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GAZPROMS FINANCIAL AND ECONOMIC POLICY PRESS CONFERENCE 0 St. Petersburg JUNE 28, 2018 DISCLAIMER This presentation was prepared by Gazprom (hereafter the Company) . It contains corporate information for investors. This presentation

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  • St. Petersburg

GAZPROM’S FINANCIAL AND ECONOMIC POLICY PRESS CONFERENCE

JUNE 28, 2018

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1 DISCLAIMER 1

This presentation was prepared by Gazprom (hereafter “the Company”). It contains corporate information for investors. This presentation does not constitute an offer to sell or a solicitation of any offer to purchase any shares or other securities for equity participation in the Company, or a subscription for such. The presentation and information contained herein, as well as the fact of the display or publication thereof, cannot be regarded in connection with any contract or investment decision. The information contained herein should not be construed as investment advice. The Company made every effort to ensure that the facts contained in this presentation would be reliable and the opinions voiced herein would be reasonable and impartial. However, no guarantees or assurances, either expressed or implied, are provided as to the accuracy and completeness of the information or opinions contained or reviewed herein on behalf of the Company or any of its shareholders, directors, officials, employees or any other persons. None of the Company’s directors, shareholders, officials, employees or any other persons assume any responsibility for any losses that may occur as a result of using this presentation or its contents in any form or in any other way relating to this presentation. This presentation may contain forward-looking statements. Such forward-looking statements include the following: the data that are not accomplished facts; statements of the Company’s intentions; and suggestions or current expectations in relation to, inter alia, the Company’s operating results, its financial condition and liquidity, prospects, growth, strategy, and development

  • f the industry the Company operates in. Due to being related to future events and depending on the circumstances that may occur in the future, forward-looking statements inherently involve

risks and uncertainties. The Company wishes to advise that it provides no guarantees for forward-looking statements to be realized and that the actual operating results, financial condition and liquidity, as well as the development of the industry the Company operates in, may differ essentially from the projections or suggestions contained or implied in the said forward-looking

  • statements. Furthermore, regardless of whether the Company’s operating results, financial condition and liquidity, as well as the development of the industry the Company operates in,

conform with forward-looking statements contained herein, such results and circumstances do not reflect the results and circumstances of the future periods. The data and statements contained in this presentation are relevant as of the time of its display and are subject to change without prior notice. No party is under legal obligation to update and amend the data contained herein. By attending this presentation, you agree to abide by the limitations mentioned above.

GAZPROM’S FINANCIAL AND ECONOMIC POLICY, JUNE 28, 2018

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Key priorities of financial policy

  • Conservative approach to budget planning
  • Precise ranking of investment projects
  • Optimization of operating expenditures
  • Risk reduction measures
  • Effective debt management
  • Well-balanced dividend policy

RUB to USD exchange rate

197 197 232

50 100 150 200 250

ACTUAL 2017 BUDGET 2018* ACTUAL Q1 2018

58.3 64.2 56.9

10 20 30 40 50 60 70

ACTUAL 2017 BUDGET 2018* ACTUAL Q1 2018

Gas export price

53 44 65

10 20 30 40 50 60 70

ACTUAL 2017 BUDGET 2018* ACTUAL Q1 2018

Oil price

USD/bbl USD/1,000 m3 RUB/USD

*approved by Board of Directors

FUNDAMENTAL ASPECTS OF FINANCIAL POLICY

GAZPROM’S FINANCIAL AND ECONOMIC POLICY, JUNE 28, 2018

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3

6,111 1,323 952 6,546 1,468 714 2 000 4 000 6 000

Revenue Adjusted EBITDA Net profit

2016 2017

(1) Net of excise tax, VAT and customs duties (2) EBITDA is adjusted by changes in asset impairment reserves (3) Annual profit attributable to shareholders of Gazprom

RUB bln

(1) (2) (3)

USD bln

91 20 14 112 25 12 40 80 120

Revenue Adjusted EBITDA Net profit

2016 2017

(1) (2) (3) +7% +11%

  • 25%

+23% +27%

  • 14%

GAZPROM GROUP’S KEY FINANCIAL INDICATORS (IFRS)

GAZPROM’S FINANCIAL AND ECONOMIC POLICY, JUNE 28, 2018

, , ,

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Gazprom Group’s Investment Program for 2018 Major projects under Gazprom’s Investment Program for 2018 (incl.

  • l. VAT)

T)

  • St. Petersburg

Moscow Torzhok Blagoveshchensk Ukhta Greifswald (Germany)

POWER OF SIBERIA RUB 218 BLN AMUR GPP RUB 89 BLN CHAYANDINSKOYE OIL, GAS AND CONDENSATE FIELD RUB 116 BLN UKHTA – TORZHOK 2 RUB 48 BLN NORD STREAM 2 RUB 115 BLN TURKSTREAM RUB 182 BLN

Anapa

BOVANENKOVSKOYE OIL, GAS AND CONDENSATE FIELD RUB 67 BLN

RUSSIA

CHINA TURKEY

Kiyikoy (Turkey)

GERMANY

Gazprom’s Investment Program for 2018

RUB 1,279 BLN (INCL. VAT)

LNG PLANT AT PORTOVAYA CS RUB 46 BLN GRYAZOVETS – SLAVYANSKAYA CS RUB 99 BLN

Gryazovets

KEY INVESTMENT PROJECTS IN GAS BUSINESS

GAZPROM’S FINANCIAL AND ECONOMIC POLICY, JUNE 28, 2018

Oil 21% Power generation 3% Other lines of business 3%

Gazprom’s Investment Program

Other gas business activities

Gas 74%

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1 Prime cost of gas production – costs for production of 1,000 m3 of marketable gas by 7 major gas producing subsidiaries of Gazprom 2 Prime cost of gas transmission – costs for transmission of 1,000 m3 of gas per 100 km by Gazprom’s gas transmission subsidiaries (within Russian Federation)

65.0 64.6 64.7 20 40 60 2015 2016 2017 RUB /1,000 m3 per 100 km

Prime cost of gas transmission2

872 872 880 880 845 845 677 677 722 722 1,100 300 600 900 1 200 1 500 1 800 2015 2016 2017 Unit cost of gas production (1,000 m3) Severance tax RUB/1,000 m3 1,549

Prime cost of gas production1

1,601 1,955

  • In 2017, 4% reduction of gas production cost (net of severance tax)

was attained

  • Growth in overall production cost caused by severance tax dynamics
  • In 2017, prime cost of gas transmission across

Russia grew by less than 1%

PRIME COST DYNAMICS

GAZPROM’S FINANCIAL AND ECONOMIC POLICY, JUNE 28, 2018

, , ,

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602 618 237 96 120 54 240 884 664 256 228 149 94 260

200 400 600 800 1 000

Severance tax Customs duties Excise tax Profit tax Property tax VAT Others* 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017

Dynamics of tax payments by Gazprom Group, RUB bln

6

35% 4% 10% 26% 9% 6% 10%

Severance tax VAT Excise tax Customs duties Profit tax Property tax Others*

Breakdown of Gazprom Group’s tax payments in 2017, %

RUB bln

* Other taxes, insurance payments, personal income tax

TAX PAYMENT STRUCTURE AND DYNAMICS

GAZPROM’S FINANCIAL AND ECONOMIC POLICY, JUNE 28, 2018

,

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SINGL GLE E TREASUR SURY OF GAZPR PROM OM GROU OUP

Centralize tralized manageme ment t of Gazprom Group’s cash flo lows ws Intra ra-Gr Group

  • up liquid

idit ity y manag nageme ment nt Consoli

  • lidat

atio ion of Gazpr zprom

  • m

Group’s payment operations Manag nageme ment nt of Gazp zprom

  • m

Group’s financial risks

  • expansion of cash

pooling system comprising accounts of Gazprom Group’s companies based within and beyond Russia

  • introduction of advanced

banking technologies for cash flow and transaction management

  • development of corporate

dealing at Gazprom Group

  • expansion of list of

treasury instruments for managing idle cash

  • enhancement of financial

discipline

  • creation of single

transaction processing center for Gazprom Group

  • full control of cash

movements on Gazprom Group’s accounts

  • efforts to ensure

transparency of Gazprom Group’s settlements

  • uniform principles of

financial risk management

  • establishment and

monitoring of quotas for servicing banks

  • introduction of additional

legal oversight procedures (compliance control), including for external financing

CENTRALIZED MANAGEMENT OF GAZPROM GROUP’S LIQUIDITY

GAZPROM’S FINANCIAL AND ECONOMIC POLICY, JUNE 28, 2018

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Rating Outlook Fitch *** BBB– (Investment level) positive Moody's Baa3 (Investment level) positive S&P *** BBB– (Investment level) stable Dagong AAA stable ACRA AAA (RU) stable

Gazprom’s credit ratings Net profit adjusted by bank deposits1

15,2 8,4 6,5 4,5 22,1 3 6 9 12 15 18 21 2018 2019 2020 2021 After 2021

Gazprom Group’s debt repayment schedule**

*** Gazprom’s credit ratings are limited by sovereign credit rating of Russian Federation

1 Net debt adjusted for bank deposits disclosed as Other Current and Non-Current Assets

* In dollar terms

1,952 1,747 2,068 1,831 1,491 1,083 1,199 1,530 0.9 1.5 1.4 1.1 0.5 1 1.5 2 000 4 000 6 000 2015 2016 2017 Q1 2018 CASH AND CASH EQUIVALENTS, INCL. DEPOSITS NET DEBT ADJ. NET DEBT ADJ./EBITDA ADJ.

RUB bln

1

*

  • Conservative financial policy
  • Comfortable level of debt burden
  • Liquidity cushion (cash, cash equivalents and bank

deposits)

  • Access to debt financing

USD bln

** As of late 2017 (according to IFRS)

DEBT BURDEN

GAZPROM’S FINANCIAL AND ECONOMIC POLICY, JUNE 28, 2018

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, ,

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Place cemen ment date Loaned ned amount unt Coupon pon Maturi urity perio iod Details ils 2017 2017

February

RUB 30 bln 8.9% 7 years

  • 2 bond issues in RUB

March

EUR 700 mln EURIBOR +2.5% 5 years

  • Loan agreement

March

USD 750 mln 4.95% 10 years

  • First USD loan in three years
  • Profitability 10 bps below secondary market

April

GBP 850 mln 4.25% 7 years

  • At time of issuance, biggest transaction in UK market among developing-

country firms in three years

  • Swap into EUR

May

EUR 300 mln EURIBOR +0.98% +ECA premium 10 years

  • Export credit agency (ECA) guarantee-backed loan agreement

July

EUR 200 mln EURIBOR +2.47% 5 years

  • Loan agreement

July

CHF 500 mln 2.25% 5 years

  • International public bond issue under EMTN program
  • Swap into EUR

November

EUR 700 mln EURIBOR +1.95% 5 years

  • Loan agreement

November

EUR 1,000 mln EURIBOR +1.85% 5 years

  • Loan agreement with several banks

November

EUR 750 mln 2.25% 7 years

  • International public bond issue under EMTN program

2018 2018

February

RUB 30 bln 7.15% 7 years

  • 4 bond issues in RUB

March

CHF 750 mln 1.45% 5 years

  • International public bond issue under EMTN program

March

EUR 750 mln 2.5% 8 years

  • International public bond issue under EMTN program

March

EUR 600 mln EURIBOR +1.6% 5 years

  • Loan agreement

* All data provided in this slide are for information purposes only

SUCCESSFUL PERFORMANCE IN DEBT CAPITAL MARKETS*

GAZPROM’S FINANCIAL AND ECONOMIC POLICY, JUNE 28, 2018

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200 400 600 800 1 000 1 200 1 400 1 600

2017 2018 2019 2020

NATURAL GAS** OIL POWER GENERATION

33.0 22.2 22.2 24.5

  • 27.1
  • 20.5
  • 24.1

6.2 1.9 0.4

  • 40.0
  • 30.0
  • 20.0
  • 10.0
  • 10.0

20.0 30.0 40.0

2015 2016 2017

OPERATING CASH FLOW (ADJ.)* CAPITAL INVESTMENTS FREE CASH FLOW (ADJ.)* USD bln

Free cash flow

+ Stable market position in Europe + Reasonably high oil and gas prices, optimistic price outlooks + Start of gas supplies to China in 2019 + Oil and condensate production growth + Reduction of capital expenditures after 2019 + Transition of oil and power businesses to generation of positive free cash flow + Reduction of transportation costs after 2020 thanks to commissioning of TurkStream and Nord Stream 2 projects Factors contributing to free cash flow increase in 2018–2020:

RUB bln

Investments in gas, oil and power generation businesses

* Adjusted for changes in volume of bank deposits reflected in operating cash flow under IFRS ** Gazprom

GENERATION OF FREE CASH FLOW

GAZPROM’S FINANCIAL AND ECONOMIC POLICY, JUNE 28, 2018

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, , , , , , , ,

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Main sources s used in establi lish shin ing g prin incip iple les s of corpor

  • rate govern

ernan ance e imp mproveme ement t at Gazprom

  • m

Action plan for further improvement of Gazprom’s corporate governan ance system em wa was made up in 2018 18

Plan includ ludes es follo lowi wing measu sures es:

  • Further improvement of shareholders’ rights mechanisms
  • Strea

eamli mlining ing of corporat

  • rate

e regulat lation ions s and proced edures es relat atin ing to, inter alia, a, non-fin inan ancial ial repor

  • rtin

ing

  • Furth

ther er develo lopmen ent t of corpor

  • rate

e et ethics

  • Contin

tinued ed activ ive e engage agement ent with shareh ehold

  • lders

ers and invest stor

  • rs
  • Recomme

menda dations ions of Bank of Russia ia Corpor

  • rate Govern

rnance ance Code de

  • Listin

ting g rules es of Russian ian stock k exchan ange ges

  • Guide

deli lines es of federal al authori

  • rities

ies

  • Best global

al practice ices

  • Recommenda

mendations tions of external al exper erts

STREAMLINING CORPORATE GOVERNANCE

GAZPROM’S FINANCIAL AND ECONOMIC POLICY, JUNE 28, 2018

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* Dividend yield: ratio of dividends for 2017 to share price as of June 20, 2018 ** Dividends made up 94% of free cash flow *** Recommended by Board of Directors 0.36 2.39 3.85 8.97 5.99 7.2 7.2 7.89 8.0397** 8.04*** 2 4 6 8 10 12 14 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

RUB/share

Dividend payouts Forecast for 2018–2019:

  • Keeping dividend payouts in RUB no lower than last year’s level
  • Maintaining conservative financial strategy
  • Balanced approach to dividend policy

1% 7% 9% 16% 12% 15% 107% 24% 20% 27%

Payout ratio, %

Dividend yield on Gazprom’s shares is commensurate with that of largest global oil and gas companies

Dividend yield on shares of largest global oil and gas companies*

6.1% 5.9% 5.4% 5.4% 5.2% 5.2% 4.7% 3.8% 3.7% 3.4% 3.4% 2.8% 2.7% 1.6% 1.3% 0% 2% 4% 6% 8%

SOURCE: COMPANIES’ DATA, BLOOMBERG

DIVIDEND POLICY

GAZPROM’S FINANCIAL AND ECONOMIC POLICY, JUNE 28, 2018

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Top priorities of Gazprom’s management for 2018–2020

  • Conservative approach to budgeting
  • Oil prices embedded in budget are below current level
  • Cost management
  • Risk management
  • Strong financial discipline
  • Bringing onstream key strategic projects in 2019
  • Additional profit growth from new projects after 2019
  • Wide access to Russian and international debt capital markets
  • Significant liquidity reserve

Conservative financial policy Getting through capital expenditures peak in 2018–2019 Optimization of debt repayment schedule

KEY OBJECTIVES

GAZPROM’S FINANCIAL AND ECONOMIC POLICY, JUNE 28, 2018