GAZPROM: 2018 IFRS RESULTS APRIL 29, 2019 1 FY2018 IFRS RESULTS - - PowerPoint PPT Presentation

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FY2018 IFRS RESULTS

GAZPROM: 2018 IFRS RESULTS

APRIL 29, 2019

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FY2018 IFRS RESULTS

Alexan xander der Ivannik nikov

He Head of Departm tment nt

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FY2018 IFRS RESULTS

DISCLAIMER

This presentation has been prepared by PJSC Gazprom (the “Company”), and comprises the slides for a presentation to investors concerning the Company. This presentation does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any shares or other securities representing shares in the Company, nor shall it or any part of it nor the fact of its presentation or distribution form the basis of, or be relied on in connection with, any contract or investment decision. Any viewer of this presentation considering a purchase of such securities is hereby reminded that any such purchase should be made solely on the basis of the information contained in the prospectus or other offering document prepared in relation thereto and will be subject to the selling restrictions set out therein. The information in this presentation should not be treated as investment advice. Care has been taken to ensure that the facts stated in this presentation are accurate, and that the opinions expressed are fair and

• reasonable. However, the contents of this presentation have not been verified by the Company. Accordingly, no representation or

warranty, express or implied, is made or given by or on behalf of the Company or any of its members, directors, officers or employees or any other person as to the accuracy, completeness or fairness of the information or opinions contained in or discussed at this

• presentation. None of the Company or any of their respective members, directors, officers or employees nor any other person accepts

any liability whatsoever for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection therewith. The information in this presentation includes forward-looking statements, such statements may also occur during the Q&A session. These forward-looking statements include all matters that are not historical facts, statements regarding the Company’s intentions, beliefs or current expectations concerning, among other things, the Company’s results of operations, financial condition, liquidity, prospects, growth, strategies, and the industry in which the Company operates. By their nature, forward-looking statements involve risks and uncertainties, including, without limitation, the risks and uncertainties to be set forth in the prospectus, because they relate to events and depend on circumstances that may or may not occur in the future. The Company cautions you that forward looking statements are not guarantees of future performance and that its actual results of operations, financial condition and liquidity and the development of the industry in which the Company operates may differ materially from those made in or suggested by the forward- looking statements contained in this presentation. In addition, even if the Company’s results of operations, financial condition and liquidity and the development of the industry in which the Company operates are consistent with the forward-looking statements contained in this presentation, those results or developments may not be indicative of results or developments in future periods. The information and opinions contained in this presentation are provided as at the date of this presentation and are subject to change without notice. No person is under any obligation to update or keep current the information contained herein. By attending the presentation you agree to be bound by the foregoing limitations.

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FY2018 IFRS RESULTS

20 20 21 21 24 24 25 25 25 25 29 29 32 32 36 36 41 41

10 20 30 40 2016 1q17 2q17 3q17 2017 1q18 2q18 3q18 4q18

RECORD HIGH RESULTS IN 2018

+6%

Y-O-Y GAS PRODUCTION GROWTH

499

BCM PRODUCED IN 2018

12 YEARS IN A ROW OF POSITIVE FCF

6.3 1.9 0.4 7.8

2 4 6 8 2015 2016 2017 2018 USD bn

+3.8%

Y-O-Y GAS EXPORT TO EUROPE

201.9

BCM EXPORTED IN 2018

ROBUST OIL BUSINESS GROWTH STRONG PERFORMANCE OF ASSOCIATES LOWER COSTS DUE TO RUBLE WEAKENING RECORD HIGH DIVIDENDS

CAGR 45%

USD bn

EBITDA Adj.

• j. FCF

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FY2018 IFRS RESULTS

2,599 1,456 1,639 2,127 488 488 2,217 1,000 2,000 3,000 4,000 5,000 Sales EBITDA Net profit CAPEX Operating CF adj. FCF adj. Net debt adj.

1 2 3 4

 RECORD HIGH KEY FINANCIAL INDICATORS: SALES, EBITDA, NET PROFIT  8 QUARTERS OF CONSECUTIVE LTM EBITDA GROWTH (IN USD)  2016-2018 EBITDA CAGR AT 45% (IN USD)

STRONG FINANCIAL PERFORMANCE

1 EBITDA adjusted for changes in impairment provisions 2 Profit attributable to PJSC Gazprom’s shareholders for the period 3 Cash capital expenditures 4 Compared to Net debt as of December 31, 2017

+49% +7% +77%

2017 vs 2018

+104% +17%

Adjusted for analytical purposes*

*In order to reflect the effects of the increase in bank deposits (reported as part of Other current and Other non-current assets) increase

+26%

RUB bn

+20 x

9,000 8,000 8, 224

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FY2018 IFRS RESULTS

2,221 2,951 674 811 1000 2000 3000 2017 2018 4Q17 4Q18 NET SALES TO EUROPE&OC 230 240 73 77 3,808 3,981 3,942 4,140 1000 2000 3000 4000 100 200 300 2017 2018 4Q17 4Q18 VOLUMES AVERAGE PRICE IN RUSSIA

GAS BUSINESS

876 954 288 318 200 400 600 800 1000 2017 2018 4Q17 4Q18 NET SALES TO RUSSIA

RUB/mcm bcm RUB bn

Calculations may differ due to rounding. 1 Net of value added tax (VAT) 2 OC - other countries, including LNG sales 3 VAT is not charged on export sales 4 Net of custom duties and excise tax on gas exports

bcm USD/mcm

1 3,4

+9% +9%

Russia ia Europe

• pe & OC 2

FSU

242 243 68 58 200 246 219 274 100 200 300 100 200 300 2017 2018 4Q17 4Q18 VOLUMES AVERAGE PRICE IN EUROPE&OC

USD/mcm bcm

35 38 11 11 158 163 157 176 100 200 10 20 30 40 50 2017 2018 4Q17 4Q18 VOLUMES AVERAGE PRICE IN FSU +10 10%

RUB bn

+33% +33% +2 +20% 293 349 91 113 100 200 300 400 2017 2018 4Q17 4Q18 NET SALES TO FSU

RUB bn

+19% +19% +2 +24%

3,4

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FY2018 IFRS RESULTS

34% 58% 8%

Crude e oil and gas conden ensat ate; e; refined ined product ucts sales

OIL AND ENERGY BUSINESS

Calculations may differ due to rounding. 1 Net of value added tax (VAT), excise tax and custom duties.

Total tal sales es1 break eakdown

2,227 2,915 612 612 778 778 1,000 2,000 3,000 2017 2018 4Q2017 4Q2018

RUB bn

20 2017 17 20 2018 18

+31 +31%

Electr tric icit ity and heat t sales

+27 +27%

504 504 522 522 154 154 160 160 200 400 600 2017 2018 4Q2017 4Q2018

RUB bn

+4 +4% +4 +4% 35% 58% 6%

CRUDE OIL AND GAS CONDENSATE; REFINED PRODUCTS GAS BUSINESS, TRANSPORTATION AND OTHER REVENUES ELECTRICITY AND HEAT

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FY2018 IFRS RESULTS

26.8 28.8 35.9 31.9 20.5 17.9 20.8 23.7 0.9 1.5 1.4 0.8

• 1.0
• 0.5

0.0 0.5 1.0 1.5 20 40 60 2015 2016 2017 2018 Net Debt adj. Cash & equivalents (incl. deposits) Net Debt adj./EBITDA 55.6 12.2 43.4 11.5 0.02 31.9 1.0 0.8 0.0 0.4 0.8 1.2 20 40 60 Total Debt Cash & equivalents Net Debt reported ST deposits LT deposits Net Debt adjusted Net Debt/EBITDA

KEY DEBT METRICS

2018 adjus usted ed Net t Debt t structur ture1 Tot

• tal

al Debt t breakdo kdown by curren ency Cash, , cash equiv uivalents alents, , bank k deposit its breakdo kdown n by curren ency

1 Net Debt adjusted for the bank deposits reported as a part of Other current and non-current assets (see Slide 9 for details). Based on calculations in USD.

RUB 20% USD 29% EUR 43% Other 8%

Tot

• tal

al Debt t maturit rity profile ile Net t Debt adjus usted ed for bank k deposit its1

RUB 54% USD 25% EUR 19% Other 2%

8.2 8.7 6.8 8.4 8.7 4.6 10.2 2 4 6 8 10 2019 2020 2021 2022 2023 2024 After 2024

USD bn USD bn USD bn

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FY2018 IFRS RESULTS

1,922 1,617

2,671 239 239 305 305 1,617 510 510 2,127 1,639 488 488 510 510

• 100

300 700 1,100 1,500 1,900 2,300 2,700

REPORTED AS A PART OF CHANGES IN WORKING CAPITAL

OCF before working capital changes Net working capital and

• perating items

changes Tax paid OCF reported Adjustment for increase in ST deposits OCF adjusted CAPEX FCF adjusted

2018 ADJUSTED FREE CASH FLOW BREAKDOWN

RUB bn

CHANGES IN BANK DEPOSITS

FCF ADJUSTED FOR CHANGES IN BANK DEPOSITS REMAINS POSITIVE AT RUB 488 BN ($7.8 BN) IN 2018

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FY2018 IFRS RESULTS 694 694 36 36 91 91 191 191 376 376 567 567 448 448 119 119 376 376

200 400 600

OCF before working capital changes Net working capital and

• perating items

changes Tax paid OCF reported Adjustment for increase in ST deposits OCF adjusted CAPEX FCF adjusted

–

RUB bn

FCF ADJUSTED FOR CHANGES IN BANK DEPOSITS REMAINS POSITIVE AT RUB 119 BN ($1.8 BN) IN 4Q2018

CHANGES IN BANK DEPOSITS

REPORTED AS A PART OF CHANGES IN WORKING CAPITAL

4Q2018 ADJUSTED FREE CASH FLOW BREAKDOWN

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FY2018 IFRS RESULTS

26.2 22.3 20.5 24.5 24.1 34.0 7.8 1.8 0.4

5 10 15 20 25 30 35 20.5 24.1 26.2 7.2 6.7 5 10 15 20 25 30 35 2016 2017 2018 4Q2017 4Q2018 1 Capex breakdown as provided in Management Report

CAPITAL EXPENDITURES

USD bn

Cash sh Capex Positiv tive e FCF adj.

• j. despi

spite e high CAPEX EX level el

USD bn

2016 2017 2018 Operating cash flow adj. CAPEX Free cash flow adj.

+ 9 %

• 6

6 %

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FY2018 IFRS RESULTS

5.99 7.20 7.20 7.89 8.0397 8.04 10.43 2 4 6 8 10 2012 2013 2014 2015 2016 2017 2018F

DIVIDENDS GROWTH

Outloo look

RUB/share

 HISTORICALLY RECORD-HIGH DIVIDENDS IN 2019  OVER THE PAST FEW YEARS, GAZPROM

CONSISTENTLY INCREASED DPS IN RUBLE TERMS

 KEEPING DPS IN RUBLE TERMS NOT LOWER

THAN THE LEVEL OF THE PREVIOUS PAYMENT

 MAINTENANCE OF CONSERVATIVE FINANCIAL

STRATEGY

 BALANCED APPROACH TO THE DIVIDEND POLICY

Divi vide dend d per share

1

1 Proposed by the Management Committee

+30% 30%

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FY2018 IFRS RESULTS

UNIQUE UE FUND NDAMENT ENTALS ALS BUSINESS INESS GROWTH TH STRONG ONGER ER FINAN ANCIAL CIAL OUTL TLOO OOK

CONSERVATIVE FINANCIAL POLICY, COSTS CONTROL IMPROVING FCF PROFILE DIVIDEND GROWTH POTENTIAL STRATEGIC TRANSFORMATIVE PROJECTS (CAPEX PEAK IN 2018 - 2019) BUSINESS GROWTH IN GAS AND OIL SEGMENTS; FURTHER GROWTH POTENTIAL IMPROVING IN GAS MARKET

• OUTLOOK. PRODUCTION AND

EXPORT GROWTH. OUTSTANDING RESOURCE BASE AND INFRASTRUCTURE HIGH COMPETITIVENESS OF GAZPROM’S GAS. RECORD HIGH EXPORTS, LOW COST BASE WORLD LARGEST PRODUCER AND EXPORTER OF NATURAL GAS – THE CLEANEST FOSSIL FUEL

INVESTMENT CASE

FROM PEAK INVESTMENTS TO HIGHER FCF

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FY2018 IFRS RESULTS

ADDITIONAL INFORMATION

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FY2018 IFRS RESULTS

Source: Company data, Bloomberg, Bank of Russia website 1 OC - Other countries: including LNG sales

USD/RUB USD/bbl USD/mcm RUB/mcm

1

54.1 71.2 52.9 69.9 20 40 60 80 2017 2018 BRENT URALS 58.4 62.7 57.6 69.5 20 40 60 80 2017 2018 USD/RUB AVERAGE RATE USD/RUB AS OF THE END OF PERIOD 200.2 246.4 50 100 150 200 250 2017 2018 AVERAGE GAZPROM GAS SALES PRICE IN EUROPE & OC 3,808 3,981 1,000 2,000 3,000 4,000 2017 2018 AVERAGE GAZPROM GAS PRICE IN RUSSIA

MARKET ENVIRONMENT IN 2018 VS 2017

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FY2018 IFRS RESULTS

• 1%

1% +1% +1% +2% +2% 472.1 498.7 131.4 133.5 0.0 200.0 400.0 600.0 2017 2018 4q17 4q18

Natural gas Crude oil Gas condensate

Gazprom Group’s volumes produced in Russia Calculations may diverge due to rounding.

PRODUCTION

bcm mln ton mln ton

+6% +6% +2% +2% 15.9 15.9 4.3 4.4 0.0 10.0 20.0 2017 2018 4q17 4q18 48.6 48.3 11.9 12.0 0.0 20.0 40.0 60.0 2017 2018 4q17 4q18

Electricity Heat

bn kWh mln Gcal

155.5 151.5 42.5 41.2 40 80 120 160 2017 2018 4q17 4q18 126.5 130.8 43.0 45.4 50 100 150 2017 2018 4q17 4q18 +0% +0%

• 3%

3%

• 3%

3% +3% +3% +6%

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FY2018 IFRS RESULTS

 Changes in working capital (a part of Operating cash flows)

include changes in ST bank deposits

 Operating cash flows and Free cash flow need to be adjusted

for changes in ST bank deposits for analytical purposes

IMPACT OF BANK DEPOSITS

Impact of bank deposits on Net debt:

 Bank deposits are NOT included in Сash and cash

equivalents

 Net Debt and Net Debt/EBITDA need to be adjusted for

bank deposits for analytical purposes

ST and LT bank deposits volumes Applying of LT and ST bank deposits is aimed at improving the efficiency of liquidity management

144 144 328 328 796 796 42 42 2 1 200 400 600 800

2016 2017 2018

LT DEPOSITS ST DEPOSITS

186 186 330 330

• 78

78 243 243 510 510

• 100

100 300 500

2016 2017 2018

RUB bn RUB bn  Early withdrawal clause  Deposit term of over 3 months

Key features of bank deposits2: ST bank deposits changes Impact of changes in ST bank deposits on Cash flows:

1 Source: Gazprom FY2018 IFRS report, note 12 2 Reported as a part of Other current assets and Other non-current assets

79 798

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FY2018 IFRS RESULTS

RUSSIAN NATURAL GAS BALANCE

Bcm 201 2017 2018 2018 4Q2017 17 4Q2018 18 Natura tural l gas s reso sources rces 770.2 .29 810.64 64 214.0 .09 219.02 02 Domestic gas production 691.19 725.41 188.29 193.61 Other sources including Central Asian and Azerbaijani gas 25.33 23.49 6.13 4.34 Gas withdrawn from underground storage in Russia, Latvia and Europe 50.45 59.33 19.05 20.66 Decrease in the amount of gas within the gas transportation system 3.31 2.42 0.61 0.41 Natura tural l gas s distrib stribution tion 770.2 .29 810.64 64 214.0 .09 219.02 02 Domestic consumption 468.01 493.18 140.81 144.48 including needs of the gas transportation system and underground storages 37.81 40.55 11.11 10.77 Gas pumped into underground storages 53.02 56.17 4.13 3.97 Gas for LNG production 15.46 20.94 4.16 9.60 Foreign supplies 197.40 200.29 53.50 48.82 FSU supplies 32.88 36.70 10.58 10.62 Increase in the amount of gas within the gas transportation system 3.52 3.07 1.02 0.84

Source: Company Operating Data

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FY2018 IFRS RESULTS

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