INVESTOR PRESENTATION 9M AND 3Q 2018 30 November 2018 DISCLAIMER - - PowerPoint PPT Presentation

INVESTOR PRESENTATION 9M AND 3Q 2018

30 November 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

9M 2018 Market Environment

4 9M 2018 results were positively affected by higher crude oil and oil products quotes, with a negative impact on downstream segment from increased prices of crude oil purchased for refining

Indicator 9M 2018 average 9M 2017 average % Brent, USD/bbl 72.08 51.93 +39% Exchange rate, USD/RUB 61.44 58.33 +5% Indicator 9M 2018 average 9M 2017 average % Naphtha, USD/bbl 68.97 50.99 +35% Diesel fuel, USD/bbl 84.57 63.45 +33% Fuel oil, USD/bbl 62.35 46.24 +35%

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 9M 2018 AND 3Q 2018

Indicator 9M 2018 9M 2017 3Q 2018 3Q 017 Comments

Financial Results

Revenue, MUSD

2,809 2,139 1,037 787

Increase primarily due to higher crude oil and

• il products prices

EBITDA, MUSD

314 312 118 150

Increased profitability of upstream segment (9M)/Decreased profitability of downstream segment due to increase in the cost of crude

• il purchased for refining (3Q)

Net Result, MUSD

(217) 42 (14) 56

Net loss primarily resulted from the allowance for deferred tax assets and FX loss

Adjusted Result1, MUSD

60 (6) 33 27

Increased profitability of upstream segment

Operational Results

Production, mboe

11.9 13.4 4.0 4.4

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

Refining volumes, mbbl

27.0 25.6 10.0 9.7

Increase due to resolved logistical bottleneck

• f oil products delivery

Throughput, mbbl

26.5 24.8 9.7 9.4

Increase due to resolved logistical bottleneck

• f oil products delivery

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.

9M 2018 production:

3.0 mboe (26%)1

3Q 2018 production:

1.1 mboe (27%) Timano-Pechora

9M 2018 production:

2.8 mboe (23%)

3Q 2018 production:

0.9 mboe (23%) 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

9M 2018 production:

6.0 mboe (51%)

3Q 2018 production:

2.0 mboe (50%) Volga-Urals and Kazakhstan

2P oil reserves: 551.5 mboe2 2P gas reserves: 46.9 mboe 9M 2018 production: 11.9 mboe (average daily: 43,260 boepd) 3Q 2018 production: 4.0 mboe (average daily: 42,971 boepd)

7

UPSTREAM OPERATIONS Crude Oil and Gas Production

Hydrocarbon Production, mboe Hydrocarbon Production, boepd

Implemented 96 well interventions, launched 41 new wells in 9M 2018 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 168 mln of capital commitments for Upstream segment capital construction. The Group expects to further improve its production trend

48 354 46 153 44 388 42 912 42 971 40 000 43 000 46 000 49 000 52 000 55 000

3Q 2017 4Q 2017 1Q 2018 2Q 2018 3Q 2018 4,4 4,2 4,0 3,9 4,0

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

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

UPSTREAM OPERATIONS Crude Oil Sales

Crude Oil Sales, mbbl

8

Increase due to trading in crude oil purchased from third parties, the Group's market position allows to secure favorable trading margin

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

2 4 6 8 10 12 14 16

9M 2017 9M 2018

Export Domestic Produced Domestic Re-sold

13,5 14,4 2,1 1,7 1,9 1,8 0,7 1,8

1 2 3 4 5 6

3Q 2017 3Q 2018

Export Domestic Produced Domestic Re-sold

4,7 5,3

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

37,8 52,8 23,8 50,1 10 20 30 40 50 60 70 9M 2017 9M 2018 Export Domestic 40,0 46,7 47,3 58,7 53,0 27,0 43,9 44,8 52,2 52,6 10 20 30 40 50 60 70 3Q 2017 4Q 2017 1Q 2018 2Q 2018 3Q 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

8,3 8,4 8,7 7,6 7,5 42,9 42,6 41,9 46,6 56,5 10 20 30 40 50 60

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

8,2 7,9 42,5 48,0 10 20 30 40 50 60

9M 2017 9M 2018

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

1 214 916 181 148 200 400 600 800 1 000 1 200 1 400 9M 2017 9M 2018 Sold volume of gas, kboe Sold volume of gas liqids, kboe 376 279 56 47 50 100 150 200 250 300 350 400 3Q 2017 3Q 2018

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

278 297 195 272 68 212

100 200 300 400 500 600 700 800

9M 2017 9M 2018

Export Domestic Produced Domestic Re-sold

541 781 93 98 71 95 30 99

50 100 150 200 250 300

3Q 2017 3Q 2018

Export Domestic Produced Domestic Re-sold

194 292

Retail gas stations: 14

The Republic of Buryatia Refining volumes: 9M 2018: 99,071 bopd (9M 2017: 93,748 bopd) 3Q 2018: 108,230 bopd (3Q 2017: 105,380 bopd) Throughput: 9M 2018: 26.5 mbbl (9M 2017: 24.8 mbbl) 3Q 2018: 9.7 mbbl (3Q 2017: 9.4 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: 280 Oil depots: 20 (including 8 oil depots conserved) Marine terminals: 3 Jet fuel depot: 1 Railway tankers: 1,451

TOTAL

Retail gas stations: 248 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 9M 2018, % Refining volumes, bopd Refining throughput, mbbl Light oil products yield,%

13

105 380 108 230 93 748 99 071

3Q 2017 3Q 2018 9M 2017 9M 2018

9,4 9,7 24,8 26,5

3Q 2017 3Q 2018 9M 2017 9M 2018

34% 19% 20% 21% 6%

Fuel oil Marine fuel Gasoline Diesel fuel Others 64,3% 60,9% 62,9% 62,5%

3Q 2017 3Q 2018 9M 2017 9M 2018

DOWNSTREAM OPERATIONS Oil Products Sales

Oil Products Sales, mbbl

14

Increase in retail volumes due to strong demand The Group resumed bunkering sales in Q3 2018 (terminated in Q3 2017)

3,3 3,8 4,6 2,0 12,4 15,0 4,8 6,0

4 8 12 16 20 24 28

9M 2017 9M 2018

Export Bunkering Wholesale Retail

25,1 26,8 0,4 1,2 0,1 2,0 6,8 4,3 1,8 2,2

2 4 6 8 10

3Q 2017 3Q 2018

Export Bunkering Wholesale Retail

9,1 9,8

15

DOWNSTREAM OPERATIONS Oil Products Prices

Oil Products Net Prices, USD/bbl

Increase in retail prices is restricted by the government prescriptions Wholesale and export prices increased in line with crude oil prices The Group resumed bunkering sales in Q3 2018 (terminated in Q3 2017)

57 69 36 39 61 70 99 98 20 40 60 80 100 120

9M 2017 9M 2018

Export Bunkering Wholesale Retail

39 55 60 65 70 74 33 57 58 63 67 82 99 96 104 97 94 20 40 60 80 100 120

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

Export Bunkering Wholesale Retail

DOWNSTREAM OPERATIONS Oil Products Sales

Revenue from sales of oil products, MUSD

16

Q-on-Q and 9M-on-9M revenue increased due to increase in both: prices in all destinations, and sales volumes

188 259 166 80 754 1 054 477 589

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

9M 2017 9M 2018

Export Bunkering Wholesale Retail

1 982 1 585 23 91 5 80 382 352 177 208

200 400 600 800

3Q 2017 3Q 2018

Export Bunkering Wholesale Retail

730 586

FINANCIALS

17

Profit or loss, MUSD

Financial position, MUSD

Cash flows, MUSD

Macro

9M 2018 9M 2017 3Q 2018 3Q 2017

RUB/USD exchange rate, average 61.44 58.33 65.53 59.02 Brent, average 72.08 51.93 75.32 52.09 Revenue 2,809 2,139 1,037 787 FХ loss from non-financing activities (57) 2 (14) 6 Operating income 108 161 57 101 EBITDA 314 312 118 150 EBITDA Margin 11% 15% 11% 19% FХ (loss)/gain from financing activities (78) 46 (28) 23 (Loss)/profit for the period (217) 42 (14) 56 Adjusted Result 60 (6) 33 27 Total assets 3,519 3,849 3,519 3,849 Cash and cash equivalents 163 148 163 148 Total debt 1,943 2,057 1,943 2,057 Total cash generated from operating activities 282 474 160 330 Total cash used for investments (142) (361) (46) (282) Total cash used in financing activities (148) (109) (83) (57)

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 due to increase in both: prices in all destinations, and sales volumes

541 781 1 585 1 982 200 400 600 800 1 000 1 200 1 400 1 600 1 800 2 000 2 200 2 400 2 600 2 800

9M 2017 9M 2018

Upstream Downstream

194 292 586 730 100 200 300 400 500 600 700 800 900

3Q 2017 3Q 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 9M-on-9M
• increased share of trading transactions with lower margin in the structure of crude oil sales

resulting in decreased overall EBITDA Q-on-Q Downstream segment EBITDA:

• decreased due to increased cost of crude oil for refining

207 241 80 72 161 121 83 59

40 80 120 160 200 240 280

9M 2017 9M 2018 3Q 2017 3Q 2018

Upstream Downstream 14,0 15,4 15,6 12,8 6,4 4,5 9,2 6,0

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

9M 2017 9M 2018 3Q 2017 3Q 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 9M 2018 9M 2017 3Q 2018 3Q 2017 Revenue

52.50 38.63 53.44 39.81

Production Costs

(5.94) (5.73) (4.98) (5.28)

Production and Other Taxes

(22.23) (13.79) (26.55) (13.17)

SG&A and Other2

(2.86) (3.60) (3.26) (2.70)

EBITDA

21.47 15.51 18.65 18.66

Gas and Gas Liquids Economics, USD/boe 9M 2018 9M 2017 3Q 2018 3Q 2017 Revenue

13.50 12.67 14.51 12.82

Production Costs

(2.65) (1.82) (3.06) (1.86)

Production and Other Taxes

(3.60) (3.43) (3.60) (3.52)

SG&A and Other

(0.08) (0.05) (0.07) (0.06)

EBITDA

7.17 7.37 7.78 7.38

Crude Oil (resale) Economics, USD/bbl 9M 2018 9M 2017 3Q 2018 3Q 2017 Revenue

53.78 39.89 55.85 41.31

Cost of purchased oil

(52.24) (38.14) (53.59) (39.49)

EBITDA

1.54 1.75 2.26 1.82

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

Downstream Economics, USD/bbl1 9M 2018 9M 2017 3Q 2018 3Q 2017 Revenue

73.86 63.02 74.78 64.38

Refining

(3.06) (3.24) (2.70) (2.84)

Crude Oil Transportation

(4.04) (4.16) (3.9) (4.06)

Cost of Crude Oil

(46.54) (34.89) (48.75) (33.41)

Excise and Other Taxes

(7.4) (6.39) (5.89) (6.80)

Oil Products Purchased for Resale

(2.43) (2.70) (1.97) (3.41)

SG&A and Other2

(5.87) (5.23) (5.56) (4.71)

EBITDA

4.52 6.41 6.01 9.15

FINANCIALS Debt Portfolio

Cash on balance MUSD 163 Leverage dynamics

22

Total debt of MUSD 1,9433 Net debt of MUSD 1,780 Net debt to EBITDA of 4.25:

• restriction on additional loans and

borrowing Loans and borrowings Maturity Profile1, MUSD Loans and borrowings by currency as of 30 September 2018, 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. 809 290 724 208 586 618 293 340 100 200 300 400 500 600 700 800 900 Within one year Within second year Within years three and four Five years and more As at 31 December 2017 As at 30 September 2018 2 057 2 082 2 082 2 028 1 943 1 909 1 899 1 844 1 889 1 780 4,45 4,56 4,62 4,19 4,25 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

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

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

592 32% 591 31% 692 37%

RUB bonds and bank loans USD bank loans USD Eurobonds

45; 2% 1 830; 98%

Secured debt Unsecured debt

23

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 13 21 42 38 12 7 5 7 5

• 10

20 30 40 50 60 3Q 2017 4Q 2017 1Q 2018 2Q 2018 3Q 2018 Upstream Downstream