Public Joint Stock Gazprom Neft : Presentation

1Q 2020 IFRS FINANCIAL AND OPERATING RESULTS

St Petersburg - May 28, 2020

Agenda

Highlights,	Alexey Yankevich
Financials
Member of the Management Board,
	CFO

Upstream	Igor Shkirov
	Head of Planning, Performance and
	Data Management Department,
	Upstream

Downstream	Nikita Anichkin
	Head of Economics and Investment Department,
	Downstream

Gazprom Neft 2

Disclaimer

This presentation contains forward-looking statements concerning the financial condition, results of operations and businesses of Gazprom Neft and its consolidated subsidiaries.

All statements other than statements of historical facts are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management's current expectations and assumptions and involve known and unknown risks and uncertainties that may cause actual results, performance or events to differ materially from those expressed or implied in these statements.

Forward-looking statements include, among other things, statements concerning the potential exposure of Gazprom Neft to market

risks and statements expressing management's expectations, beliefs, estimates, forecasts, projections and assumptions. These forward- looking statements are identified by their use of terms and phrases such as ''anticipate'', ''believe'', ''could'', ''estimate'', ''expect'', ''intend'', ''may'', ''plan'', ''objectives'', ''outlook'', ''probably'', ''project'', ''will'', ''seek'', ''target'', ''risks'', ''goals'', ''should'' and similar terms and phrases.

There are a number of factors that can affect the future operations of Gazprom Neft and can cause those results to differ materially from those expressed in the forward-looking statements included in this presentation, including (without limitation):

1. price fluctuations in crude oil and oil products
2. changes in demand for the Company's products
3. currency fluctuations
4. drilling and production results
5. reserve estimates
6. loss of market and industry competition
7. environmental and physical risks
8. risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions
9. economic and financial market conditions in various countries and regions
10. political risks, project delays or advancements, approvals and cost estimates
11. changes in trading conditions

All forward-looking statements contained in this presentation are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on these forward-looking statements. Each forward-looking statement speaks only as of the date of this presentation. Neither Gazprom Neft nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information.

Gazprom Neft 3

1Q 2020 highlights

1Q 2020 financial performance:









Revenue: RUB 515 billion

Adjusted EBITDA*: RUB 99 billion

Net loss: RUB 14 billion

Free cash flow: RUB 22 billion

Operational progress in 1Q 2020:







Hydrocarbon production up 6.7% y-o-y (mtoe) Refining volumes up 3.2% y-o-y

The total number of operating filling stations throughout Russia is up 5.2% y-o-y

1Q 2020 vs 4Q 2019





Hydrocarbon production up 2.6% (mtoe) Refining volumes down 1.1%

* Including GPN share in EBITDA of associates and joint ventures

Gazprom Neft 4

Gazprom Neft: responsibility and care

For our employees:

• An integrated protective system has been put in place, directed at minimising the spread of COVID-19 as well as ensuring continuous production
• • Employees have been put on remote working (>70% of administrative staff, >15% of total headcount, including field teams)

•

•

Mass preventative testing of employees (more than 160,000 tests) Shift turnarounds extended to 90 days

• Buffer zones (more than 100 with 20,000 employees processing capacity) in place at oil production facilities, automated temperature testing, incoming employees kept separate at all entrances, and contactless shift handovers organized at refineries
• Advice and information (a "hotline" for shift workers, and a new digital "Mobile Newsfeed")

For those around us:





Integrated testing of contractors at oil fields

Mobile apps for remote payment at Gazpromneft filling stations

• Direct involvement in developing a mechanism to support oilfield service companies





An integrated support programme for medics helping to combat COVID-19

Free car-refills for volunteers (>1,600 free-fuel cards for use at Gazpromneft filling stations)

• Hand sanitiser production launched at GPN facilities with spare capacity, and the first 85-tonne consignment shipped
• Help and support to combat COVID-19 in every locality in which the company operates

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Exploration and production

A flexible approach to managing the project portfolio

Gazprom Neft 6

Production growth at new fields in traditional areas, and at projects on developing oil-rim deposits

Daily hydrocarbon production

Hydrocarbon production

(thousand toe)

23.2

(mtoe)

6.7%+2.6%

24.2 24.5 24.2 24.8

				272.4
	265.8	266.3	262.7
258.2
1Q19	2Q19	3Q19	4Q19	1Q20

7.1	7.1	7.3	7.4
7.0
2.0	2.0	2.1	2.0
2.0

14.2

15.2

15.3

14.8

15.4

1Q19		2Q19	3Q19		4Q19	1Q20
	JV*		Joint operations**		Gazprom Neft

• Joint ventures: equity-participation entities (Slavneft, Arcticgas, Northgas and Messoyakhaneftegaz)
• Joint operations: proportionally consolidated companies (Tomskneft, SPD)
• Percentage changes may differ from the calculated figures and values may not sum to total due to rounding

Gazprom Neft 7

Control over per-unit operating costs in hydrocarbon production

				ОPEX (RUB/toe)
	23			-27	1.0%
					19			1
	Operating expenses (RUB/toe)
1,662					1,849				1,957		1,678
	1,758				1,662	1,687	1,731		1,678
	1,571	1,654	1,595
	2017	1Q 18	2Q 18	3Q 18	4Q 18	1Q 19	2Q 19	3Q 19	4Q 19	1Q 20
1Q 2019	Brownfields*	Major projects**	Joint operations***	International assets	1Q 2020

• Noyabrskneftegas, Khantos, Vostok, Orenburg
• GPN Yamal, Prirazlomnoye
• Tomskneft, SPD

Percentage changes may differ from the calculated ones and the values ​​may not converge in the totals due to rounding

Gazprom Neft 8

Production optimised on the basis of efficiency improvements throughout the entire value chain

Viability of core well stock

• Analysed under various price scenarios, with tax implications taken into account
• Evaluated with lifting costs, transport costs, equipment servicing and well repairs all being taken into account

Quick responses to external change

• Adopted on the basis of multiple

factors being optimised, and specific aspects of the upstream and downstream businesses taken into account

• Conducted on a regular basis, in line with any changes in external factors

Profitability of field clusters, with infrastructure costs taken into account

• Operating well stock is grouped around booster pumping stations (BPS)
• Evaluated in line with both variable and

fixed operating costs

• Any decision on mothballing will be taken in line with each cluster's overall profitability

An optimum and balanced portfolio

• Maximises the added value of every barrel throughout the entire value chain. One priority being - low-sulphur oil production and refining at our own facilities
• Driven by the balance between "base production" and new well workovers

Gazprom Neft 9

Production optimisation technologies, well-stock management options

			Moving over to		Moving over to		Full
			piezometric (pressure-		temporary
					mothballing
			observation) well stock		mothballing
Description			No equipment lifting to		No equipment lifting to		Equipment lifted to
		surface		surface		surface
			Well blinding		Inert-fluid injection		Well bore flushed and
			Measurements of		Well blinding		scoured
			formation pressure				Well flooded with inert
							fluid
+ / -			Facilitates faster response, if necessary, on wells		High cost of works
			going back into production				Restarting risk
			Short lead-times				Lengthy approval
			Low cost of works				procedure with
			High recovery rate on restarting			regulatory agencies

Shutdown length

Well stock covered

	not limited, for the period of	up to six months	over six months
	need for geological surveys
	5-10%	≈90%	≤5%

Gazprom Neft 10

COVID-19 prevention strategies at oil and gas production facilities

TEST

First stage March-April 2020

Second stage from May 2020

"Barrier" mass preventive testing

100% testing of Gazprom Neft employees and contractors working at the company's production facilities

Regular testing of high-contact personnel. 100% testing of personnel at buffer zones to ensure infection-free "clean shifts".

Compliance with all epidemiological requirements

Personal Protective Equipment Sanitisers and disinfectants Temperatures taken before starting work Medical examinations

Transport and premises disinfected regularly

Buffer zones put in place

Transport to

shifts

Medical examination

"Clean shift"

at arrival to the buffer

If tests are

zone

negative

Quarantine

Initial

14-day stay

Second

New shift

teams

COVID-19

at the buffer

COVID-19

If tests are

tests

zone

tests

positive

>100

BUFFER

>20,000

EMPLOYEES - 14-DAY PROCESSING

ZONES

CAPACITY

Organisational initiatives

Shift turnarounds extended to 90 days

Staff allocated into non-overlapping groups (shifts)

Assistance provided to hospitals in production locations

Gazprom Neft 11

Downstream

Flexibility at every level in the face of high market volatility

Gazprom Neft 12

Maintaining y-o-y crude exports in the face of declining global demand

Crude price and average netbacks ($/bbl)

80

Brent

60

Refining netback

40

Crude export netback

20

Crude export duty

0

1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20

Percentage changes may differ from the calculated ones and the values ​​may not converge in the totals due to rounding

Crude mix (mt)

				-0.5%
16.4		16.3
	0.3		-4.0%		0.2
4.7		+0.0%	4.7
0.4	+0.9%	1.1
1.1

10.0 +3.2% 10.3

1Q 2019

1Q 2020

International market Domestic market

Crude export Refining

Crude to CIS

Gazprom Neft 13

Improving refinery performance

Refining throughput (mt)

			+3.2%	10.3
	10.0
		0.8
NIS	0.6	+39.3%
Yaroslavl	2.0	-2.6%	1.9

Moscow	2.3	2.4
+4.3%

Conversion rate in Russia* (%)

		81.1	+3.6 p.p. 84.7
Yaroslavl	64.1	64.6
Moscow	74.6	82.1
Omsk	90.5	93.2
		1Q19	1Q20

Light product yield in Russia* (%)

							64.3	+1.1 p.p.	65.4
Omsk	5.1		5.2	Yaroslavl	54.3		56.4
+1.0%
					Moscow	57.1		62.3
					Omsk	71.4		70.1
		1Q19		1Q20	1Q19		1Q20

Percentage changes may differ from the calculated ones and the values ​​may not converge in the totals due	* At company refineries
to rounding

Gazprom Neft 14

The company's use of digital technologies allows prompt and remote respond to changes in market demand

Efficiency Control

Centre

• integrated planning of production

capacity, logistics operations and	Integrated
sales	scheduling

• predictive management of the entire value chain - from refinery to sales - in a single, cohesive digital environment

• drives production capacity
• optimises the value chain and stock control
• reallocates production flows in line with market demand

Oil delivered	Production		Logistics
		ex-refinery
	Company	shipments

	refineries
to
refineries

exported

Tank farms, refueling complexes, bunkering	Sales on the domestic markets
	Tank farms
			Filling stations
	Refueling			Bunkering fleet
	complexes			Tankers
	Terminals

Arctic Gates

Prirazlomnaya

UMBA

Arctic logistics

NEFTEKONTROL

facilitates remote oversight and control over oil-products' quality and quantity

CAPITAN

real-time predictive analysis means bottlenecks on the Northern Sea Route are predicted and the most viable and safe oil-transportation route put in place

Gazprom Neft 15

Growing lubricants and bitumens sales despite a weaker market environment

Premium sales in 1Q 2020

Aviation
-4.3%
0.69	0.66
1Q19	1Q20

Bunkering
	-31.6%
0.76
	0.52
1Q19	1Q20

Lubricants
	+28.6%
	0.09
0.07
1Q19	1Q20

Bitumens
+33.3%
	0.04
0.03
1Q19	1Q20

Key events

• Number of airports of presence has increased to 284 (+14)
• Gazpromenft-Aerohas joined the Joint Inspection Group (JIG) for developing international aviation safety standards
• Gazpromneft-AeroSheremetyevo has been certified for refuelling of Boeing- 787 Dreamliner (IATA category 2) aircraft
• Gazpomneft-AeroSheremetyevo has begun refuelling Aeroflot A-350 aircraft
  - a new liner for the Russian Federation

• New MARPOL Regulations have come into force - sales of marine fuels with less than 0.5% sulphur content
• An agreement with Austrial's OMV has resulted in a two-fold increase in low-sulphur fuel sales in Constanta, Romania in 1Q 2020
• Market share at Russian Black Sea ports has increased 29.4% (up 6.6% on IQ 2019)
• The company has begun exporting marine fuel to Estonia

• Gazpromneft Ocean lubricants have been officially approved for use on Wärtsilä-Sulzer engines running on IMO 2020- compliant fuel
• Seven new products have been launched, including high-quality synthetic turbine oils and hand sanitiser
• 12 new endorsements have been secured from equipment manufacturers

• A wider customer base in Latin America has delivered an increase in sales
• Together with Rosavtodor (the Federal Highways Agency), the ROSASPHALT Association and others, Gazprom Neft has signed up to a temperature- research programme designed to protect binder quality in transportation

Gazprom Neft 16

How Gazprom Neft is helping contain COVID-19

GAZPROM NEFT	An integrated programme to support medics in combatting COVID-19
for

MEDICS

Providing personal protective equipment for medics

1.3 million items (hamzat suits, respirators, gloves, masks, and more)

Deliveries of medical equipment and medicines

ventilators delivered to hospitals in Omsk, the Yamalo-Nenets Autonomous Okrug and St Petersburg

Refueling of medical transportation vehicles

in the Omsk Oblast and Yamalo-Nenets Autonomous Okrug

Free oil-changes for emergency vehicles and ambulances

at 73 G-Energy Service stations across 27 of Russia's regions

Antiseptics produced and delivered to hospitals

85 tonnes for free

GAZPROM NEFT	Providing free fuel for volunteers
for

VOLUNTEERS

Free fuel for volunteers delivering groceries and medicines to the elderly and people with poor mobility, as well as to healthcare workers and their families

Free coffees for doctors and paramedics

at Gazpromneft filling stations across 47 of Russia's regions

>1,600

FREE FUEL CARDS AVAILABLE TO

VOLUNTEERS

More than 200,000 litres

of fuel provided to volunteers

Gazprom Neft 17

Financials

Maintaining financial stability in the face of a major drop in oil and oil-product prices

Gazprom Neft 18

An adverse price environment and a weakening ruble have impacted financial performance

Revenue

(RUB billion)

Adjusted

EBITDA*

(RUB billion)

Net

income/(loss) (RUB billion)

		-12%	657			-16%
586	628	614	515

1Q19

2Q19

3Q19

4Q19

1Q20

			-50%				-45%
198	210	207
180
							99
	1Q19	2Q19	3Q19	4Q19		1Q20
108	107	105
					80

				-14
1Q19	2Q19	3Q19	4Q19	1Q20

• Revenues are down 12.2% y-o-y due to the drop in oil and oil-product prices on the global and domestic markets. This decrease in prices has been partially offset by higher sales of oil products for export
• Revenues are down 16.2 q-o-q mainly due to the drop in oil and oil-product prices on the global and domestic markets, together with lower sales volumes of oil products
• The decrease in adjusted EBITDA y-o-y and q-o-q is mainly due to the negative effect of export-duty lag and lower contribution to EBITDA from joint ventures
• This net loss to Gazprom Neft PJSC shareholders is mainly due to the weaker ruble in Q1 2020 and impairments arising from the sharp drop in oil prices

• Adjusted EBITDA includes the share of EBITDA of associated and jointly controlled companies

Gazprom Neft 19

Adjusted EBITDA* reconciliation 1Q 2020 vs 1Q 2019 (RUB bn)

Group share in JV's EBITDA

198

41

-112

Internal factors: +13	99
2	11
27

156

72

1Q 2019	Price factor	Upstream volumes&costs	Downstream	1Q 2020
			volumes&costs

• Adjusted EBITDA includes the share of EBITDA of associated and jointly controlled companies
  The values ​​may not converge in the totals due to rounding

Gazprom Neft 20

Adjusted EBITDA* reconciliation 1Q 2020 vs 4Q 2019 (RUB bn)

	180
Group share
in JV's	42
EBITDA
		-86
				99
			5
				27
	138
				72
	4Q 2019	Price factor	Internal factors	1Q 2020

*Adjusted EBITDA includes the share of EBITDA of associated and jointly controlled companies The values ​​may not converge in the totals due to rounding

Gazprom Neft 21

Net income reconciliation 1Q 2020 vs 1Q 2019 (RUB bn)

108

98

10

		20		37
					Growth in D&A: +16
						8
					8
								-14
1Q 2019	Operating	Retained	Non-controlling	FX	Impairment Commissioning	1Q 2020
	income and	earnings	interest, past				and production
	share in JV's		years' losses				growth
	net income

The values ​​may not converge in the totals due to rounding

Gazprom Neft 22

Net income reconciliation 1Q 2020 vs 4Q 2019 (RUB bn)

80

75

	9
19	35
	Growth in D&A: +10
	9
	1

-14

4Q 2019	Operating	Retained	Non-controlling	FX	Impairment	Commissioning	1Q 2020
	income and	earnings	interest, past			and production
	share in JV's		years' losses			growth
	net income
Значения могут не сходиться в итоговые суммы в связи с округлением

Gazprom Neft 23

New projects moving into their active phase has led to higher CAPEX in 1Q 2020

• Higher drilling volumes and construction of infrastructure facilities at oil-rimdeposits
• Implementation of the Zima and OGF projects in traditional locations
• Greater drilling at the Yuzhno-Priobskoye field and fields in the Noyabrsk region
• Seismic prospecting projects at newly acquired license blocks
• Implementation of deep conversion projects at the Omsk Refinery, and construction of the catalyst production facility

Changes in advances paid and payments for capital construction materials include expenditure on materials and equipment for ongoing projects.

* Percentage changes and totals shown may differ slightly from those calculated, due to rounding.

			Investments*
				(RUB bn)	112
						8
							5
						3
81				19
8
2	3
18
						43
25
			<20%				>25%
				of 2019			of 2020
				programme	33	programme
26
		1Q 2019	1Q 2020
		Advances issued			Refining
		Other					Greenfields
		Marketing and distribution			Brownfields

Gazprom Neft 24

Significant net cash flow in the face of a worsening macroeconomic environment

1Q 2020 cash flow reconciliation (RUB bn)

	-112
134
						19	1
		22	-8					36
			-12	15
Operating	Investments*	Free cash flow	M&A**	Net borrowings	Bank deposits	FX	Other	Net cash flow
cash flow

• Includes changes in the amount of prepayments and materials for capital construction ** The acquisition of oil and gas licences and other cash flows from investing activities
  The values ​​may not converge in the totals due to rounding

Gazprom Neft 25

A strong and sustainable position: the company is more sustainable than in the 2014 crisis

Cash at the end of
the period
(RUB bn)	> 4.5 times

	238
53
2014	1Q 2020

Accumulated liquidity...

• cash on the balance sheet as at 31.03.2020: RUB238 billion
• available credit facilities in the order of RUB85 billion

Ruble-denominated debt

	53%
17%
2014	1Q 2020

Short-term portion of debt

11%
	4%
2014	1Q 2020

and a sustainable debt portfolio

• in terms of currency (>50% of debt is in rubles)
• in terms of maturity (<5% is short-term debt )

Средства

support the company's financial stability

Gazprom Neft 26

Maintaining financial stability

Debt repayment profile as at end-1Q 2020

777

20%

748.1

70%

238.0

Cash* up to 1 year 2 years 3-5 years	over 5	Debt
(RUB bn)	years	(RUB bn)

Debt-portfolio structure (by

currency)

RUB

30.3%

USD	52.6%
EUR
	16.8%
Other
0.3%

Debt portfolio and credit ratings

• February 2020 - successful completion of a RUB10-billionfive-year6.2% p.a. coupon bond placement. The coupon rate has become the lowest in the history of the Russian market**
• The company's rating was affirmed by S&P in May 2020 at BBB- (outlook stable)

• Average debt maturity increased from 3.18 (end-2019) to 3.58 years as at 31 March 2020
• The average interest rate declined from 6.18% (end-2019) to 5.68% as at 31 March 2020

* Cash and cash equivalents, short-term deposits.
** Among placements for similar maturity	Gazprom Neft 27

The company's response to global changes

Capital investment

(RUB bn)

>20%

>450

• Internal workings on every project optimised
• Lead-timesextended
• Projects suspended pending financing
• Projects terminated

2020 business	2020 current plan
plan (as at $55/bbl)	(as at $35/bbl)

• Approximately 20% estimated revision of initial investment programme
• >10% - optimization of manageable selling, general and administrative expenses, which fully compensates for counter-COVID-19 costs
• > RUB10 billion - the anticipated impact of optimising OPEX
• Stringent control over the management of working capital
• No major M&A transactions
• A range of initiatives directed to optimisation at joint ventures level - optimising the investment programme, self-financing of joint ventures

Gazprom Neft 28