Rosneft posts record 2013 results: daily hydrocarbon production reached 4.9 mmboe, EBITDA amounted to RUB 947 bln supported by hydrocarbon production growth, increased efficiency and integration of new assets

February 4, 2014, Rosneft is publishing consolidated IFRS financial statements for 12 months of 2013.

1 Adjusted for the amount of prepayment made in 2013 under long-term crude oil supply contracts.

Crude oil and liquids production equaled 4,196 th.bpd (organic growth 1%), gas production reached a record high figure of 38.17 bcm (organic growth 22%).

The Company stabilized production of its largest West Siberia assets, including Samotlorneftegaz, Nizhnevartovsk, Varieganneftegaz, and Nyaganneftegaz. The brownfield successes have been primarily driven by employment of new oil recovery increase technologies, including massive implementation of horizontal wells with multi-stage hydrofracturing, sidetracking, waterflood management, dual completions and injection. In 2013, the Company achieved a 2.9% growth of liquids production in Samaraneftegaz due to extraction of reserves discovered on fields acquired in 2011-2012 and increased geological exploration works efficiency caused by the use of 3D seismic.

In 2013, output from producing greenfields (Vankor, Verkhnechonskoye and the Uvat group of fields) accounted for 19% of the Company’s total liquids production. The Company continues implementation of the associated petroleum gas utilization program at Vankor, East Siberia’s largest field and a new oil and gas province hub. The Company started gas injection in 4Q at the field as a a part of the project solution for the field development to maintain formation pressure. Two new fields, Yuzhno-Petiegskoye and Radonezhskoye, were brought on stream at the Uvat group of fields in the south of the Tymen region and three new fields were discovered. The Company continued to improve operational efficiency and control of its lifting costs, which in 2013 amounted to USD 4.8/bbl, the best unit-cost performance among world public companies.

According to oil and gas reserve information prepared by independent auditor proved hydrocarbon reserves increased by 74% (organic growth 11%) and amounted to 33.00 billion barrels of oil equivalent on the basis of the standards set forth by the U.S. Securities and Exchange Commission (“SEC”).

Rosneft is the leader in developing Russia’s offshore resources. In 2013, the Company, jointly with its partners, carried out an unprecedented E&A offshore effort, including acquisition of 32.5 th. linear km of 2D seismic and 2.6 th. sq. km of 3D seismic, conducting geological engineering surveys to prepare 12 sites for exploration drilling, as well as acquiring 19 new offshore hydrocarbon exploration and production licenses for the Arctic, the Sea of Okhotsk and the southern seas of Russia. In total, the Company has 46 licenses for developing Russia’s offshore with the resources of 45 bln tons of oil equivalent.

The 2013 performance has made Rosneft the third largest gas producer in Russia with increased gas production to 38.17 bcm. Gas production posted a record more than twofold growth which was primarily due to the integration of the major gas assets resulting from the TNK acquisition and also consolidation of the Itera assets. Favorable prerequisite for future organic growth of gas business were created in 2013. Rosneft is expanding development at Rospan, (Vostochno- Urengoysky and Novo-Urengoysky license blocks development). Kharampurskoe integrated gas project development plan is approved. In 2013, gas sales amounted to 39.07 bcm, including 24.02 bcm in West Siberia, 10.42 bcm in the European part of Russia and 0.94 bcm outside of Russia.

Significant attention is given to development of gas resource base in the Far East. In 2013 the Company signed an agreement with Exxon Mobil on an LNG plant construction project development in the Far East. Asian-Pacific will be the main market for the future LNG supply from the project.

In 2013, Rosneft processed 97.68* mln t of crude oil in Russia and abroad (organic growth 1%). In 2013, Euro-4 and Euro-5 motor fuel and diesel output equaled 18 mln t*. In 2013, incremental Euro-4 and Euro-5 motor fuel output added RUB 18 bln* to the Company’s EBITDA.

In October 2013, as part of the refinery modernization program, the largest crude oil distillation unit in Russia (AVT-12) was launched at the Tuapse refinery with the throughput of 12 mln t per year. In 4Q, main heavy manufacturing equipment was delivered to the Komsomolsk refinery, Achinsk refinery, Novokuibyshev refinery, Kuibyshev refinery, Angarsk petrochemical complex, and Syzran refinery. The Company is successfully competing in the retail oil product and jet fuel markets. The customer base of the high-marginal “in-wing” fueling channel has been expanded with a number of new counter-parties added. The 2013 results show an increase of fuel volumes delivered on contracts with air lines up to RUB 67.8 bln which is 23% more compared to 2012.

In 2013, the Company made a number of key acquisitions with the total synergy effect from capital and operational expenditure reductions amounting to RUB 23 bln.

Despite an unfavorable macroeconomic environment in 2013, the revenues (including the share in the profits of associates and joint ventures) reached a record RUB 4,694 bln (revenue organic growth 2.5%).

In 2013, EBITDA amounted to RUB 947 bln. The Company continues its policy of effective cost control and is constantly implementing the synergy effect on its financial performance, which helps to maintain a stable EBIDTA level.

Rosneft’s 2013 net income totaled RUB 551 bln.

The Company continues to generate a cash flow sufficient to cover its investment needs. In 2013, the Company increased its 2012 dividend payments to RUB 85 bln.

The Company intends to gradually de-leverage. In 2013 the Company repaid part of the loans attracted to acquire TNK assets in the amount of RUB 166.9 bln.

The Company is the country’s biggest corporate taxpayer. The tax revenues from Rosneft to the Russian budget in 2013 equaled RUB 2.7 trln.

Commenting on performance in 2013, President of Rosneft Igor Sechin said:

“2013 was a transformational year in the Company’s history. Despite a challenging macroeconomic situation the Company delivered record results in upstream and downstream due to increased efficiency, skillful use of advanced technologies and business expansion in accordance with our strategic priorities. The Company has been pursuing a prudent and responsible investment and financial policy aimed at cost control, liquidity increase, timely debt redemption and dividend payments.

Since the appointment of the new Company management (in May, 2012) Rosneft market capitalization has been showing the best dynamics not only in the Russian oil and gas industry, but also compared to the international peer group despite market volatility. We are not using artificial means to increase the Company’s capitalization, and maintain our focus on operational activities, implementation of large-scale projects and improvement of our financial performance. This is clearly reflected in the reported results. We are proud to say that on a number of metrics such as hydrocarbon production, reserve replacement ratio and lowest operational costs, the Company’s results are the best not only in Russia, but also on a global scale. In 2014, we will continue to improve our business efficiency, prepare new major projects to be launched and ensure long-term profitability for our shareholders”.

Rosneft Information Policy Division
phone: +7 (495) 411 54 20
fax: +7 (495) 411-54-21
February 4, 2014

*Integrated Company data for the period 01.01.2013 through 31.12.2013

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