ROSNEFT ANNOUNCES FULL-YEAR 2022 IFRS RESULTS

• 2022 HYDROCARBON PRODUCTION INCREASED BY 2.3% YOY TO 5.10 MLN BOE PER DAY
• 2022 GAS PRODUCTION REACHED A RECORD HIGH OF 74.4 BCM
• IN 2022, 7  OIL AND GAS DEPOSITS AND 153 NEW OIL AND GAS ACCUMULATIONS  WERE DISCOVERED
• THE COMPANY DISCOVERED MADACHAGSKOYE FIELD WITH 82 MLN TONNES OF RESERVES, THE LARGEST DISCOVERY IN RUSSIA IN 2022
• 2022 PETROLEUM PRODUCTS SALES ON THE DOMESTIC MARKET REACHED A RECORD HIGH OF 42.1 MLN TONNES
• FINANCIAL DEBT AND PREPAYMENTS DECREASED BY RUB 0.7 TRLN COMPARED TO THE BEGINNING OF THE YEAR

Rosneft Oil Company releases 12M 2022 results prepared in accordance with International Financial Reporting Standards (IFRS).

Rosneft’s Chairman of the Management Board and Chief Executive Officer Igor Sechin said:

“In the reporting year, in the context of external pressure and a volatile macro environment, the Company once again demonstrated operational efficiency and confirmed the resilience of its business model.

Thus, in 2022, the Company's hydrocarbon production exceeded the 2021 level and amounted to 5.10 mln boe per day. I would like to make a special mention of the Sakhalin-1 project. After the exit of the former operator, we restored production within the shortest possible period of time and  began tanker shipments, while resuming the drilling program. In addition, we have saved over 3,000 highly qualified jobs.

In 2022, thanks to tight cost control and efforts to improve efficiency, the Company managed to rein in the unit upstream cost growth below the industrial producer price inflation.

In the reporting year, the Company’s revenue and EBITDA increased, while debt and trade liabilities decreased by RUB 0.7 trln as compared to the beginning of the year.

We continued our ambitious investment program – 2022 capital expenditures exceeded RUB 1.1 trln.

At the same time, we should note that over the past three years, the tax conditions for the activities of oil companies have been made more stringent on 14 occasions, which certainly creates risks for the implementation of our production program.

Strictly adhering to the principles of the dividend policy, in February 2023, Rosneft completed the payment of interim dividends totaling over RUB 216 bln, which corresponds to 50% of the IFRS net income for 1H 2022. Positive 2022 net income lays the foundation for sustainable performance-based payouts to shareholders for the entire reporting period.”

Operating results

Exploration and production

In 2022, hydrocarbon production reached 5.10 mln boe per day, exceeding the 2021 level by 2.3% YoY. At the same time, in Q4 2022, average daily hydrocarbon production increased to 5.50 mln boe due to the production restart at the Sakhalin-1 project.

In the reporting year, gas production hit a new all-time record of 74.4 bcm, up by 15.0% YoY.

In 2022, Rosneft conducted over 4.4 th. linear km of 2D seismic and more than 6.8 th. sq. km of 3D seismic work onshore. Rosneft tested 64 exploration wells with an 80% success rate.

High efficiency of the geological exploration allowed for the discovery of 7 oil and gas deposits and 153 new oil and gas accumulations with around 0.3 bln toe of AB1C1+B2C2 reserves. The most significant discoveries included the Madachagskoye field on the Pechora Sea shelf with 82.3 mln tonnes of АВ1С1+В2С2 recoverable oil reserves, which is the largest discovery in Russia in 2022². As a result, the Company’s АВ1С1+В2С2 hydrocarbon reserves amounted to 159.3 bln boe (21.5 bln toe) as of December 31, 2022.

According to the results of the reserve audit under the PRMS standards (the international Petroleum Resources Management System), as of December 31, 2022 the Company's 1P, 2P and 3P hydrocarbon reserves amounted to 42.3 bln boe, 84.2 bln boe, and 132.4 bln boe, respectively. The 2Р reserves replacement ratio is in excess of 100%.

In 2022, production drilling footage amounted to 11.2 mln meters, up by 3.3% YoY. In recent years, despite the volatility of the macroeconomic and geopolitical environment, Rosneft has maintained consistently high volumes of production drilling. In the reporting year, the number of newly commissioned wells exceeded 3 th. units, while the share of the most efficient new horizontal wells was 68%. In 2022, the number of newly commissioned horizontal wells with multistage hydrofracturing exceeded 1.3 th. units, or 43% of the total number of wells commissioned. Unit production per a horizontal well is twice as much as a unit performance of a directional well. The use of these wells allows the Company to maintain sustainable brownfield production by developing more complex reserves, as well as to reduce the conventional reserve development costs.

The Vostok Oil project

In 2022, the Company completed over 2 th. linear km of 2D seismic surveys and 2 th. sq. km of 3D seismic, drilled 6 exploration wells and completed construction of 4 wells with 5 wells  being tested at the flagship Vostok Oil project. As a result, in the reporting year, the resource base of the project increased by 300 mln tonnes to 6.5 bln tonnes. The project’s high resource potential was confirmed by the results of an independent international audit.

In H2 2022, the Company started pilot commercial development of the Payakhskoye field. Currently, Rosneft has drilled more than 25 th. m and completed 7 production wells while drilling is in progress at 5 more wells.

The construction of the Vankor–Payakha–Sever Bay oil trunk pipeline and an expansion of coastal and mooring infrastructure is underway. Within the framework of the project, record long winter roads of 2 th. km were built through the north of the Krasnoyarsk Territory and the Yamalo-Nenets Autonomous District.

Refining and marketing

In 2022, the Company processed 94.4 mln tonnes. The processing depth at the Company’s refineries in Russia increased to 76.2%, while light product yields improved to 57.1%.

In the reporting year, Rosneft continued to fully meet the growing demand for high-quality motor fuels on the domestic market. In 2022, domestic petroleum product sales reached a record level of 42.1 mln tonnes, up by 6.0% YoY. The Company has been consistently working on development of domestic technologies and import substitution. Rosneft’s refineries in Russia use proprietary catalysts for production of motor fuels compliant with modern standards. In 2022, the Company launched export sales of its catalysts due to their high quality.

Financial results

In 2022, Rosneft’s operating performance and the macroeconomic environment combined with competent management decisions allowed the Company to achieve growth in a number of key financial indicators.

In 2022, the Company’s revenue³ increased by 3.2% YoY, while EBITDA improved by 9.5% YoY.

In 2022, net income attributable to shareholders amounted to RUB 813 bln. The indicator dynamics was affected by non-monetary factors. The achieved level of net income forms a solid basis for dividend payment for the reporting year.

Higher electricity prices, as well as increased tariffs for transportation of oil and petroleum products by rail and by pipeline had a negative impact on the dynamics of operating and transportation costs.

In 2022, the Company’s capital expenditure reached RUB 1.1 trln, up by 7.9% YoY.

The implementation of measures aimed at maintaining financial resilience allowed for the reduction of the Company’s financial debt and prepayments by RUB 0.7 trln compared to the beginning of 2022. The Net financial debt/EBITDA ratio was 1.3x as of the end of 2022, which corresponds to this financial ratio at the beginning of last year.

ESG

In 2022, the Company continued the implementation of measures aimed at achieving sustainable development goals within the framework of the Rosneft 2030: Reliable Energy and Global Energy Transition strategy.

During 2022, the PSER-1 process safety event rate improved by 30% (compared to the 2021 baseline). Rosneft strives to achieve zero accidents by 2030 or earlier.

In 2022, Rosneft remediated 149 hectares of legacy polluted land under the Program for the liquidation of the environmental legacy. In 2022, the volume of drilling waste decreased by 34% due to improved waste management efficiency ensuring no additional waste accumulation.

In 2022, the Company continued implementing the Program on detecting and eliminating methane leaks as well as reducing methane emissions at hydrocarbon production facilities. The comprehensive air and ground monitoring covered over 800 sites at 20 enterprises.

The Company's activities in the field of sustainable development win stakeholder recognition. In 2022, for the seventh consecutive time Rosneft was among the leaders of the Russian ESG stock indices, including the Moscow Exchange - RSPP “Responsibility and Openness” index and the Moscow Exchange - RSPP “Sustainable Development Vector” index. The Company was assigned the highest rating in the Sustainable Corporate Governance ESG rating compiled by the University of Perugia (Italy) and the Corporate Development “Da-Strategy” Agency.

¹ The net income dynamics is primarily due to external factors, including non-cash effects from the actual seizure of the Company's assets in Germany and changes in the RUB exchange rate.
² In 2021, Rosneft discovered a gas condensate field named after E. Zinichev with 384 bcm of АВ1С1+В2С2 recoverable gas reserves which is unique in terms of its reserves volume – the largest global discovery made that year. In 2020, 2 large Arctic fields were discovered (the Zhukov gas field and the Rokossovsky gas condensate field) with total reserves of 1.3 trln cubic meters of gas and 55 mln tonnes of condensate.
³ Includes revenue and equity share in profits of associates and joint ventures

Information and Advertising Department
Rosneft
March 20, 2023

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