GAZPROM: 3Q 2018 IFRS RESULTS DECEMBER 3, 2018 1 3Q2018 IFRS - - PowerPoint PPT Presentation

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3Q2018 IFRS RESULTS

GAZPROM: 3Q 2018 IFRS RESULTS

DECEMBER 3, 2018

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3Q2018 IFRS RESULTS

Alexander Ivannikov

Head of Department

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3Q2018 IFRS RESULTS

DISCLAIMERS

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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3Q2018 IFRS RESULTS

19.8 21.5 23.7 25.0 25.1 28.6 31.7 35.7

10 15 20 25 30 35 40

2016 1q17 2q17 3q17 2017 1q18 2q18 3q18

EBITDA LTM

KEY HIGHLIGHTS: STRONG FINANCIAL RESULTS IN 3Q2018

• 3q18 EBITDA growth +86% y-o-y in Rubles (+62% in 9m18)

7 consecutive quarters of LTM EBITDA growth in dollar terms

• Marginally positive Free cash flow RUB 3 bn* in 3q (vs. RUB -166* bn in 3q 2017),

RUB 369 bn* in 9m (vs. RUB -53.2* bn in 9m 2017)

• Reduction of leverage continues:

Net debt*/EBITDA decreased to 0.9 q-o-q (1.0 in 2Q2018)*

Key fa fact ctor

• rs:

s:

• Seasonally weakest quarter in a year
• Record high gas exports to Europe
• Gas, oil and oil products price growth
• High level of cost control, optimization

and prioritization of CAPEX schedule

• Ruble weakening
• Oil business growth

+81%

Key highl hlights: ights:

USD bn

*Adjusted for bank deposits

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3Q2018 IFRS RESULTS

KEY EVENTS AND MARKET ENVIRONMENT

Source: Company data, Bloomberg, Bank of Russia website

1 OC - Other countries: including LNG sales

59.0 65.5 58.0 65.6 20 40 60 80 3q17 3q18 USD/RUB AVERAGE RATE USD/RUB AS OF THE END OF PERIOD USD/RUB USD/bbl

Market environment in 3q18 vs 3q17

USD/mcm 194.6 250.8 50 100 150 200 250 3q17 3q18 AVERAGE GAZPROM GAS SALES PRICE IN EUROPE & OC 3,692 3,831 1,000 2,000 3,000 4,000 3q17 3q18 AVERAGE PRICE IN RUSSIA RUB/mcm

1

Jan 2018 2018

• Nov

2018 2018

• Gas production increased by 7.2% YoY to 365 bcm as of

9M2018

• Exports to Europe increased by 6.7% YoY to 185.4 bcm
• Over 96% of the first phase of the Power of Siberia pipeline

laid

• Offshore

part

• f

the TurkStream completed. Gazprom and Turkey agreed on the onshore section of the second string of the TurkStream

• Germany, Sweden, Finland and Russia granted all required

approvals to build the Nord Stream-2 pipeline. More than 300 km

• f

the pipeline built. Financing was received from European energy companies according to the agreements.

• Moody's and S&P upgraded Gazprom’s ratings to

investment grade

52.1 75.3 50.9 74.3 20 40 60 80 3q17 3q18 BRENT URALS

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3Q2018 IFRS RESULTS

33 73 88 41 33 3,692 3,942 3,974 3,823 3,831 1000 2000 3000 4000 25 50 75 100 3Q17 4Q17 1Q18 2Q18 3Q18 VOLUMES AVERAGE PRICE IN RUSSIA 55 68 72 57 57 195 219 232 238 251 50 100 150 200 250 300 20 40 60 80 100 3Q17 4Q17 1Q18 2Q18 3Q18 VOLUMES AVERAGE PRICE IN EUROPE & OC

GAS SALES

121 288 351 158 128 100 200 300 400 3Q17 4Q17 1Q18 2Q18 3Q18 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

494 674 758 653 729 200 400 600 800 3Q17 4Q17 1Q18 2Q18 3Q18 NET SALES TO EUROPE & OC RUB bn bcm 6 11 14 7 7 165 157 155 149 181 50 100 150 200 5 10 15 20 3Q17 4Q17 1Q18 2Q18 3Q18 VOLUMES AVERAGE PRICE IN FSU 51 91 111 56 69 50 100 3Q17 4Q17 1Q18 2Q18 3Q18 NET SALES TO FSU bcm USD/mcm USD/mcm

1

Russia Europe & OC2 FSU

3,4 3,4

RUB bn +5% +48% +48% +35% +35%

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3Q2018 IFRS RESULTS

OIL AND UTILITIES BUSINESS

Calculations may differ due to rounding.

1 Net of value added tax (VAT), excise tax and custom duties.

Net Sales1

561 612 620 717 800 200 400 600 800 1,000 3Q2017 4Q2017 1Q2018 2Q2018 3Q2018 86 154 175 99 88 50 100 150 200 3Q2017 4Q2017 1Q2018 2Q2018 3Q2018 RUB bn +1 +1%

3Q2017 3Q2018

+43 +43%

Electricity and heat sales Crude oil and gas condensate; refined products sales

41% 54% 5%

CRUDE OIL AND GAS CONDENSATE; REFINED PRODUCTS GAS BUSINESS AND OTHER REVENUES ELECTRICITY AND HEAT RUB bn

39% 55% 6%

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3Q2018 IFRS RESULTS

1,930 664 664 386 386 401 401 403 403 3 2,204

• 200

300 800 1,300 1,800 2,300

Total net sales

• Adj. EBITDA

Net profit Capex

• Adj. Operating

CF

• Adj. FCF
• Adj. Net debt

1 2 3 4, 5

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

SUMMARY OF 3Q2018 IFRS FINANCIAL RESULTS

+35% 5% +137% 37% +7% +7% +86% +86% 3Q2017 vs 3Q2018 RUB bn

RUB bn

+93% +93% +19 +19%

5 In order to reflect the effects of the bank deposits (reported as part of Other current and

non-current assets). See page 14

5 5

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3Q2018 IFRS RESULTS

OCF before working capital changes Net working capital and

• perating items

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

1,978 205 205 213 213 1,426 1,192 235 235 134 134 369 369 134 134

200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000

9M2018 ADJUSTED FREE CASH FLOW BREAKDOWN*

–

RUB bn

FCF adjusted ed for chang nges es in bank depos

• sit

its remains ins positi tive e at RU RUB 369 bn bn ($6 bn bn) in 9M2018

Changes in bank deposits

* Free Cash Flow adjusted for changes in the ST bank deposits

Reported as a part

• f Changes in

working capital

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3Q2018 IFRS RESULTS

1,952 1,747 2,068 2,204 1,491 1,083 1,199 1,308 0.9 1.5 1.4 0.9 0.0 0.5 1.0 1.5 2000 4000 6000 2015 2016 2017 3Q2018 CASH&CASH EQUIVALENTS (INCL. DEPOSITS) NET DEBT ADJ. FOR BANK DEPOSITS NET DEBT ADJ./ADJ.EBITDA RUB bn 3 512 886 2,627 421 1 2,204 1.1 0.9 0.5 1 1.5 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 Total Debt Cash & equivalents Net Debt reported ST deposits LT deposits Net Debt adjusted NET DEBT ADJ./ADJ.EBITDA RUB bn

KEY DEBT METRICS

3Q2018 adjusted Net Debt structure Total Debt breakdown by currency Total Debt and Net Debt adj. Cash, cash equivalents, bank deposits breakdown by currency

1 Calculated using dollar values of Net debt and EBITDA. Net Debt adjusted for the bank deposits reported as a part of Other current and non-current assets

RUB 20% USD 32% EUR 39% Other 9% RUB 59% USD 21% EUR 17% Other 3%

1 1

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3Q2018 IFRS RESULTS

1 641 1 369 1 406 336 401 600 1200 1800 2015 2016 2017 3Q2017 3Q2018

Cash CapEx

1 CapEx breakdown as provided in Management Report

CAPITAL EXPENDITURES

(17%) +19 19% RUB bn 37% 16% 18% 19% 3% 7% TRANSPORT PRODUCTION OF CRUDE OIL AND GAS CONDENSATE PRODUCTION, DISTRIBUTION AND STORAGE OF NATURAL GAS REFINING ELECTRICITY AND HEAT OTHER CAPEX

The Group’s 3Q2018 CapEx breakdown1

+3% +3% 27,053 20,464 24,100 5,695 6,117 5000 10000 15000 20000 25000 30000 2015 2016 2017 3Q2017 3Q2018 USD mn (24%) +18 18% +7% +7%

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3Q2018 IFRS RESULTS High compet petive veness ess

• f Gazprom’s gas.

Record exports Outst standing reso source ce base e and infrast structure Low cost base

UNIQUE FUNDAMENTALS

Strategi egic transf sforma mative e projec ects (capex ex peakin king in 2018 - 2019) 2019) Impr proving g gas market kets s

• utlo

look. Spare e production and export capacity Busi sines ess growth in gas and oil l segmen ments; further er growth poten ential

BUSINESS GROWTH STRONGER FINANCIAL OUTLOOK

Conse servative e financial l policy, cy, cost control Balanced ed dividen end poli licy Impr proving g FCF F profi file le

BUSINESS GROWTH, ENHANCING SUPPLY SECURITY

INVESTMENT CASE

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3Q2018 IFRS RESULTS

ADDITIONAL INFORMATION

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3Q2018 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

Impa mpact t of bank deposits its on Net et debt: bt:

• 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 depos

• sit

its vo volu lumes es

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

144 144 328 328 571 571 496 496 421 421 42 42 2 7 8 1 200 400 600

2016 2017 1Q18 2Q18 3Q18

LT DEPOSITS ST DEPOSITS

186 186 330 330 579 579 503 03

• 78

78 243 243 244 244

• 35

35

• 75

75

• 100
• 50

50 100 150 200 250

2016 2017 1Q18 2Q18 3Q18

RUB bn RUB bn

• Early withdrawal clause
• Deposit term of over 3 months

Key features of bank deposits2:

ST bank depos

• sit

its chang nges es

Impa mpact t of chang anges es in ST bank deposit

• sits

s on Cash sh flows ws: According to Gazprom 3Q2018 IFRS report1:

1 Source: Gazprom 3Q2018 IFRS report, page 21 2 Reported as a part of Other current assets and Other non-current assets

423 423

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3Q2018 IFRS RESULTS

10.3 43.4 57.4 18.8 9.9 20 40 60 3Q17 4Q17 1Q18 2Q18 3Q18 12.6 11.9 11.7 11.9 12.7 5 10 15 3Q17 4Q17 1Q18 2Q18 3Q18 3.7 4.3 4.1 3.8 3.7 2 4 3Q17 4Q17 1Q18 2Q18 3Q18

Crude oil Gas condensate

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

mt mt (1%) 1% 1%

PRODUCTION

32.9 42.5 46.7 32.7 31.0 20 40 3Q17 4Q17 1Q18 2Q18 3Q18

Electricity Heat

bn kWh mn Gcal (6%) %) (4%) 107.3 131.4 134.1 119.3 111.7 50 100 150 3Q17 4Q17 1Q18 2Q18 3Q18

Natural gas

bcm 4% 4%

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3Q2018 IFRS RESULTS

RUSSIAN NATURAL GAS BALANCE

Bcm 2016 2016 201 2017 9M201 2017 9M201 2018 Natura tural l gas s reso sources rces 718.2 .20 770.2 .29 556.2 .2 591,6 ,6 Domestic gas production 640.40 691.19 502.9 531,8 Other sources including Central Asian and Azerbaijani gas 22.97 25.33 19.2 19,2 Gas withdrawn from underground storage in Russia, Latvia and Europe 50.98 50.45 31.4 38,7 Decrease in the amount of gas within the gas transportation system 3.85 3.31 2.7 2,0 Natura tural l gas s distrib stribution tion 718.2 .20 770.2 .29 556.2 .2 591,6 ,6 Domestic consumption 456.68 468.01 327.2 348,7 including needs of the gas transportation system and underground storages 32.29 37.81 26.7 29,8 Gas pumped into underground storages 28.54 53.02 48.9 52,2 Gas for LNG production 14.70 15.46 11.3 11,3 Foreign supplies 181.68 197.40 143.9 151,5 FSU supplies 32.11 32.88 22.3 26,1 Increase in the amount of gas within the gas transportation system 4.49 3.52 2.5 1,8

Source: Company Operating Data

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3Q2018 IFRS RESULTS

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