INVESTOR PRESENTATION 2015 AND 4Q 2015 29 April 2016 DISCLAIMER - - PowerPoint PPT Presentation

INVESTOR PRESENTATION 2015 AND 4Q 2015

29 April 2016

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 constitute 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

12M 2015 Market Environment

12M 2015 results were negatively affected by weak ruble and low crude oil and oil products quotes

Indicator 2015 average 2014 average % Urals, USD/bbl 50.04 97.09

• 48%

Brent, USD/bbl 51.80 98.99

• 48%

ESPO, USD/bbl 53.02 99.77

• 47%

Exchange rate, USD/RUB 60.96 38.42 58% Indicator 12M 2015 12M 2014 % Naphtha, USD/bbl 52.81 94.33

• 44%

Diesel fuel, USD/bbl 64.48 112.67

• 43%

Fuel oil, USD/bbl 43.38 83.35

• 48%

10 30 50 70 90 110 130

1-Apr-14 1-Jul-14 1-Oct-14 1-Jan-15 1-Apr-15 1-Jul-15 1-Oct-15 1-Jan-16

Oil Products Price

Naphtha Diesel Fuel (Gasoil 500 ppm) Fuel Oil (HSFO 180) 20 30 40 50 60 70 30 40 50 60 70 80 90 100 110 120

Crude Oil Prices and Exchange Rate

Urals average Brent ESPO Kozmino Exchange rate

RUB/USD USD/bbl

3

HIGHLIGHTS FOR 2015 AND 4Q 2015

Indicator

2015 2014 4Q 2015 4Q 2014

Comments Financial Results Revenue, MUSD

2,173 3,505 525 697

Decrease primarily due to RUB depreciation

EBITDA, MUSD

318 692 90 141

Decrease due to unfavourable macroeconomic factors and maintenance works at the Khabarovsk Refinery

Net Result, MUSD

(153) (209) (49) (205)

Decrease in net loss resulting from FX effects due to less severe RUB to USD exchange rate fluctuations

Operational Results Production, mboe

20.1 20.7 5.2 5.1

Drilling and production plans amended for more sustainable oil fields development

Refining volumes, mbbl

31.5 33.1 8.4 8.4

Decrease due to planned maintenance works at the Khabarovsk Refinery

Throughput, mbbl

30.6 32.2 8.2 8.1

Decrease due to planned maintenance works at the Khabarovsk Refinery 4

2015 production:

5.5 mboe (27%)1

4Q 2015 production:

1.4 mboe (27%) Timano-Pechora

2015 production:

5.1 mboe (26%)

4Q 2015 production:

1.3 mboe (26%) Tomsk

UPSTREAM OPERATIONS Crude Oil and Gas Reserves and Production

2015 production:

2.6 mboe

4Q 2015 production:

0.7 mboe Khanty-Mansiysk and Yamalo-Nenetsk2

Notes: (1) Percentage in consolidated Alliance Oil Company production. (2) Through the Group’s operations with AROG (Alliance Repsol Oil & Gas), a joint venture with Repsol, which is accounted for under the equity method. (3) As per DeGolyer & MacNaughton as of 31 December 2015.

Alliance Oil Company, consolidated

2015 production:

9.5 mboe (47%)

4Q 2015 production:

2.4 mboe (47%) Volga-Urals and Kazakhstan

2P oil reserves: 594.2 mboe3 2P gas reserves: 58.9 mboe 2015 production: 20.1 mboe (average daily: 55,153 boepd) 4Q 2015 production: 5.2 mboe (average daily: 56,509 boepd)

5

UPSTREAM OPERATIONS Crude Oil and Gas Production

Hydrocarbon Production, mboe Hydrocarbon Production, boepd

Implemented 212 well interventions, launched 52 new wells for 2015

55 726 53 295 55 182 55 588 56 509 52 000 54 000 56 000 58 000

4Q 2014 1Q 2015 2Q 2015 3Q 2015 4Q 2015 5,1 4,8 5,0 5,1 5,2 1 2 3 4 5 6 4Q 2014 1Q 2015 2Q 2015 3Q 2015 4Q 2015

6

UPSTREAM OPERATIONS Crude Oil Sales

Crude Oil Sales, mbbl

Reallocation of crude oil sales to export and domestic markets due to higher margins

0,9 1,8

0,2

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

1 2 3 4 5

4Q14 4Q15

Export CIS Domestic Intra-group

4.6 4.1

3,3 6,0

0,6

4,0 4,5 9,6 7,6

3 6 9 12 15 18

2014 2015

Export CIS Domestic Intra-group

17.4 18.1

7

UPSTREAM OPERATIONS Crude Oil Netbacks

Crude Oil Netback Prices, USD/bbl

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) or transportation, brokers’ commission and certain other costs (for CIS countries sales) from the gross price.

55 8 19 25 16 24 51 35 49 28 36 28 22 20 40 60 3Q2014 4Q2014 1Q2015 2Q2015 3Q2015 4Q2015 Export CIS Domestic 42 21 45 28 20 40 60 2014 2015 Export Domestic

Decreased netbacks in all destinations due to lower prices for crude oil Reduced export netbacks since 4Q 2014 till 3Q 2015 due to earlier prepaid shipments to offtakers at fixed exchange rate while RUB depreciated significantly since 4Q 2014

8

Notes: The net prices are calculated by deducting VAT (for Russian domestic sales).

UPSTREAM OPERATIONS Gas Sales and Price

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

Decreased sales volumes due to revised field development scheme Gas and gas liquids economics negatively affected by increase in RUB/USD exchange rate

11,5 7,5 44,2 28,1 10 20 30 40

12M 2014 12M 2015

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

11,8 9,2 7,1 8,4 7,5 7,2 49,0 37,6 27,6 28,5 29,3 27,3 10 20 30 40 50 60

3Q 2014 4Q 2014 1Q 2015 2Q 2015 3Q 2015 4Q 2015

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

641 626 110 114 100 200 300 400 500 600 700 4Q 2014 4Q 2015 Sold volume of gas, kboe Sold volume of gas liqids, kboe 2 586 2 323 472 395 500 1 000 1 500 2 000 2 500 3 000 2014 2015 Sold volume of gas, kboe Sold volume of gas liqids, kboe

9

UPSTREAM OPERATIONS Crude Oil and Gas Sales

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

Despite higher volumes, two main factors contributed to the decrease in revenue from sales of crude oil 2015 vs 2014:

• decreased netbacks in all destinations due to lower prices for crude oil;
• reduced export revenues due to fixed exchange rates applied to prepaid shipments (RUB depreciated

significantly since 2014). Decrease in overall prices Q415 vs Q414 was offset by increase in volumes; increase in revenue due to termination of fixed exchange rate export contract in September 2015.

160 152 30 247 163 416 243

200 400 600 800

2014 2015

Export CIS Domestic Intra-group

854 559

12 50 6 49 42 60 39

20 40 60 80 100 120 140

4Q14 4Q15

Export CIS Domestic Intra-group

127 131

10

Retail gas stations:

13 The Republic of Buryatia Refining volumes: 2015: 86,304 bopd (2014: 90,770 bopd) 4Q 15: 91,493 bopd (4Q 14: 90,766 bopd) Throughput: 2015: 30.6 mbbl (2014: 32.2 mbbl) 4Q 15: 8.2 mbbl (4Q 14: 8.1 mbbl) Khabarovsk Oil Refinery

DOWNSTREAM OPERATIONS Assets and Refining volumes

11

Retail gas stations: 18 Marine terminals: 1 Jet fuel depot: 2

Kamchatka region

Retail gas stations: 279 Oil depots: 20 Marine terminals: 4 Jet fuel depot: 2 Railway tankers: 1,439

TOTAL

Retail gas stations: 248 Oil depots: 20 Marine terminals: 3 Railway tankers: 1,439

Far East: Amur, Primor and Khabarovsk regions

DOWNSTREAM OPERATIONS Khabarovsk Oil Refinery

Khabarovsk Oil Refinery connection to ESPO Oil Products Breakdown in 2015, %

Pumping station No34 (pipeline tie-in point)

On 1 September 2015 the Group commenced commercial delivery of crude oil through the newly launched connection to ESPO. Net positive effect is RUB 1 bln per month for September-December 2015.

ESPO-I (length 2,694 km) ESPO-II (length 2,046 km) ESPO leg (length 28 km)

Refining volumes, bopd Refining throughput, mbbl Light oil products yield,%

12

90 766 91 493 90 770 86 304

4Q 2014 4Q 2015 2014 2015

36% 17% 21% 20% 7%

Fuel oil Marine fuel Gasoline Diesel fuel Others

8,1 8,2 32,2 30,6 4Q 2014 4Q 2015 2014 2015

63,4% 59,8% 60,7% 63,0%

4Q 2014 4Q 2015 2014 2015

DOWNSTREAM OPERATIONS Oil Products Sales

Oil Products Sales, mbbl

13

5,2 7,8 11,2 8,3 11,4 11,2 5,8 5,6

5 10 15 20 25 30 35

2014 2015

Export Bunkering Wholesale Retail

33.6 32.9 1,3 2,1 2,6 2,2 3,0 2,9 1,7 1,5

3 6 9

4Q14 4Q15

Export Bunkering Wholesale Retail

8.6 8.7

Reallocation of shipments from bunkering to export due to higher margins Decrease in overall volumes 2015 vs 2014 due to planned maintenance works at the Khabarovsk Refinery in Q3 2015

DOWNSTREAM OPERATIONS Oil Products Prices

Oil Products Net Prices, USD/bbl

71 41 43 53 38 33 73 55 38 41 31 23 112 82 58 78 65 61 136 103 85 103 88 85 50 100 150

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15

Export Bunkering Wholesale Retail

67 41 70 33 102 65 126 90 50 100 150

2014 2015

Export Bunkering Wholesale Retail

Net USD prices decreased primarily due to RUB depreciation for domestic sales and decrease in quotes for export and bunkering sales

14

DOWNSTREAM OPERATIONS Oil Products Sales

Revenue from sales of oil products, MUSD

344 321 786 272 1 157 733 724 503

500 1 000 1 500 2 000 2 500 3 000

2014 2015

Export Bunkering Wholesale Retail

3 011 1 829 53 68 141 51 246 178 180 129

200 400 600

4Q14 4Q15

Export Bunkering Wholesale Retail

426 620

Total amount of revenue nominated in USD decreased primarily due to dramatic increase in RUB/USD exchange rate

15

FINANCIALS

Profit or loss, MUSD

Financial position, MUSD

Cash flows, MUSD

Macro

FY 2014 FY 2015 4Q 2014 4Q 2015 RUB/USD exchange rate, average 38,42 60,96 47,42 65,94 Urals, average 97,09 50,04 74,89 41,15 Revenue 3 505 2 173 697 525 Operating income 398 144 74 54 EBITDA 692 318 141 90 EBITDA Margin 20% 15% 20% 17% FX loss

• 444
• 149
• 264
• 83

Loss for the period

• 209
• 153
• 205
• 49

Total assets 3 749 2 968 3 749 2 968 Cash and cash equivalents 317 355 317 355 Total debt 2 229 2 018 2 229 2 018 Total cash from operating activities 549 323

• 29

149 Total cash used for investments

• 379
• 164
• 44
• 33

Total cash generated from/(used in) financing activities 67

• 61
• 84
• 1

16

Revenue Breakdown, MUSD

FINANCIALS Segment Performance

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

Two main factors contributed to the decrease in upstream segment revenue 2015 vs 2014:

• decreased netbacks in all destinations due to lower prices for crude oil;
• reduced export revenues due to fixed exchange rates applied to prepaid shipments.

Increase in upstream segment revenue Q415 vs Q414 due to termination of fixed exchange rate export contract in September 2015. Downstream segment revenue decreased primarily due to RUB depreciation.

127 131 620 426 200 400 600 800

4Q14 4Q15

Upstream Downstream

854 559 3 011 1 829 500 1 000 1 500 2 000 2 500 3 000 3 500 4 000

2014 2015

Upstream Downstream

17

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.

EBITDA, USD/bbl

Upstream segment EBITDA decreased 2015 vs 2014 due to:

• decreased netbacks in all destinations
• higher MET as a result of increased RUB/USD exchange rate
• reduced export revenues due to fixed exchange rates applied to prepaid shipments

Termination of fixed exchange rate export contract in September 2015 resulted in increase in upstream segment EBITDA Q415 vs Q414 Downstream segment EBITDA decreased due to:

• RUB depreciation
• higher crude oil component in the cost of oil products
• planned maintenance works at the Khabarovsk Refinery in Q3 2015

398 200 45 51 337 186 76 61

100 200 300 400 500

2014 2015 4Q14 4Q15

Upstream Downstream 19,4 9,6 9,3 9,4 10,1 5,7 8,9 6,9

10 20 30

2014 2015 4Q14 4Q15

Upstream Downstream

18

FINANCIALS Upstream Economics

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 2015 vs 2014 negatively affected by:

• decreased netbacks in all destinations
• higher MET as a result of increased RUB/USD exchange rate
• reduced export revenues due to fixed exchange rates applied to prepaid shipments

Termination of fixed exchange rate export contract in September 2015 resulted in increase in upstream segment EBITDA Q415 vs Q414 Gas and gas liquids economics negatively affected by increase in RUB/USD exchange rate and higher MET

Crude Oil Economics, USD/bbl1 2014 2015 4Q14 4Q15 Revenue 46.05 29.04 28.24 26.02 Production Costs 6.75 4.68 5.27 4.38 Production and Other Taxes 13.21 10.15 9.66 8.06 Cost of purchased oil 0.26 0.48 1.10 0.21 SG&A and Other2 5.08 3.67 2.95 3.44 EBITDA 20.75 10.06 9.26 9.94 Gas and Gas Liquids Economics, USD/boe 2014 2015 4Q14 4Q15 Revenue 16.56 10.53 13.32 10.27 Production Costs 1.83 1.39 1.92 1.47 Production and Other Taxes 2.55 2.45 2.22 2.29 SG&A and Other 0.30 0.10 - 0.09 0.24 EBITDA 11.88 6.59 9.27 6.27 19

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.

Downstream economics negatively affected by:

• RUB depreciation
• higher crude oil component in the cost of oil products
• planned maintenance works at the Khabarovsk Refinery in Q3 2015

Downstream Economics, USD/bbl1 12m14 12m15 4Q14 4Q15 Revenue 89.97 55.52 72.08 48.75 Refining 4.15 2.90 3.69 2.66 Crude Oil Transportation 15.13 7.85 11.35 3.46 Cost of Crude Oil 40.59 27.48 28.76 25.00 Excise and Other Taxes 6.00 3.12 5.94 2.84 Oil Products Purchased for Resale 5.39 3.81 4.58 3.45 SG&A and Other2 8.63 4.70 8.86 4.40 EBITDA 10.08 5.66 8.90 6.94 20

FINANCIALS Debt Portfolio

Debt Maturity Profile1, MUSD

Cash on balance MUSD 355

Notes: (1) Future cash flows for the repayment of loan principal. (2) Including interest accrued and net of unamortized issue costs.

Total Debt by currency as of 31 December 2015, MUSD2 Leverage dynamics

Total debt of MUSD 2,0182 Net debt of MUSD 1,664

MUSD 299 Eurobonds MUSD 500 Eurobonds

Net debt to EBITDA of 5.23:

• no breach of covenants
• restriction on additional loans and borrowing

521 26% 694 34% 804 40%

RUB bonds and bank loans USD bank loans USD Eurobonds

58; 3% 1 960; 97%

Secured debt Unsecured debt

2 530 2 229 2 151 2 181 2 075 2 018 1 919 1 912 1 935 1 958 1 809 1 664 2,57 2,76 3,07 3,59 4,89 5,23 1 2 3 4 5 6 1 000 1 200 1 400 1 600 1 800 2 000 2 200 2 400 2 600 2 800

3Q 2014 4Q 2014 1Q 2015 2Q 2015 3Q 2015 4Q 2015

Total debt, MUSD Net debt, MUSD Net debt/EBITDA 595 280 304 1047 422 133 548 915 200 400 600 800 1000 1200 Within one year Within second year Within years three and four Five years and more As of 31 December 2014 As of 31 December 2015 30 269 500 500

In February and March 2016 MRUB 11,500 short-term bank loan was extended for another six months until August 2016 21

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

27 42 38 5 10 33 15 14 71 59 91 24 9 20 15 15

• 20

40 60 80 100 120 140 1Q 2014 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015 3Q 2015 4Q 2015 Upstream Downstream 352 604 360 262 112 73 253 343 369 444 245 60

• 100

200 300 400 500 600 700 800 900 1 000 2010 2011 2012 2013 2014 2015 Upstream Downstream

22