INVESTOR PRESENTATION 9M AND 3Q 2019 28 November 2019 DISCLAIMER - - PowerPoint PPT Presentation

INVESTOR PRESENTATION 9M AND 3Q 2019

28 November 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

9M 2019 Market Environment

4

Indicator 9M 2019 average 9M 2018 average % Brent, USD/bbl 64.65 72.08

• 10%

Exchange rate, USD/RUB 65.08 61.44 +6% Indicator 9M 2019 average 9M 2018 average % Naphtha, USD/bbl 55.89 68.97

• 19%

Diesel fuel, USD/bbl 77.53 84.57

• 8%

Fuel oil, USD/bbl 60.15 62.35

• 4%

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 9M 2019 AND 3Q 2019

Indicator 9M 2019 9M 2018 3Q 2019 3Q 2018 Comments

Financial Results

Revenue, MUSD

2,716 2,809 957 1,037

9M/9M stable revenue effected by RUB weakening. 3Q/3Q decrease primarily due to lower crude oil and oil products (export and bunkering) prices

EBITDA, MUSD

291 314 123 118

9M/9M decrease - due to lower crude oil prices and increased MET (Upstream). 3Q/3Q increase – due to lower cost of crude oil purchased for refining and income on reverse excise tax (Downstream)

Net Result, MUSD

69 (217) 4 (14)

Net result improved due to FX gains

Adjusted Result1, MUSD

(5) 60 22 33

Decreased profitability of Upstream (9M/9M and 3Q/3Q)

Operational Results

Production, mboe

12.2 11.9 4.1 4.0

Stable volumes

Refining volumes, mbbl

25.8 27.0 9.9 10.0

9M/9M decrease due to planned major maintenance works at the Khabarovsk Refinery in 2Q 2019

Throughput, mbbl

25.0 26.5 9.7 9.7

9M/9M decrease due to planned major maintenance works at the Khabarovsk Refinery in 2Q 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.

9M 2019 production:

3.8 mboe (31%)1

3Q 2019 production:

1.3 mboe (32%) Timano-Pechora

9M 2019 production:

2.5 mboe (21%)

3Q 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

9M 2019 production:

5.9 mboe (48%)

3Q 2019 production:

1.9 mboe (47%) Volga-Urals and Kazakhstan

2P oil reserves: 526.9 mboe2 2P gas reserves: 41.7 mboe 9M 2019 production: 12.2 mboe (average daily: 44,669 boepd) 3Q 2019 production: 4.1 mboe (average daily: 44,436 boepd)

7

UPSTREAM OPERATIONS Crude Oil and Gas Production

Hydrocarbon Production, mboe Hydrocarbon Production, boepd

Implemented 95 well interventions, launched 51 new wells for 9M 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 79 mln of capital commitments for Upstream segment capital construction

42 971 44 741 44 480 45 091 44 436 40 000 42 000 44 000 46 000 48 000 50 000

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

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

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

UPSTREAM OPERATIONS Crude Oil Sales

Crude Oil Sales, mbbl

8

Increase due to trading in crude oil purchased from third parties (9M/9M) and higher production volumes (9M/9M and 3Q/3Q)

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

4 8 12 16 20

9M 2018 9M 2019

Export Domestic Produced Domestic Re-sold

14,4 16,9 1,7 1,7 1,8 2,1 1,8 1,6

5,3 5,4 2 4 6

3Q 2018 3Q 2019

Export Domestic Produced Domestic Re-sold

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 affected by crude oil quotes and tax maneuver effective since Q1 2019

52,8 47,5 50,1 47,0 10 20 30 40 50 60 70 9M 2018 9M 2019 Export Domestic 53,0 46,7 46,3 51,2 45,0 52,6 43,6 46,5 50,5 44,0 10 20 30 40 50 60 70 3Q 2018 4Q 2018 1Q 2019 2Q 2019 3Q 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 liquids prices affected by crude oil quotes

916 633 148 93 200 400 600 800 1 000 9M 2018 9M 2019 Sold volume of gas, kboe Sold volume of gas liqids, kboe 279 195 47 28 50 100 150 200 250 300 350 400 3Q 2018 3Q 2019 Sold volume of gas, kboe Sold volume of gas liqids, kboe 7,9 7,7 48,0 48,8 10 20 30 40 50 60

9M 2018 9M 2019

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

7,5 7,5 7,5 7,7 7,8 56,5 54,2 44,4 53,6 48,6 10 20 30 40 50 60

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

UPSTREAM OPERATIONS Crude Oil and Gas Sales

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

11

9M/9M revenue increased due to trading in crude oil purchased from third parties and higher production

• volumes. 3Q/3Q revenue decreased due to lower crude oil prices

297 267 272 292 212 274

781 833 200 400 600 800 1 000

9M 2018 9M 2019

Export Domestic Produced Domestic Re-sold

98 84 95 95 99 73

292 252 50 100 150 200 250 300

3Q 2018 3Q 2019

Export Domestic Produced Domestic Re-sold

Retail gas stations: 17

The Republic of Buryatia Refining volumes: 9M 2019: 94,412 bopd (9M 2018: 99,071 bopd) 3Q 2019: 107,933 bopd (3Q 2018: 108,230 bopd) Throughput: 9M 2019: 25.0 mbbl (9M 2018: 26.5 mbbl) 3Q 2019: 9.7 mbbl (3Q 2018: 9.7 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: 293 Operating oil depots: 12 Marine terminals: 3 Jet fuel depot: 1 Railway tankers: 1,449

TOTAL

Retail gas stations: 258 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 9M 2019, % Refining volumes, bopd Refining throughput, mbbl Light oil products yield,%

13

108 230 107 933 99 071 94 412

3Q 2018 3Q 2019 9M 2018 9M 2019

9,7 9,7 26,5 25,0

3Q 2018 3Q 2019 9M 2018 9M 2019

60,9% 62,0% 62,5% 59,2%

3Q 2018 3Q 2019 9M 2018 9M 2019

39% 20% 19% 18% 4%

Fuel oil Marine fuel Gasoline Diesel fuel Others

DOWNSTREAM OPERATIONS Oil Products Sales

Oil Products Sales, mbbl

14

Increase in retail volumes due to strong demand Decrease in sales volumes 9M/9M 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)

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

9,7 9,7 2 4 6 8 10 12

3Q 2018 3Q 2019

Export Bunkering Wholesale Retail

3,7 4,5

1,6 9,8

15,5 5,7 6,0 6,6

26,8 26,5 4 8 12 16 20 24 28 32

9M 2018 9M 2019

Export Bunkering Wholesale Retail

15

DOWNSTREAM OPERATIONS Oil Products Prices

Oil Products Net Prices, USD/bbl

Export and bunkering prices fluctuated roughly in line with crude oil prices The Group resumed bunkering sales in 3Q 2018 (terminated in 3Q 2017)

69 60 50 44 68 91 98 97 20 40 60 80 100 120

9M 2018 9M 2019

Export Bunkering Wholesale Retail

74 64 59 62 60 50 54 44 45 44 74 73 88 89 94 94 93 95 99 98 20 40 60 80 100 120

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

Export Bunkering Wholesale Retail

DOWNSTREAM OPERATIONS Oil Products Sales

Revenue from sales of oil products, MUSD

16

Decrease 9M/9M primarily due to RUB weakening Decrease 3Q/3Q due lower export and bunkering prices

259 270 80 431 1 054 513 589 638

1 982 1 852 200 400 600 800 1 000 1 200 1 400 1 600 1 800 2 000 2 200

9M 2018 9M 2019

Export Bunkering Wholesale Retail

91 91 80 152 352 229 208 224

730 695 200 400 600 800

3Q 2018 3Q 2019

Export Bunkering Wholesale Retail

FINANCIALS

17

Profit or loss, MUSD

Financial position, MUSD

Cash flows, MUSD

Macro

9M 2019 9M 2018 3Q 2019 3Q 2018

RUB/USD exchange rate, average 65.08 61.44 64.57 65.53 Brent, average 64.65 72.08 61.94 75.32 Revenue 2,716 2,809 957 1,037 FХ gain/(loss) from non-financing activities 72 (57) (14) (14) Operating income 219 108 59 57 EBITDA 291 314 123 118 EBITDA Margin 11% 11% 13% 11% FХ gain/(loss) from financing activities 10 (78)

• (28)

Profit/(Loss) for the period 69 (217) 4 (14) Adjusted Result (5) 60 22 33 Total assets 3,744 3,519 3,744 3,519 Cash and cash equivalents 187 163 187 163 Total debt 1,931 1,943 1,931 1,943 Total cash generated from operating activities 305 282 208 160 Total cash used in investing activities (180) (142) (80) (46) Total cash used in financing activities (75) (148) (48) (83)

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 9M/9M primarily due to trading in crude oil purchased from third parties and higher production volumes. 3Q/3Q revenue decreased due to lower crude oil prices Downstream segment revenue decreased primarily due to RUB weakening (9M/9M) and lower export and bunkering prices (3Q/3Q)

781 833 1 982 1 852 500 1 000 1 500 2 000 2 500 3 000

9M 2018 9M 2019

Upstream Downstream

292 252 730 695 100 200 300 400 500 600 700 800 900 1 000 1 100

3Q 2018 3Q 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:

• lower crude oil prices, increased mineral extraction tax and higher share of trading transactions

with lower margin in the structure of crude oil sales (in respect of EBITDA per bbl) resulted in decreased EBITDA 9M/9M

• decrease 3Q/3Q primarily due to lower crude oil prices

Downstream segment EBITDA:

• income on reverse excise tax and lower cost of crude oil purchased for refining resulted in

increased EBITDA both 9M/9M and 3Q/3Q

• 1

241 201 72 61 121 146 59 81

40 80 120 160 200 240 280

9M 2018 9M 2019 3Q 2018 3Q 2019

Upstream Downstream 15,4 11,4 12,8 10,9 4,5 5,5 6,0 8,4

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

9M 2018 9M 2019 3Q 2018 3Q 2019

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 negatively affected by lower netbacks (9M/9M and 3Q/3Q) and increased mineral extraction tax (9M/9M)

Crude Oil Economics, USD/bbl1 9M 2019 9M 2018 3Q 2019 3Q 2018 Revenue

48.72 52.50 45.97 53.44

Production Costs

(5.43) (5.94) (5.45) (4.98)

Production and Other Taxes

(23.62) (22.23) (22.65) (26.55)

SG&A and Other2

(2.30) (2.86) (2.27) (3.26)

EBITDA

17.37 21.47 15.60 18.65

Gas and Gas Liquids Economics, USD/boe 9M 2019 9M 2018 3Q 2019 3Q 2018 Revenue

12.97 13.50 12.92 14.51

Production Costs

(3.57) (2.65) (3.88) (3.06)

Production and Other Taxes

(3.75) (3.60) (3.78) (3.60)

SG&A and Other

(0.07) (0.08) (0.23) (0.07)

EBITDA

5.58 7.17 5.03 7.78

Crude Oil (resale) Economics, USD/bbl 9M 2019 9M 2018 3Q 2019 3Q 2018 Revenue

48.76 53.78 46.26 55.85

Cost of purchased oil

(48.47) (52.24) (45.99) (53.59)

EBITDA

0.29 1.54 0.27 2.26

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 9M/9M and 3Q/3Q positively affected by income

• n reverse excise tax and lower cost of crude oil purchased for refining

Downstream Economics, USD/bbl1 9M 2019 9M 2018 3Q 2019 3Q 2018 Revenue

69.00 73.86 71.71 74.78

Refining

(3.45) (3.06) (3.25) (2.70)

Crude Oil Transportation

(3.77) (4.04) (4.21) (3.90)

Cost of Crude Oil

(42.22) (46.54) (43.68) (48.75)

Excise and Other Taxes

(2.09) (7.40) (2.27) (5.89)

Oil Products Purchased for Resale

(5.85) (2.43) (3.79) (1.97)

SG&A and Other2

(6.17) (5.87) (6.11) (5.56)

EBITDA

5.45 4.52 8.40 6.01

FINANCIALS Debt Portfolio

Cash on balance MUSD 187 Leverage dynamics

22

Total debt of MUSD 1,9313 Net debt of MUSD 1,744 Net debt to EBITDA of 5.11:

• restriction on additional loans and

borrowing Loans and borrowings Maturity Profile1, MUSD Loans and borrowings by currency as of 30 September 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 and lease liabilities.

35 2% 1 648 98%

Secured debt Unsecured debt 406 644 238 303 1004 192 212 251 200 400 600 800 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 September 2019 1 943 1 699 1 854 1 919 1 931 1 780 1 566 1 578 1 812 1 744 4,25 4,35 3,82 5,38 5,11 0,00 1,00 2,00 3,00 4,00 5,00 6,00 7,00 1 000 1 100 1 200 1 300 1 400 1 500 1 600 1 700 1 800 1 900 2 000

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

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

1 164 69% 519 31%

RUB bonds and bank loans USD Eurobonds and trade financing

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

112 73 78 63 147 112 245 60 30 33 24 21

• 100

200 300 400 2014 2015 2016 2017 2018 9M 2019 Upstream Downstream 38 46 46 35 31 5 7 4 7 10

• 10

20 30 40 50 60 3Q 2018 4Q 2018 1Q 2019 2Q 2019 3Q 2019 Upstream Downstream