INVESTOR PRESENTATION 1H AND 2Q 2019 13 September 2019 DISCLAIMER - - PowerPoint PPT Presentation

INVESTOR PRESENTATION 1H AND 2Q 2019

13 September 2019

This presentation (hereinafter – the “Presentation”) of the Alliance Oil Company (hereinafter – the “AOC”) was prepared exclusively for the information purposes in order to improve the transparency of disclosure of relevant information and materials

• f AOC and establish a continuous dialogue with investors.

The data contained in this Presentation constitutes the confidential information of the AOC group of companies and shall not be disclosed or transmitted to any third parties without the prior written consent of the disclosing party. The information contained in this Presentation was prepared and provided by the AOC structural departments. These data can be changed with the course of time and are subject to regular update and amendment. This presentation is not an offer or solicitation of an offer and does not cause creation of any rights or obligations from the AOC and/or potential partners to carry out transactions or to enter into negotiations on cooperation. The information provided in this Presentation is not an offer or proposition to conclude an agreement. AOC makes no warranty in respect of the accuracy or reliability of the information contained in the Presentation and accepts no liability for any losses suffered by third parties arising from inaccuracy or unreliability of such information as well as for other negative effects. 2

DISCLAIMER

On 1 June 2017 the Office of Foreign Assets Control of U.S. Department of the Treasury (“OFAC”) included AO Nezavisimaya Neftegazovaya Kompaniya and AO NNK-Primornefteproduct, subsidiaries of the Group, to the Specially Designated Nationals and Blocked Persons list (“SDN List”). Sanctions were imposed pursuant to the US President Executive Order No. 13722 of 15 March 2016, concerning blocking the property of the Government of North Korea and the Workers’ party of Korea, and prohibiting certain transactions with North Korea. The Group cooperates with OFAC on all arising matters. The Group has received a confirmation from The Bank of New York Mellon of the current absence of obstacles for the provision of services and payments settlement under the Group’s existing Eurobonds. As of now there are no further developments that the Group is able to report. Information will be updated accordingly. 3

Operating Environment

1H 2019 Market Environment

4 1H 2019 results were negatively affected by lower crude oil and oil products quotes along with RUB weakening

Indicator 1H 2019 average 1H 2018 average % Brent, USD/bbl 66.01 70.45

• 6%

Exchange rate, USD/RUB 65.34 59.35 +10% Indicator 1H 2019 average 1H 2018 average % Naphtha, USD/bbl 57.17 66.98

• 15%

Diesel fuel, USD/bbl 78.06 82.54

• 5%

Fuel oil, USD/bbl 60.96 59.68 +2%

USD/bbl RUB/USD

Crude oil prices and exchange rates Oil products prices

USD/bbl 20 30 40 50 60 70 80 20 30 40 50 60 70 80 90 100 110 120 Brent Exchange rate 20 40 60 80 100 120 Naphtha Diesel fuel (Gasoil 500 ppm) Fuel oil (HSFO 180)

5

HIGHLIGHTS FOR 1H 2019 AND 2Q 2019

Indicator 1H 2019 1H 2018 2Q 2019 2Q 2018 Comments

Financial Results

Revenue, MUSD

1,790 1,771 854 905

11% increase (1H) and stable revenue (2Q) effected by RUB weakening. H-on-H increase primarily due to increased volumes of crude oil trading transactions and higher oil products prices

EBITDA, MUSD

169 196 50 126

Decreased profitability of upstream - due to increased MET (1H and 2Q) and downstream - due to major maintenance works at the Khabarovsk Refinery and increase in the cost of crude oil purchased for refining (2Q)

Net Result, MUSD

65 (204) (17) (185)

Net result improved due to FX gains

Adjusted Result1, MUSD

(27) 27 (44) 46

Decreased profitability of upstream (1H and 2Q) and downstream (2Q) along with higher finance costs

Operational Results

Production, mboe

8.1 7.9 4.1 3.9

Stable volumes

Refining volumes, mbbl

15.8 17.1 6.8 8.0

Decrease due to planned major maintenance works at the Khabarovsk Refinery in Q2 2019

Throughput, mbbl

15.3 16.7 6.5 7.9

Decrease due to planned major maintenance works at the Khabarovsk Refinery in Q2 2019

1 Adjusted Result is defined as the Group’s Net Result adjusted for non-cash items such as foreign currency exchange gain/(loss),

modification loss on loans, allowance for deferred tax assets and other significant one-off items in profit or loss.

1H 2019 production:

2.5 mboe (31%)1

2Q 2019 production:

1.3 mboe (31%) Timano-Pechora

1H 2019 production:

1.7 mboe (21%)

2Q 2019 production:

0.9 mboe (21%) Tomsk

UPSTREAM OPERATIONS Crude Oil and Gas Reserves and Production

6

Notes: (1) Percentage in consolidated Alliance Oil Company production. (2) As per DeGolyer & MacNaughton as of 31 December 2018.

Alliance Oil Company, consolidated

1H 2019 production:

3.9 mboe (48%)

2Q 2019 production:

2.0 mboe (48%) Volga-Urals and Kazakhstan

2P oil reserves: 526.9 mboe2 2P gas reserves: 41.7 mboe 1H 2019 production: 8.1 mboe (average daily: 44,787 boepd) 2Q 2019 production: 4.1 mboe (average daily: 45,091 boepd)

7

UPSTREAM OPERATIONS Crude Oil and Gas Production

Hydrocarbon Production, mboe Hydrocarbon Production, boepd

Implemented 62 well interventions, launched 31 new wells for 1H 2019 Due to successful interventions oil production has stabilized. Previous decrease in production explained by minimal capital expenditures in 2016-2017 due to negative macro parameters The Group has USD 103 mln of capital commitments for Upstream segment capital construction

42 912 42 971 44 741 44 480 45 091 40 000 42 000 44 000 46 000 48 000 50 000

2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 3,9 4,0 4,1 4,0 4,1

0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5 4,0 4,5

2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019

UPSTREAM OPERATIONS Crude Oil Sales

Crude Oil Sales, mbbl

8

Increase due to trading in crude oil purchased from third parties and higher production volumes

3,5 3,5 3,5 4,0 2,2 4,0

4 8 12

1H 2018 1H 2019

Export Domestic Produced Domestic Re-sold

9,2 11,5 1,7 1,7 1,7 2,1 1,2 1,8

2 4 6

2Q 2018 2Q 2019

Export Domestic Produced Domestic Re-sold

4,6 5,6

UPSTREAM OPERATIONS Crude Oil Netbacks

Crude Oil Netback Prices, USD/bbl

9

Notes: The netback prices are calculated by deducting VAT, railway and pipeline transportation costs (for Russian domestic sales) or transportation, export duty, brokers’ commission and certain other costs (for export sales).

Netbacks in all destinations fluctuated roughly in line with crude oil prices

52,8 48,8 48,6 48,4 10 20 30 40 50 60 70 1H 2018 1H 2019 Export Domestic 58,7 53,0 46,7 46,3 51,2 52,2 52,6 43,6 46,5 50,5 10 20 30 40 50 60 70 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 Export Domestic

Notes: The net prices are calculated by deducting VAT.

10

UPSTREAM OPERATIONS Gas Sales and Price

Gas and Gas Liquids Sales, kboe Gas and Gas Liquids Prices, USD/boe

Gas and gas liquids prices fluctuated in line with market demand, affected by RUB/USD exchange rate

637 438 101 65 200 400 600 800

1H 2018 1H 2019

Sold volume of gas, kboe Sold volume of gas liqids, kboe 314 216 47 33 50 100 150 200 250 300 350 400

2Q 2018 2Q 2019

Sold volume of gas, kboe Sold volume of gas liqids, kboe 8,1 7,6 44,1 49,0 10 20 30 40 50 60

1H 2018 1H 2019

Gas net price, USD/boe Gas Liquids net price, USD/boe

7,6 7,5 7,5 7,5 7,7 46,6 56,5 54,2 44,4 53,6 10 20 30 40 50 60

2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019

UPSTREAM OPERATIONS Crude Oil and Gas Sales

Revenue from Sales of Crude Oil, Gas and Gas Liquids, MUSD

11

Revenue increased primarily due to trading in crude oil purchased from third parties and higher production volumes

200 183 177 196 112 202

100 200 300 400 500 600

1H 2018 1H 2019

Export Domestic Produced Domestic Re-sold

489 581 107 97 92 105 66 94

50 100 150 200 250 300

2Q 2018 2Q 2019

Export Domestic Produced Domestic Re-sold

265 296

Retail gas stations: 15

The Republic of Buryatia Refining volumes: 1H 2019: 87,540 bopd (1H 2018: 94,416 bopd) 2Q 2019: 74,794 bopd (2Q 2018: 87,947 bopd) Throughput: 1H 2019: 15.3 mbbl (1H 2018: 16.7 mbbl) 2Q 2019: 6.5 mbbl (2Q 2018: 7.9 mbbl) Khabarovsk Oil Refinery

DOWNSTREAM OPERATIONS Assets and Refining volumes

12

Retail gas stations: 18 Marine terminals: 1 Jet fuel depot: 1

Kamchatka region

Operating retail gas stations: 289 Operating oil depots: 12 Marine terminals: 3 Jet fuel depot: 1 Railway tankers: 1,449

TOTAL

Retail gas stations: 256 Operating oil depots: 12 Marine terminals: 2 Railway tankers: 1,449

Far East: Amur, Primor and Khabarovsk regions

DOWNSTREAM OPERATIONS Khabarovsk Oil Refinery

Oil Products Breakdown in 1H 2019, % Refining volumes, bopd Refining throughput, mbbl Light oil products yield,%

13

87 947 74 794 94 416 87 540

2Q 2018 2Q 2019 1H 2018 1H 2019

7,9 6,5 16,7 15,3 2Q 2018 2Q 2019 1H 2018 1H 2019 63,3% 54,6% 63,4% 57,5% 2Q 2018 2Q 2019 1H 2018 1H 2019

43% 23% 17% 13% 4%

Fuel oil Marine fuel Gasoline Diesel fuel Others

DOWNSTREAM OPERATIONS Oil Products Sales

Oil Products Sales, mbbl

14

Decrease in sales volumes Q-on-Q due to planned major maintenance works at the Khabarovsk Refinery during 2Q 2019 The Group resumed bunkering sales in 3Q 2018 (terminated in 3Q 2017)

2,5 3,0 10,8 3,6 3,8 4,3

6,3 2 4 6 8 10 12 14 16 18 20

1H 2018 1H 2019

Export Bunkering Wholesale Retail

17,1 17,2 1,0 1,2

2,9

5,5 1,5 1,9 2,1

2 4 6 8 10

2Q 2018 2Q 2019

Export Bunkering Wholesale Retail

8,4 7,7

15

DOWNSTREAM OPERATIONS Oil Products Prices

Oil Products Net Prices, USD/bbl

Increase in retail prices is restricted by the government prescriptions Export and bunkering prices fluctuated roughly in line with crude oil prices The Group resumed bunkering sales in 3Q 2018 (terminated in 3Q 2017)

67 60 44 65 88 101 97 20 40 60 80 100 120

1H 2018 1H 2019

Export Bunkering Wholesale Retail

70 74 64 59 62 39 54 44 45 67 82 73 88 89 97 94 93 95 99 20 40 60 80 100 120

2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019

Export Bunkering Wholesale Retail

DOWNSTREAM OPERATIONS Oil Products Sales

Revenue from sales of oil products, MUSD

16

Decrease H-on-H is due to RUB weakening. 5% increase in functional currency resulted from higher wholesale and retail prices Decrease Q-on-Q due to planned major maintenance works at the Khabarovsk Refinery during 2Q 2019 and therefore decrease in refining and sales volumes

168 179 279 703 316 381 415

200 400 600 800 1 000 1 200 1 400

1H 2018 1H 2019

Export Bunkering Wholesale Retail

1 189 1 252 70 72 368 138 187 208

130 200 400 600 800

2Q 2018 2Q 2019

Export Bunkering Wholesale Retail

547 625

FINANCIALS

17

Profit or loss, MUSD

Financial position, MUSD

Cash flows, MUSD

Macro

1H 2019 1H 2018 2Q 2019 2Q 2018

RUB/USD exchange rate, average 65.34 59.35 64.56 61.80 Brent, average 66.01 70.45 68.82 74.35 Revenue 1,790 1,771 854 905 FХ gain/(loss) from non-financing activities 86 (43) 26 (42) Operating income 160 51 29 30 EBITDA 169 196 50 126 EBITDA Margin 9% 11% 6% 14% FХ gain/(loss) from financing activities 11 (51)

• (53)

Profit/(Loss) for the period 65 (204) (17) (185) Adjusted Result (27) 27 (44) 46 Total assets 3,783 3,579 3,783 3,579 Cash and cash equivalents 107 139 107 139 Total debt 1,919 2,028 1,919 2,028 Total cash generated from/(used in)

• perating activities

97 122 (138) 13 Total cash used in investing activities (100) (96) (51) (57) Total cash (used in)/generated from financing activities (27) (65) 19 (46)

Revenue Breakdown, MUSD

18

FINANCIALS Segment Performance

Notes: Segment revenue is based on total sold volumes including external and intra-group. Segment revenue excludes other income.

Upstream segment revenue increased primarily due to trading in crude oil purchased from third parties and higher production volumes Downstream segment revenue decreased due to RUB weakening (H-on-H) and planned major maintenance works at the Khabarovsk Refinery (Q-on-Q)

489 581 1 252 1 189 500 1 000 1 500 2 000

1H 2018 1H 2019

Upstream Downstream

265 296 625 547 100 200 300 400 500 600 700 800 900 1 000

2Q 2018 2Q 2019

Upstream Downstream

FINANCIALS Segment Performance

EBITDA Distribution, MUSD

Notes: EBITDA for Upstream and Downstream segments is based on IFRS financial information. Segment EBITDA is based on total sold volumes including external and intra-group.

19

EBITDA, USD/bbl

Upstream segment EBITDA:

• increased mineral extraction tax and share of trading transactions with lower margin in the

structure of crude oil sales (in respect of EBITDA per bbl) resulted in decreased EBITDA both H-on-H and Q-on-Q Downstream segment EBITDA:

• stable H-on-H
• decreased Q-on-Q primarily due to planned major maintenance works at the Khabarovsk

Refinery

168 140 96 72 63 65 48

20 40 60 80 100 120 140 160 180

1H 2018 1H 2019 2Q 2018 2Q 2019

Upstream Downstream

• 1

16,9 11,7 19,2 12,3 3,6 3,8 5,6

0,0 2,0 4,0 6,0 8,0 10,0 12,0 14,0 16,0 18,0 20,0 22,0

1H 2018 1H 2019 2Q 2018 2Q 2019

Upstream Downstream

• 0,1

FINANCIALS Upstream Economics

20

Notes: (1) Based on total upstream sold volume including external and intra-group; (2) Selling, administrative and other income/expenses, include transportation tariffs and

• ther selling expenses, administrative expenses and other operating income/expense.

H-on-H and Q-on-Q crude oil economics both negatively affected by increased mineral extraction tax and RUB weakening

Crude Oil Economics, USD/bbl1 1H 2019 1H 2018 2Q 2019 2Q 2018 Revenue

50.13 52.03 52.13 56.91

Production Costs

(5.43) (6.41) (5.47) (6.27)

Production and Other Taxes

(24.13) (20.07) (25.71) (21.66)

SG&A and Other2

(2.32) (2.66) (2.63) (2.05)

EBITDA

18.25 22.89 18.32 26.93

Gas and Gas Liquids Economics, USD/boe 1H 2019 1H 2018 2Q 2019 2Q 2018 Revenue

12.99 13.06 13.72 12.68

Production Costs

(3.43) (2.47) (3.44) (2.21)

Production and Other Taxes

(3.74) (3.61) (3.92) (3.48)

SG&A and Other

(0.01) (0.08) 0.08 (0.07)

EBITDA

5.81 6.90 6.44 6.92

Crude Oil (resale) Economics, USD/bbl 1H 2019 1H 2018 2Q 2019 2Q 2018 Revenue

49.73 52.08 52.59 54.91

Cost of purchased oil

(49.43) (51.13) (52.30) (54.13)

EBITDA

0.30 0.95 0.29 0.78

FINANCIALS Downstream Economics

Notes: (1) Based on total downstream sold volume including external and intra-group; (2) Selling, administrative and other income/expenses, include transportation tariffs and other selling expenses, administrative expenses and other operating income/expense.

21

Downstream economics Q-on-Q negatively affected by planned major maintenance works at the Khabarovsk Refinery during 2Q 2019 (therefore high volumes of oil products purchased for resale with lower margin), increased cost of crude oil for refining and RUB weakening. Partially offset by income on reverse excise tax

Downstream Economics, USD/bbl1 1H 2019 1H 2018 2Q 2019 2Q 2018 Revenue

69.31 72.28 71.11 72.32

Refining

(3.56) (3.21) (4.05) (3.12)

Crude Oil Transportation

(3.52) (4.06) (3.45) (3.73)

Cost of Crude Oil

(41.39) (44.62) (43.95) (42.90)

Excise and Other Taxes

(1.98) (8.14) (1.37) (8.20)

Oil Products Purchased for Resale

(8.86) (2.65) (11.71) (3.32)

SG&A and Other2

(6.22) (5.98) (6.70) (5.47)

EBITDA

3.78 3.62 (0.12) 5.58

FINANCIALS Debt Portfolio

Cash on balance MUSD 107 Leverage dynamics

22

Total debt of MUSD 1,9193 Net debt of MUSD 1,812 Net debt to EBITDA of 5.38:

• restriction on additional loans and

borrowing Loans and borrowings Maturity Profile1, MUSD Loans and borrowings by currency as of 30 June 2019, MUSD2

Notes: (1) Future cash flows for the repayment of loan principal. (2) Including interest accrued and net of unamortized issue costs. (3) Including financing component of long-term advances received.

39 2% 1 683 98%

Secured debt Unsecured debt 406 644 238 303 1023 187 219 282 200 400 600 800 1000 1200 Within one year Within second year Within years three and four Five years and more As at 31 December 2018 As at 30 June 2019

1 213 70% 509 30%

RUB bonds and bank loans USD Eurobonds and trade financing 2 028 1 943 1 699 1 854 1 919 1 889 1 780 1 566 1 578 1 812 4,19 4,25 4,35 3,82 5,38 0,00 1,00 2,00 3,00 4,00 5,00 6,00 7,00 1 000 1 200 1 400 1 600 1 800 2 000 2 200

2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019

Total debt, MUSD Net debt, MUSD Net debt/EBITDA

23

FINANCIALS Capital Expenditures

Historical CAPEX1, MUSD

Notes: (1) CAPEX excluding financial costs capitalized and paid

High level of CAPEX in 2014 related to the reconstruction of the Khabarovsk Refinery, which is completed. Any future CAPEX will be attributable to sustaining of production in both segments

42 38 46 46 35 7 5 7 4 7

• 10

20 30 40 50 60

2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019

Upstream Downstream 112 73 78 63 147 81 245 60 30 33 24 11

• 100

200 300 400 2014 2015 2016 2017 2018 1H 2019 Upstream Downstream