OPERATING RESULTS FOR Q1 2018

• Q1 2018 AVERAGE DAILY HYDROCARBON PRODUCTION AT 5.71 MMBOE, CLOSE TO Q1 2017 LEVEL             
• LIQUIDS PRODUCTION INCREASED BY 0.3% QoQ
• NEW UPSTREAM PROJECTS CAPACITY GROWTH IN LINE WITH THE APPROVED PLANS
• Q1 2018 GAS PRODUCTION AMOUNTED TO 16.9 BCM
• REFINING QUALITY IMPROVEMENT: LIGHT PRODUCTS YIELD REACHING 58.8%, REFINING DEPTH – 75.4%

Upstream

Hydrocarbon production reached 5.71 mmboed in Q1 2018, remaining close to Q4 2017 level.

Q1 2018 average daily liquids production grew 0.3% QoQ to 4.57 mn bbl, but declined 1.2% YoY constrained by the Company’s production cut obligations under the agreement with the OPEC countries and major oil producing non-OPEC countries. Taking into account these external limitations, the Company seeks flexible solutions in the production management approach based on the projects economic efficiency, meeting all the obligations and qualitative risk management. It gives the management a certain degree of comfort in future timely utilization of spare capacity, exceeding 100 kbpd at the end of 1Q18.

Q1 2018 development drilling was at 2.8 mln m with in-house drilling share remaining at 60%. The number of new wells commissioned increased by 22% with horizontal wells share up to 39% аnd the number of new horizontal wells with multistage fracs jumping by more than 65% YoY.

RN-Yuganskneftegaz, the largest asset of the Company demonstrates a stable production growth. On the back of the advanced drilling technology application and successful development of the Tyumen suite last year the oil output is sustainably exceeding 190 ktpd, or up by 10.8% YoY.

Samotlor also started improving the production trend with the investment incentives in place and an advance revision of the development program. Q1 2018 oil output at the field rose by 0.3% after several years of 3-5% decline.

The Company keeps developing the major projects successfully. The production level at the greenfields, including the Kondinskoye, the Yurubcheno-Tokhomskoye and the Srednebotuobinskoye fields exceeded 100 kbpd.

Development drilling, setup of new well pads and infrastructure facilities are ongoing, the gas-turbine power plant construction work is near the completion at the Kondinsky field of the Erginsky Cluster. The work is conducted according to the approved production program under previous investment decisions. A horizontal well with a start-up oil flow rate of 240 tpd was commissioned at the field, average flow rate in the region was at ~30 tpd in 2017. A 7-stage frac with a proppant volume of 500 tons was performed at the field. Drilling rate was at 4.8 th. m / rig-month. Advanced technologies of hard-to-recover reserves extraction are applied at the Erginsky project, including real-time controlled horizontal drilling, multistage fracturing with ultra-strong polymer proppant, and other oil recovery enhancing technologies. The Company continues exploration and appraisal activity at all license areas to confirm geological structure of productive formations and prepare reserves for the full-scale development drilling.

At the East Siberian Yurubcheno-Tokhomskoye field construction and installation of the first priority facilities are at the final stage, the preparation started for commissioning of the second stage facilities in the test mode, development drilling is under way. Construction of the second multilateral well was completed in January. Well testing resulted in high oil flow rates at 289 tpd, which is over twice the amount than on the neighboring wells.  A new pressure managed drilling technology involving injection of nitrogen, an inert gas, into drill strings, was used to drill the multilateral well. Innovation technologies have been extensively used in the field to increase the coverage of the productive formation and to increase oil recovery factor.

Infrastructure facilities construction and development drilling are ongoing at the Srednebotuobinskoye field as part of the second stage start-up preparation. The program of pilot oil production started at the Osinsky horizon with hard-to-recover reserves. As of the end of March 2018 daily oil output exceeded 7 kt.

The Tagul, the Russkoye and the Kuyumba fields development including the construction of the main infrastructure facilities development drilling is in line with the schedule.

Q1 2018 gas production amounted to 16.87 bcm demonstrating a 2.0% decrease YoY. Associated petroleum gas (APG) utilization level was at 85.7% in Q1 2018.

In December 2017, the gas production at the Egyptian offshore Zohr field started. Five development wells have been commissioned at the field with the gas output at 21 mmcmpd (the whole project, ~4 mmcmpd in the Company's share). Q1 2018 gas production reached  ~0.9 bcm (the whole project, or ~160 mmcm in the Company's share). In late April 2018, the new gas processing facility was commissioned (Train 1). In the beginning of May, the next gas processing facility was launched (Train 2). This allows to increase the current capacity up to 34 mmcmpd (the whole project, ~7 mmcmpd in the Company's share) in the nearest future. In accordance with the project operator plans, after the commissioning of four gas processing trains, development wells and marine infrastructure facilities (pipelines, control systems) completion the daily production is to exceed the planned levels by the end of 2018.

3.6 th. km onshore of 2D seismic surveys and 4.7 th. sq. km of 3D seismic surveys were conducted in Q1, or up by 3% and 18% YoY respectively. 14 exploration wells were completed in total with a 86% success rate. Exploration activity conducted in Q1 2018 resulted in discovery of 26 new deposits. 

Refining, Commerce and Logistics

Q1 2018 oil refining throughput at Company’s refineries in Russia amounted to 24.7 mmt, declining by 2.6% QoQ due to optimization of refineries' utilization rate in current macro environment with the objective of ensuring an efficient refining level with regard to the secondary processes optimum utilization taking into account the requirements to fully meet domestic demand in high-quality motor fuels and refineries repair schedule.

The Company boosted the light product yield to 58.8% (+0.1 p.p. YoY) and the refining depth to 75.4% (+1.4 p.p. YoY) on the back of modernization program progress.

In March 2018, Rosneft produced the first batch of high-octane motor gasoline AI-100 at the Ryazan Refinery. The fuel ensures the best work of high-power engines and improves their performance. The product has also better environmental parameters. The first batch of high-octane fuel has been supplied for LADA Sport ROSNEFT racing team. Since season 2018 high-octane motor gasoline AI-100 produced by the Company has become an official fuel of Russia-based race of touring car championship.

The first batch of a new type of Arctic diesel fuel (ADF) with a lower filterability temperature (-50^о С) limit was shipped at the Company’s Komsomolsk Refinery in February 2018. Production of Class 3 winter diesel fuel (WDF) is under development. These types of products are intended for the Far North and Far East regions. 

The Ryazan Refinery conducted an upgrade of on-spot product loading units and the automation of the process to load light products into the rail tankers, significantly improving the industrial and environmental safety level.  

As part of Rosneft import substitution program, the catalysts purchased for the hydrogen unit of the Kuibyshev Refinery were substituted with catalysts produced by the Angarsk Plant of Catalysts and Organic Synthesis. 

As part of  international crude trading development and maintaining supplies through high-marginal channels, the Company concluded a contract with TOTAL OIL TRADING SA to supply crude via Druzhba pipeline to Germany in the amount of 4.8 - 10.8 mmt for 2 years.

The Company continued to increase crude supplies in the eastern destination: Q1 2018 shipments increased by 19.5% to 13.5 mmt YoY.

In Q1 2018, the products sales through the high-margin retail channel increased by 3.7% YoY partly due to emerging growth in industrial production and truckage turnover in the beginning of 2018. Also, additional incentive for fuel sales growth was diesel fuel quality produced by the Company, specifically its low-temperature properties which represent competitive advantage during winter-and-spring season and ensure demand. The revenue from associated products sales rose by 2% YoY due to new product mix policy on all the Company’s retail sites.

After the roll-out of the new loyalty program was completed in 57 regions of the Russian Federation, the work continued to increase the number of participants of two loyalty programs "Family team" and "BP Club" through targeted promo. As of March 31, 2018, 6.8 million participants are involved.

The Company constantly controls fuel quality sold on its retail sites using in-house mobile laboratories. From the year beginning fuel quality control is conducted in all regions of the Company’s retail chain presence.

As part of multi-fuel supply development, 3 retail sites were brought into testing operations in Ulyanovsk and Voronezh to sell compressed natural gas as a motor fuel. Reconstruction of another 8 filling stations is expected to be completed in the near future.

International operations

Rosneft Deutschland GmbH, subsidiary of the Company, and German BITUMINA Handel GmbH & Co. KG, subsidiary of Basalt-Actien-Gesellschaft, concluded the contract on bitumen processing and production of polymer modified bitumen products Alphabet based on the Company’s formulation. This will allow Rosneft Deutschland to increase the product range and supply in-house produced high-quality bitumen to customers of Germany and other countries.

Key operational indicators for Q1 2018:

*According to management data
** Including bunker fuel 

Information Policy Division
Rosneft Oil Company
Tel.: +7 (495) 411 54 20
Fax: +7 (495) 411 54 21
May 14, 2018

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.