of the Yurubcheno-Tokhomsky field, the East Siberian Oil and Gas Company produced the first 1 mmt of crude oil since the start of development. The Company continues building the main infrastructure units and field facilities. Rosneft is actively working to prepare the Yurubcheno-Tokhomskoye field for the launching.

In Q1 2017, the Company jointly with Statoil drilled the first exploration well in Samara region as a part of hard-to-recover hydrocarbon reserves exploration of Domanic layers. By 2020, the companies are planning to drill two more horizontal exploration wells and conduct extended research. The project pilot drilling opens a new area for cooperation between Rosneft and Statoil.

In Q1 2017 the Company maintained leading position in gas production among independent producers in Russia. Gas production reached 17.21 bcm, rising by 2.9% vs. Q1 2016. The growth was driven by launching of two wells in the northern tip of the Chayvo field (Sakhalin Island) in 2016, reaching the design capacity at Rospan's Novo-Urengoy gas and condensate treatment plant in August 2016, successful launching three new wells in the Tyumen suite of the Yem-Yegovskoye field in Q1 2017, as well as the increase in the gas production at the Severo-Varyoganskoye field due to new wells putting on stream and growing gas deliveries from the Van-Yoganskoye field to the Tyumen compressor station after the renovation.

In Q1 2017 3.5 th. km of onshore 2D seismic surveys and 4 th. sq. km of onshore 3D seismic surveys were acquired, exceeding the Q1 2016 results by 76% and 26% respectively. In 2017, the Company launched a seismic exploration program in a new region on the Taymyr peninsula. At present, over 2.5 th. km of 2D seismic surveys are underway. Rosneft is also increasing the volume of exploration drilling in new and traditional oil production regions. 24 E&A wells were tested with a 79% success rate. Eight new fields and one deposit were discovered.

On April 3, 2017, drilling started in the Khatanga subsoil area on the Laptev Sea shelf to make the northernmost well on the Russian Eastern Arctic sea shelf. The President of Russia Vladimir Putin launched the exploration drilling via a video conference with Rosneft CEO Igor Sechin who was on the shore of the Khatanga bay. Preparation for drilling was carried out by the Company in record time and in full compliance with the safety requirements. The well will be drilled to a target depth of 5 th. m. from the shore with a subsequent displacement under the water area. This technology makes it possible to save money, ensures economic efficiency, and meets high environmental standards.. Preliminary estimates suggest that the Laptev Sea’s total potential geological resources could come to 9.5 billion tons of oil equivalent.

The Khatanga-Winter-2017 ice exploration expedition organized by the Company with the participation of the Arctic Research Center in the framework of the Target Innovation Project has begun field research in the Khatanga Bay area and in the southern part of the Laptev Sea. The operations will be conducted from Rosneft's year-round scientific base on the shore of the Khara-Tumus Peninsula in the Khatanga Bay of the Laptev Sea. During the Khatanga-Winter-2017 expedition, scientists will study the morphometric parameters and dynamic characteristics of the ice cover, physical and mechanical properties of the ice, characteristics of the weather and water masses.

Downstream

In Q1 2017, refining throughput in Russia fell by 5.9% vs. Q4 2016 to 25.5 mmt. Whereas, taking into account the new assets operating results starting the beginning of 2016, on the backdrop of improving the market conditions, the parameter growth was 5.4% y/y.

With the actual integration of new assets in Q4 2016, the Q1 2017 growth of refining throughput of the Company's refineries in the Russian Federation was about 31% y/y and growth of the Company’s total refining throughput was 25% y/y.

Resulting from an optimization of the Company's refinery operations in Q1 2017, light product yield grew to 58.7%, and conversion rate to 74.0%.

In February 2017, as part of Bashneft integration into a single production chain of Rosneft plants, high-octane component deliveries started from the Ufa Refinery Group to the Rosneft refineries. A single production chain will significantly improve efficiency of refining and petrochemical facilities of the Company, reduce operating costs. Also, as part of optimizing the component flows between the Rosneft refineries in February 2017, Kuibyshev refinery began shipping MTBE of its own production to the Novokuibyshevsk refinery.

The Company continues to diversify oil supplies between the western and eastern destinations: Eastward shipments in Q1 2017 grew to 11.3 mmt compared to 10.9 mmt in Q1 2016.

As part of the inter-governmental agreement between the Russian Federation and the Republic of Cuba, in March Rosneft and the authorized Cuban company Cubametales signed a contract for the supply of about 250 th. tons of oil / diesel fuel to Cuba.

To expand cooperation with Turkish partners, agreements for the supply of oil products in 2018-2020  between Rosneft and Demiroren Group Companies, Rosneft and BA Gas Enerji Sanayi ve Ticaret A.S. were signed in March. The new agreements provide the foundation for signing legally binding contracts for the oil products supply by 2020 of up to 4.6 mmt to Demiroren Group Companies and up to 6 mmt to BA Gas Enerji Sanayi ve Ticaret A.S. annually.

As a result of Bashneft acquisition high marginal retail sales volumes in Q1 2017 increased by 10% vs. Q1 2016 level. Implementation of loyalty programs «Family Team» and «BP Club» was continued: the programs were implemented in 31 region of the Russian Federation, involving about 4 mln participants. On 1.5 th. retail sites we installed cash-register equipment that allows online transactions data transfer to tax authorities. Main focus in 2017 is aimed at 100% automatization of parameters measurement on all material retail chain flows, control procedures in commercial and accounting systems of oil depots and retail sites, implementation on gasoline tanker trucks an electronic system of guaranteed oil products delivery on quantity and quality.

International operations, assets acquisition and cooperation with partners

As part of the strategy to expand competencies in the exploration and production of hydrocarbons outside Russia, the Company started geological exploration under projects in Iraq and Brazil where it acts as an operator. Based on the results of exploratory drilling, the geological data obtained will be evaluated to determine the potential of hydrocarbon resources and the prospects for further development of the projects.

In April 2017 Rosneft closed the acquisition of a 100% stake in the Kondaneft project, which is developing the Kondinsky, Zapadno-Erginsky, Chaprovsky and Novo-Endyrsky license areas in the Khanty-Mansy Autonomous District. This acquisition is in line with the Company's strategy to maximize the efficiency of resource development in Rosneft's main oil and gas producing region with developed infrastructure. The start of production in the Kondaneft project will launch the development of one of the most promising production clusters in the Russian oil and gas industry.

In February Rosneft and the Iraqi Kurdistan Regional Government signed an agreement to cooperate in the exploration, production, infrastructure, logistics and trading of hydrocarbons. According to the terms of the agreement, the parties entered into a sale and purchase contract which considers prepayments and sale of oil to Rosneft during 2017-2019. A mutually beneficial partnership will provide feedstock for the Company's expanding international refining network and ensure its efficiency.

In January, the Company fully completed the withdrawal from the share capital of Saras S.p.A., having sold a 12% stake. This sale is part of the program to optimize the Company's asset portfolio, which is also due to external constraints making it impossible to execute the original plans.

In the beginning of the year, Rosneft and the Chinese National Oil and Gas Corporation (CNPC) signed an supplementary agreement to increase the supply of oil transiting through Kazakhstan and to extend the contract from 2013 to the end of 2023. According to the agreement, supplies to this destination will reach 91 mmt during a 10-year period, which will allow further planned increases of sales to a highly marginal Asian destination.

Key operational indicators for Q1 2017:

_{*According to management data} 

Information Policy Division
Rosneft
Tel.: +7 (495) 411 54 20
Fax: +7 (495) 4115421
May 3, 2017

These materials contain statements about future events and expectations that are forward-looking in nature. Any statement in these materials that is not a statement of historical fact is a forward-looking statement that involves known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements expressed or implied by such forward-looking statements to differ. We assume no obligations to update the forward-looking statements contained herein to reflect actual results, changes in assumptions or changes in factors affecting these statements.