INVESTOR PRESENTATION 1Q 2018 30 May 2018 DISCLAIMER This - - PowerPoint PPT Presentation

INVESTOR PRESENTATION 1Q 2018

30 May 2018

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

1Q 2018 Market Environment

4 1Q 2018 results were positively affected by higher crude oil and oil products quotes, with a negative impact on downstream segment from increased prices for crude oil purchased for refining and increased excise tax on gasoline and diesel fuel

Indicator 1Q 2018

average

1Q 2017

average

% Brent, USD/bbl 66.55 53.78 +24% Exchange rate, USD/RUB 56.88 58.84

• 3%

Indicator 1Q 2018 average 1Q 2017 average % Naphtha, USD/bbl 63.25 54.24 +17% Diesel fuel, USD/bbl 78.36 64.96 +21% Fuel oil, USD/bbl 55.49 47.16 +18%

20 30 40 50 60 70 80 20,00 30,00 40,00 50,00 60,00 70,00 80,00 90,00 100,00 110,00 120,00

Crude Oil Prices and Exchange Rate

Brent Exchange rate RUB/USD USD/bbl 20 40 60 80 100

Oil Products Price

Naphtha Diesel Fuel (Gasoil 500 ppm) Fuel Oil (HSFO 180) USD/bbl

5

HIGHLIGHTS FOR 1Q 2018

Indicator 1Q 2018 1Q 2017 Comments Revenue, MUSD

866 697

Increase primarily due to higher crude oil and oil products prices

EBITDA, MUSD

70 87

Decreased profitability of downstream segment due to increase in the cost of crude oil purchased for refining and excise tax rates

Net Result, MUSD

(18) 47

Decreased FX income and profitability of downstream segment

Production, mboe

4.0 4.5

Decrease in capital expenditures in 2016-2017 due to negative macro parameters

Refining volumes, mbbl

9.1 9.2

Stable volumes

Throughput, mbbl

8.9 8.9

Stable volumes

1Q 2018 production:

1.0 mboe (25%)1 Timano-Pechora

1Q 2018 production:

0.9 mboe (24%) 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 2017.

Alliance Oil Company, consolidated

1Q 2018 production:

2.0 mboe (51%) Volga-Urals and Kazakhstan

2P oil reserves: 551.5 mboe2 2P gas reserves: 46.9 mboe 1Q 2018 production: 4.0 mboe (average daily: 44,388 boepd)

7

UPSTREAM OPERATIONS Crude Oil and Gas Production

Hydrocarbon Production, mboe Hydrocarbon Production, boepd

Implemented 21 well interventions, launched 2 new wells in 1Q 2018

50 318 49 146 48 354 46 153 44 388 40 000 43 000 46 000 49 000 52 000 55 000

1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018 4,5 4,5 4,4 4,2 4,0

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

1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018

UPSTREAM OPERATIONS Crude Oil Sales

Crude Oil Sales, mbbl

8

Increase due to trading in crude oil purchased from third parties

2,5 1,8 1,7 2,8

0,0 2,0 4,0 6,0

1Q 2017 1Q 2018

Export Domestic

4,2 4,6

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

38,3 34,8 40,0 46,7 47,3 35,8 32,8 36,3 43,9 44,8 10 20 30 40 50 1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018 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 RUB/USD exchange rate and market demand

440 324 67 54 50 100 150 200 250 300 350 400 450 500

1Q 2017 1Q 2018

Sold volume of gas, kboe Sold volume of gas liqids, kboe 8,1 8,3 8,3 8,4 8,7 39,2 46,0 42,9 42,6 41,9 10 20 30 40 50

1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018

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

UPSTREAM OPERATIONS Crude Oil and Gas Sales

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

11

Revenue increased primarily due to more favorable netbacks in both destinations and trading in crude oil purchased from third parties

224 176 107 93 69 131

50 100 150 200 250

1Q 2017 1Q 2018

Export Domestic

Retail gas stations: 14

The Republic of Buryatia Refining volumes: 1Q 2018: 100,956 bopd (1Q 2017: 102,194 bopd) Throughput: 1Q 2018: 8.9 mbbl (1Q 2017: 8.9 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: 278 Oil depots: 20 (including 8 oil depots conserved) Marine terminals: 3 Jet fuel depot: 1 Railway tankers: 1,451

TOTAL

Retail gas stations: 246 Oil depots: 20 (including 8 oil depots conserved) Marine terminals: 2 Railway tankers: 1,451

Far East: Amur, Primor and Khabarovsk regions

DOWNSTREAM OPERATIONS Khabarovsk Oil Refinery

Oil Products Breakdown in 1Q 2018, % Refining volumes, bopd Refining throughput, mbbl Light oil products yield,%

13

102 194 100 956

1Q 2017 1Q 2018

34% 20% 21% 21% 5%

Fuel oil Marine fuel Gasoline Diesel fuel Others 8,9 8,9 9,0 9,0

1Q 2017 1Q 2018

61,9% 63,5%

1Q 2017 1Q 2018

DOWNSTREAM OPERATIONS Oil Products Sales

Oil Products Sales, mbbl

14

Increase in retail volumes due to strong demand No export bunkering sales in 1Q 2018 Reallocation of shipments from export and bunkering to wholesale market to avoid sanctions risks

2,0 1,5 2,7 2,6 5,3 1,4 1,9

2 4 6 8 10

1Q 2017 1Q 2018

Export Bunkering Wholesale Retail

8,7 8,7

15

DOWNSTREAM OPERATIONS Oil Products Prices

Oil Products Net Prices, USD/bbl

Q-on-Q prices increased due to overall price increase in the domestic market and higher quotes for export sales. There was decrease in wholesale net price since Q3 resulted from reallocation of shipments from export and bunkering to wholesale market and therefore change in the product mix. No export bunkering sales since 4Q 2017

59 55 55 60 65 37 27 33 65 77 57 58 63 97 102 99 96 104 20 40 60 80 100 120

1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018

Export Bunkering Wholesale Retail

DOWNSTREAM OPERATIONS Oil Products Sales

Revenue from sales of oil products, MUSD

16

Q-on-Q revenue increased as a result of increase in prices in all destinations

523 627 116 98 101 168 335 138 194

100 200 300 400 500 600 700 800

1Q 2017 1Q 2018

Export Bunkering Wholesale Retail

FINANCIALS

17

Profit or loss, MUSD

Financial position, MUSD

Cash flows, MUSD

Macro

1Q 2018 1Q 2017

RUB/USD exchange rate, average 56.88 58.84 Brent, average 66.55 53.78 Revenue 866 697 Operating income 21 39 EBITDA 70 87 EBITDA Margin 8% 13% FХ gain from financing activities 2 62 (Loss)/Profit for the period (18) 47 Total assets 3,948 3,783 Cash and cash equivalents 238 176 Total debt 2,082 2,132 Total cash generated from operating activities 109 95 Total cash used for investments (39) (35) Total cash used in financing activities (19) (26)

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 more favorable netbacks in both destinations and trading in crude oil purchased from third parties Downstream segment revenue increased as a result of increase in prices in all destinations

176 224 523 627 100 200 300 400 500 600 700 800 900

1Q 2017 1Q 2018

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 primarily due to higher netbacks

Downstream segment EBITDA:

• decreased due to increased cost of crude oil for refining and excise tax rates

61 73 35 14

10 20 30 40 50 60 70 80

1Q 2017 1Q 2018

Upstream Downstream 13,8 14,6 4,1 1,7

• 2,0

4,0 6,0 8,0 10,0 12,0 14,0 16,0 18,0

1Q 2017 1Q 2018

Upstream Downstream

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.

Crude oil economics positively affected by higher netbacks

Crude Oil Economics, USD/bbl1 1Q 2018 1Q 2017 Revenue

47.67 40.61

Production Costs

(5.16) (5.79)

Production and Other Taxes

(14.64) (14.69)

Cost of purchased oil

(10.02) (2.19)

SG&A and Other2

(2.56) (3.32)

EBITDA

15.29 14.62

Gas and Gas Liquids Economics, USD/boe 1Q 2018 1Q 2017 Revenue

13.42 12.17

Production Costs

(2.73) (1.62)

Production and Other Taxes

(3.72) (3.41)

SG&A and Other

(0.08) (0.07)

EBITDA

6.89 7.07

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 negatively affected by increased cost of crude oil for refining and excise tax rates

Downstream Economics, USD/bbl1 1Q 2018 1Q 2017 Revenue

72.24 60.30

Refining

(3.31) (3.03)

Crude Oil Transportation

(4.39) (4.34)

Cost of Crude Oil

(46.33) (36.76)

Excise and Other Taxes

(8.09) (5.48)

Oil Products Purchased for Resale

(1.97) (1.23)

SG&A and Other2

(6.48) (5.39)

EBITDA

1.67 4.07

FINANCIALS Debt Portfolio

Cash on balance MUSD 238 Leverage dynamics

22

Total debt of MUSD 2,0823 Net debt of MUSD 1,844 Net debt to EBITDA of 4.62:

• restriction on additional loans and

borrowing Loans and borrowings Maturity Profile1, MUSD Loans and borrowings by currency as of 31 March 2018, MUSD2

809 290 724 208 1045 98 697 175 200 400 600 800 1000 1200 Within one year Within second year Within years three and four Five years and more As at 31 December 2017 As at 31 March 2018 2 132 2 070 2 057 2 082 2 082 1 956 1 916 1 909 1 899 1 844 5,09 5,23 4,45 4,56 4,62 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

1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018

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

56; 3% 1 978; 97%

Secured debt Unsecured debt

707 35% 590 29% 737 36%

RUB bonds and bank loans USD bank loans USD Eurobonds 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.

Debt portfolio restructuring

• RUB-denominated bonds

Group successfully restructed JSC Oil & Gas Holding bonds (RUB 9.1 bln). Maturity was extended until June

• 2021. Interest rate is equal to CBR Key Rate + 2.25%.
• Eurobonds

Currently Group is not planning any actions in respect to Eurobonds.

• Short-term bank loans

Group is negotiating prolongation of its short-term bank loans and expecting rollover of its revolver facilities in the total amount not less than RUB 22 bln. In addition Group has restructed USD-denominated bank loan and has shifted repayment schedules to subsequent time periods.

23

24

FINANCIALS Capital Expenditures

Historical CAPEX1, MUSD

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

High level of CAPEX in the previous years related to the reconstruction of the Khabarovsk Refinery, which is

• completed. Any future CAPEX will be attributable to sustaining of production in both segments

360 262 112 73 78 63 369 444 245 60 30 33

• 100

200 300 400 500 600 700 800 2012 2013 2014 2015 2016 2017 Upstream Downstream 14 23 14 13 21 8 6 12 7 5

• 5

10 15 20 25 30 35 1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018 Upstream Downstream