Public Joint Stock Rosneft Oil : 2020 First quarter IFRS (Presentations)

Rosneft Oil Company

IFRS Results

Q1 2020

May 15, 2020

Important Notice

Information herein has been prepared by the Company. The presented conclusions are based on the general information collected as of the date hereof and can be amended without any additional notice. The Company relies on the information obtained from the sources which it deems credible; however, it does not guarantee its accuracy or completeness.

These materials contain statements about future events and explanations representing a forecast of such events. Any assertion 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 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 forward-looking statements contained herein to reflect actual results, changes in assumptions or changes in factors affecting such statements.

This presentation does not constitute an offer to sell, or any solicitation of any offer to subscribe for or purchase any securities. It is understood that nothing in this report / presentation provides grounds for any contract or commitment whatsoever. The information herein should not for any purpose be deemed complete, accurate or impartial. The information herein in subject to verification, final formatting and modification. The contents hereof has not been verified by the Company. Accordingly, we did not and do not give on behalf of the Company, its shareholders, directors, officers or employees or any other person, any representations or warranties, either explicitly expressed or implied, as to the accuracy, completeness or objectivity of information or opinions contained in it. None of the directors of the Company, its shareholders, officers or employees or any other persons accepts any liability for any loss of any kind that may arise from any use of this presentation or its contents or otherwise arising in connection therewith.

2

Inclusive Approach* to Combat COVID-19

Concern for people's well-being is the

Company's top priority

Health and safety

• Regular testing
• 5.6 mlnpersonal protective equipment, 2.9 mln litersof disinfectant, over 455,000 litersof hand sanitizer, constantly replenished
• 89% of the central office employees, more than 50 th. Group's subsidiaries' employees work remotely
• Rotation period is increasedto 90 days
• 94observation, 260isolation rooms, with qualified health treatment
• Constantly informing employees about safety measures
• Psychological support hotline
• Antiseptic components production (15 th. tons per month)

Stability

• Preservation of jobs and payment of salaries in due course
• Distance learning and professional development resumed

* The approach embraces the best Russian and international practices of combating COVID-19, including those recommended by Rospotrebnadzor

3

COVID-19 Impact
on Crude Oil and Petroleum Products Demand
Oil demand in Europe				Main petroleum products demand in Europe
15					50			gasoline
mmbd					mmt
						jet fuel
					40
		2019					diesel
							fuel oil
					30
10			-28%	-22%
					20
					10
5					0
Jan-20	Feb-20	Mar-20	Apr-20	May-20	Jan-20Feb-20Mar-20	Apr-20May-20
Oil demand in Asia-Pacific region			Domestic demand for main petroleum products
35					9			gasoline and diesel
mmbd					mmt
						jet fuel
								fuel oil
30		2019			6
			-18%	-12%
25					3
20					0
Jan-20	Feb-20	Mar-20	Apr-20May-20	Jan-20	Feb-20	Mar-20	Apr-20	May-20
Source: Wood Mackenzie, Petromarket Research Group, Company estimates						4

Record Low Oil Prices
Oil prices and differentials1				Gross Upstream margin2
90	$/bbl	Brent			12	'000 Rub/bbl	Monthly avarage
		Urals					FY average
		ESPO
70					9
50					6
30	Urals-Brent		$/bbl	10	3
	ESPO-Brent			5
				0
				-5
10				-10	0
Note: (1) Monthly averages, (2) Calculated as Urals price less MET, export customs duty and transportation costs at the Yugansk-Primorsk route	5

Key Events

1	Rosneft BOD recommended record high dividends
for 2019

2	Positive free cash flow generation amid sharp oil
price drop

3	Successful launch of the open market share
buyback program

4	OPEC+ agreement on record high crude oil
production cuts

Company's operations in Venezuela have been

5completely discontinued, including production JVs, oilfield service companies and trading operations

6

Best-positioned to New Realities

Operations	Financials

• Leadership in lifting costs
• Technological capabilities for managing production
• Successful experience of rapid production buildup
• Diversified distribution channels
• Long-termsupply contracts
• Efficient gas business

• Flexible CAPEX program
• Cost control
• Ability to generate cash in stressful scenarios
• Solid liquidity cushion
• Comfortable debt level with smooth repayment schedule

7

Operating Results

8

Key Operating Indicators

Oil production,

kbd

Gas production,

mmcmd

Petroleum product and petrochemical output, mmt

4,674	4,640
Q4 2019	Q1 2020

187.2	182.7
Q4 2019	Q1 2020
2.99	2.93

24.72 25.07

Q4 2019

Q1 2020

in Russia				abroad	9

Navigating OPEC+ Environment

Crude oil production in Russia (2020)

Main terms of the OPEC+ Agreement:

6	mmbd
		Stage 2
5		Stage 1
4
3
2
	Rosneft (LHS)	Russia total (RHS)

11Oil production in Russia with limitations (mmbd):

• stage 1(May-Jun. 2020) - 8.5
• stage 2(Jul.-Dec. 2020) - 9.0

9stage 3 (Jan. 2021 - Apr. 2022) - 9.5

• Production cuts on a pro rata basis
• Gas condensate production excluded from quotas

7	Rosneft's approach to production cuts:
	Asset selection (to cut production) based on economic
	efficiency
5	Continued development of new fields
Efficient long-cycle wellworks to be continued according
	to schedule
	Efficient well stock management:

3Limitation of flow rates without shut-ins

• Recurring well operation
• Optimization of wellworks program on the existing well stock

10

Rosneft's Advantages in Managing Production

Average operating well stock1(2019)

56.0

28.3

22.9 18.8

7.6

Share of wells equipped with ESP units*

72%

* electrical submersible pump

Company's own capacities

56 th. wells - average operating well stock

267drilling rigs

20frac fleet

704well servicing and workover crews

Substantial well	Wide range of well	Availability of		High-quality portfolio
stock with wide	Efficient in-house
operation	necessary electric	of high-margin
regional	service
parameters	equipment	projects
diversification

Ability to flexibly manage production at minimal costs

Note: (1) on 100% and proportionally consolidated assets

11

Successful Experience of Rapid Production Buildup

Production recovery after easing OPEC+ restrictions		Yugansk reaching record high daily production after
in 2018		lifting restrictions on oil intake in 2019

4.9

mmbd

6.8

2.0

mmbd

Rosneft (LHS)

1,466 kbd

other companies (RHS)

new production record

4.7

6.4

1.5

4.5

6.0

1.0

+800 kbd

within 3 weeks

May-October oil production growth in

Russia:

4.3

+4.5%

- Rosneft

5.6

0.5

+2.4%

- competitor 1

+1.9%

- competitor 2

+2.7%

- competitor 3

4.1

5.2

0.0

Jan

Feb

Mar

Apr May Jun

Jul

Aug Sep Oct

Nov

Jan

Feb Mar

Apr May Jun

Jul

Aug Sep

Oct

Nov

12

Ensuring Timely Launch of New Large Projects

Rospan

Kharampur

Erginskiy LA

Sev. Komsomolskoye

Lodochnoye

Sev. Danilovskoye

Current status

Construction of key facilities is at the final stage: installation of core process equipment of the Vostochno-Urengoiskiy LA gas and gas condensate treatment unit completed, assembly of equipment at the railroad terminal (Korotchaevo station) is in active phase

Construction and installation activities at the gas treatment unit and gas pipeline are underway, development of cluster pads and power facilities continues

Development drilling at 11 cluster pads continues, construction of a 70 km pipeline from Priobskoye field to Transneft and infrastructure facilities is underway

Pilot project program at PK-1 horizon, drilling and operation of wells with horizontal section of up to 2 km, preparatory works at full-scale development facilities are underway

Test production stage with a hook-up to Vankor site facilities continues, development drilling and infrastructure construction is underway

Development drilling with 2 rigs started, construction of a road and a pipeline to the Verkhnechonskoye field and other key infrastructure facilities continues

2020 - 2021+

Gas projects Crude oil projects

Note: (1) Circle area corresponds to field's plateau production

13

Gas Business

Gas production			The share of gas - the most environmental friendly
(OPEC+ impact is limited by the amount of associated gas)
				fuel - in total hydrocarbon production of the Company
200	mmcmd			is c.19% (flat YoY). Its further growth up to >20% is
180				planned
160				The main driver of growth is the Rospan project, which
			provides the largest incremental production increase
140				for both gas and liquids. The project is planned to be
			launched in 2020
	2018	2019	Q1 2020

Average price and sales volumes

4.214.23

16.05	14.91
3.06
2.89
Q4 2019	Q1 2020

Gas sales revenues

Rub bn

Average price

('000 Rub/mcm)

Volume (bcm), including.:

gas procured

• Projects development at Sibneftegaz and Kharampurneftegaz fields is in active phase
• Amid a 6% decrease in gas production1in Russia YoY, the Company's gas production in Q1 2020 declined slightly - c. 2%
• Revenues decrease caused by end consumers' demand reduction following warm weather conditions

67.5	63.1
Q4 2019	Q1 2020

Note: (1) Gas extracted less gas flared

14

Gas Business is Resistant to

Volatile Prices at Global Markets

Domestic and export netback from Novy Urengoy			Starting 2020 domestic gas netbacks have been
														more efficient compared to export deliveries at
	Rub/mcm												spot prices. Forward prices imply domestic market
8,000												premiums throughout the year
			Netback, export (TTF)	Netback, Russia (Moscow)	The Company's long-term domestic gas supply
6,000
													portfolio is up to 70 bcm per annum
4,000														Power producers subject to the smallest demand
2,000														reduction under restrictive measures comprise
													60% of the supply portfolio
0
-2,000
01	02 03	04 05	06 07	08	09 10	11 12	01	02 03	04 05	06 07	08	09 10	11 12
			2019							2020

Competitive advantages of Rosneft's gas business:

• Low risk profile of gas projects focused on the domestic market
• Stable and predicted cash flow, unaffected by the external environment
• No need to subsidize gas exports at the expense of the domestic market
• Gas condensate production is excluded from OPEC+ restrictions

15

Refining

		Refining margins										Refining economics in Q1 2020
												$/bbl		Significant refining margin increase in Russia
			Russia1		Europe
											9.23					during Q1 2020 was mainly caused by positive
												8.56			impact of macro environment: sharp crude oil price
					7.62	7.78
				7.52				6.31				reduction compared to a slower decline in
5.63						5.27	5.13					petroleum product prices
							5.06						Refining margin growth in Germany QoQ was
											2.62		1.89			driven by crude oil price drop in the second half of
															the reporting period
				-0.63	0.38				-0.10
								-1.00
-1.30							-1.58
	Q1'18	Q2'18		Q3'18	Q4'18	Q1'19	Q2'19	Q3'19	Q4'19	Q1'20		Q1 2020 results and achievements

Key refining indicators
Refining in Russia	Refining abroad	Light product yield
58.2	56.7	56.9
2.37	2.82	2.77
24.5	25.51	25.95
Q1 2019	Q4 2019	Q1 2020

• Achinsk refineryinitiated production of RMLS low sulphur marine fuel that complies with IMO 2020 requirements
• Ryazan refineryput into commercial use an automated petrol quantity and quality measurement system
• Angarsk refinerystarted to produce high-tech mineral hydrocarbon base for drilling liquids production which will improve drilling efficiency and reduce environmental impact

Note: (1) Including the reverse excise tax on crude and dampfer for motor fuels

16

Focus on Distribution Channels Development

Netbacks of the main crude oil marketing channels

Export, Asia				Export, Europe
Refining in Russia				Domestic market
450								$/t
400
350
300
250
200
Q1'18	Q2'18	Q3'18	Q4'18	Q1'19	Q2'19	Q3'19	Q4'19	Q1'20

• In Q1 2020 36.0 mmt were sold tonon-CIS countries (+12.8% YoY). The share of supplies eastwards amounted to 57.2% (+7.4 p.p. YoY)
• Motor fuel sales via the exchange exceeded the required levels by over 2x times
• As part of cooperation development with the Republic of Belarus, the Company signed agreements with Naftan OJSC, BNK CJSC and Mozyr Oil Refinery OJSC to supply 9 mmt of oil from April to December 2020

Crude oil marketing breakdown

mmt

	60.0	67.1	63.4
Export, West	27%	22%	24%
Export, Asia	26%	35%	33%
Export, CIS	4%
Domestic market	2%	3%	2%
		2%
	41%	38%	41%
Refining in Russia
	Q1 2019	Q4 2019	Q1 2020

17

Beneficial Petroleum Products Export Structure

Petroleum products export to non-CIS countries

mmt
15
10			28%	28%	30%
33%
	30%
5				57%
52%	57%	56%	54%
0
Q1'19	Q2'19	Q3'19	Q4'19	Q1'20
Fuel oil	Diesel	Naphta	High-octane gasoline	Other

Q1 2020 demand for main petroleum products1

10%
3%	Diesel oil	Motor gasoline	Kerosene
0%
Fuel oil
-10%
-20%
-30%
-40%

	OECD Europe	Asia Pacific (excl. China)	China	Total

• Petroleum products export tonon-CIS countries from Russia amounted to 12.9 mmt in Q1 2020 (+6.6% YoY). While the share of 1+ years term contracts exceeded 90% creating additional support for deliveries during the demand stagnation period
• Demand for fuel oil (the Company's main export product) remains relatively resilient because of its industrial consumption (rather than households). The average export price of fuel oil sold innon-CIS countries in Q1 2020 amounted to 18,000 Rub/t, which is only 3% below the average price in Q4 2019

Note: (1) IHS Markit data compared with Q4 2019

18

Financial Results

19

Key Financial Indicators

219Free cash flow Rub bn

-9.1	$ bn	liabilities
		Reduction of debt and trading

354Rub bn	2019
	Record high dividends for

20

EBITDA and Net Income Dynamics

EBITDA Q4 2019 vs. Q1 2020

						Rub bn
Q4 2019			488
Exchange rate					29
Tax maneuver completion					(54)
EPT effect					47
Crude oil price					(89)
Share in profits of					(14)
associates and JVs
Export duty lag			(98)	External
Transport tariffs indexation	(4)				factors :
		-175 Rub bn
Number of days	(3)			-35.9%
MET and excise duty rates	11
Change in volumes	(19)				Internal
Intragroup balances	(13)				and seasonal
				factors :
	28				-4 Rub bn
General costs				-0.8%
Q1 2020
309

Net income Q4 2019 vs. Q1 2020

Net income
attr. to shareholders Q4 2019
Minorities
Q4 2019
EBITDA
DDA	1
Financial expenses (net)	(35)
Other income	(2)
Other costs	(28)
Income tax			92
FX gains/losses	(171)
Q1 2020			(143)
Minorities	13
Net income
	(156)
attr. to shareholders Q1 2020

158Rub bn

21

179

(179)

Efficient Cost Control

Lifting costs
Rub/boe	Quarter	12M average	% YoY
			198
195	203	201	196	191
5.4%	5.7%	4.1%
			-4.4%	-2.1%
Q1 2019	Q2 2019	Q3 2019	Q4 2019	Q1 2020

General and administrative costs1

Rub/boe		Quarter	12M average		% YoY

Refining costs in Russia
Rub/bbl		Quarter	12M average	% YoY
	213		201	220
183		191			181
23.8%
8.9%		6.1%
			2.3%
				-1.1%
Q1 2019	Q2 2019	Q3 2019	Q4 2019	Q1 2020

Producer Price Index (annual basis)

	88		79
		90
76
			73
	11.4%	64			10.0%
5.6%
			-8.2%	-3.9%		6.6%
							-0.6%
		-21.0%							-1.7%
								-5.6%
Q1 2019	Q2 2019	Q3 2019	Q4 2019	Q1 2020	Q1 2019	Q2 2019	Q3 2019	Q4 2019	Q1 2020

Note: (1) excl. provisions

22

CAPEX

CAPEX evolution
Rub trln				Following negative macro environment
			previous	and production cuts the CAPEX
0.92	0.94	0.85	range	program was optimized by 20%
			reviesed	The program still allows for fast project
				development recovery and
				production buildup whenever the
				market conditions change
2017	2018	2019	2020
			Plan	Key areas for optimization
Revision of CAPEX
		Reduction of maintenance costs while ensuring
Rub trln
			industrial safety and eliminating environmental risks

~1

Postponing short-term less economically viable projects

Rising hurdle rates for certain groups of projects

CAPEX

Slowing down new development and high-risk

optimization in

long-term projects, including joint ventures

Russia c. 0.2

Maintaining active pre-investment work on high-margin

perspective projects

2020

Upstream Downstream

Other

2020

Plan

Revised

Projects in Russia		International projects	23

Strong Free Cash Flow

Free cash flow calculation			Crude oil price and free cash flow dynamics, LTM
Net cash provided	341	Rub bn
by operating activities

		4.50	4.47
Reimbursement of	79			4.25	4.11
prepayments received
(historical FX rate)						3.85
Reimbursement of	47
other financial obligations
FX rate change effect	32
Interest on prepayments	12	1,220
		1,119
Net change in operations	(98)			920	941	931
of subsidiary banks
Reimbursement of	(9)
prepayments granted
Adj. operating cash flow	404
		Q1'19	Q2'19	Q3'19	Q4'19	Q1'20

CAPEX	185
				Free cash flow, Rub bn		Urals price, '000 Rub/bbl
Free cash flow	219

24

Appendix

25

Key Operational Highlights

Indicator	Q1 2020	Q4 2019	%	Q1 2020	Q1 2019	%

Hydrocarbon production, incl.

kboed

Liquids

kbpd

Gas

kboed

Oil refining

mmt

Product output in Russia

mmt

5,753

5,814

(1.0)%

5,753

5,902

(2.5)%

4,640

4,674

(0.7)%

4,640

4,744

(2.2)%

1,113	1,140	(2.4)%	1,113	1,158	(3.9)%

28.72

28.33

1.4%

28.72

26.87

6.9%

25.07	24.72	1.4%	25.07	23.67	5.9%

26

Key Financial Highlights

Indicator	Q1 2020	Q4 2019	%	Q1 2020	Q1 2019	%
EBITDA, Rub bn	309	488	(36.7)%	309	548	(43.6)%

Net Income, Rub bn

attributable to Rosneft shareholders

Adjusted net income1, Rub bn

attributable to Rosneft shareholders

Adjusted operating cashflow2, Rub bn CAPEX, Rub bn

Free Cash Flow, Rub bn

EBITDA, $ bn

Net Income, $ bn

attributable to Rosneft shareholders

Adjusted net income1, $ bn

attributable to Rosneft shareholders

Adjusted operating cashflow2, $ bn

CAPEX, $ bn

Free Cash Flow, $ bn

Urals price, '000 Rub/bbl

(156)	158	-	(156)	131	-
34	184	(81.5)%	34	242	(86.0)%
404	502	(19.2)%	404	443	(8.8)%
185	220	(15.9)%	185	214	(13.6)%
219	282	(22.3)%	219	229	(4.4)%
4.9	7.7	(36.4)%	4.9	8.3	(41.0)%
(2.0)	2.4	-	(2.0)	1.9	-
0.5	2.9	(82.8)%	0.5	3.7	(86.5)%
6.3	8.0	(21.3)%	6.3	6.7	(6.0)%
2.8	3.5	(20.0)%	2.8	3.2	(12.5)%
3.5	4.5	(22.2)%	3.5	3.5	-
3.19	3.92	(18.5)%	3.19	4.18	(23.6)%

Note: (1) Adjusted for FX gains/losses and other one-off effects; (2) Adjusted for prepayments under long-term crude oil supply contracts (including accrued interest), net change in	27
operations of subsidiary banks and operations with trading securities (RUB equivalent)

EBITDA and Net Income Dynamics

EBITDA Q1 2019 vs. Q1 2020

Net income Q1 2019 vs. Q1 2020

				Rub bn
Q1 2019	548
Exchange rate			(1)
Tax maneuver completion			(42)
EPT effect			27
Crude oil price			(123)
Share in profits of	(14)
associates and JVs
Export duty lag	(97)
Transport tariffs indexation	(5)		External
				factors:
MET and excise duty rates	(2)		-262 Rub bn
			-47,8%
Other taxes	(4)
Number of days	(1)
Change in volumes	19
				Internal
Intragroup balances	(31)		and seasonal
				factors:
OPEX	(1)		+23 Rub bn
			4,2%
General costs	36
Q1 2020	309

Net income

attr. to shareholders Q1 2019

Minorities

Q1 2019

EBITDA

DDA

Financial expenses

(net)

Other income

Other costs

Income tax

FX gains/losses

Q1 2020

Minorities

Net income

attr. to shareholders Q1 2020

		Rub bn
131
	25
156

(239)

(2)

(32)

(1)

60

70

(155)

(143)

13

(156)

Calculation of Adjusted OCF

Profit and Loss Statement

№	Indicator	Q1 2020,
$ bn
1	Revenue, incl.	27.6
	Reimbursement of prepayments and	2.4
	other financial obligations received
2	Costs and expenses, incl.	(25.4)
	Reimbursement of prepayments	(0.1)
	granted
3	Operating profit (1+2)	2.2
4	Expenses before income tax	(4.4)
5	Income before income tax (3+4)	(2.2)
6	Income tax	0.4
7	Net income (5+6)	(1.8)

Cash Flow Statement

Q1 2020,	Indicator	№
$ bn
(1.8)	Net income	1
5.3	Adjustments to reconcile net income to	2
cash flow from operations, incl.
	Reimbursement of prepayments
(1.7)	received under crude oil and
	petroleum products supply contracts

(0.7)	Reimbursement of other financial
obligations received
	Reimbursement of prepayments

0.1granted under crude oil and petroleum products supply contracts

3.5	Changes in operating assets and	3
liabilities, incl.
(0.2)	Interest on prepayments under long-
term crude oil supply contracts
(1.6)	Income tax payments, interest and	4
dividends received
5.4	Net cash from operating activities	5
(1+2+3+4)
(1.6)	Net change in operations of subsidiary	6
banks
2.5	Effect from prepayments	7
6.3	Adjusted operational cash flow	8
(5+6+7)

29

Finance Expenses, Rub bn

Indicator	Q1 2020	Q4 2019	%	Q1 2020	Q1 2019	%

1. Interest accrued1
2. Interest paid and offset2
3. Change in interest payable(1-2)
4. Interest capitalized3
5. Net loss from operations with financial derivatives4
6. Increase in provision due to the unwinding of a discount
7. Interest on prepayments underlong-term oil and petroleum products supply contracts
8. Change in fair value of financial assets
9. Increase in loss allowance for expected credit losses on debt financial assets

10. Other finance expenses

Total finance expenses (1-4+5+6+7+8+9+10)

65	67	(3.0)%	65	74	(12.2)%
66	72	(8.3)%	66	73	(9.6)%
(1)	(5)	(80.0)%	(1)	1	-
36	37	(2.7)%	36	41	(12.2)%
7	-	-	7	-	-
6	5	20.0%	6	5	20.0%
12	14	(14.3)%	12	21	(42.9)%
22	-	-	22	-	-
1	2	(50.0)%	1	1	-
3	-	-	3	4	(25.0)%
80	51	56.9%	80	64	25.0%

Note: (1) Interest accrued on credits and loans and other financial obligations, (2) Interest is paid according to the schedule, (3) Interests paid shall be capitalized in accordance with IAS
23 standard Borrowing Costs. Capitalization rate is calculated by dividing the interest costs for borrowings related to capital expenditures by the average balance of loans. Capitalized
interest shall be calculated by multiplying average balance of construction in progress by capitalization rate, (4) Net effect on operations with financial derivatives was related to FX	30
component fluctuations of cross-currency interest rate swaps.

Fiscal Support During Crude Oil Price Fall

Main rental payments in the price of a barrel of oil produced in Russia

$/bbl

13.8	14.7	15.1	16.2

9.2

10

15

20

25

30

Oil price

Export duty

MET

Gross Upstream margin (excluding costs)

Source: Company data

31

Variance Analysis

Q1 2020 EBITDA and net income sensitivity to +/- 10%		Q1 2020 EBITDA and net income sensitivity to +/-
change in Urals price				10% change in Rub/$ exchange rate
							Rub bn							Rub bn
			EBITDA							EBITDA
(70)				70	(64)		64
		Net income						Net income
	(56)				56			(51)		51

-10%	48.2	+10%	-10%	66.3	+10%
$/bbl	Rub/$

Source: Company data

32

Questions & Answers

33