INVESTOR PRESENTATION Q1 2019 31 May 2019 DISCLAIMER This - - PowerPoint PPT Presentation

INVESTOR PRESENTATION Q1 2019

31 May 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

Q1 2019 Market Environment

4 Q1 2019 results were negatively affected by weak ruble Q-on-Q, stabilization of crude oil price had a positive impact on downstream economics

Indicator Q1 2019 average Q1 2018 average % Brent, USD/bbl 63.20 66.55

• 5%

Exchange rate, USD/RUB 66.13 56.88 +16% Indicator Q1 2019 average Q1 2018 average % Naphtha, USD/bbl 56.07 63.25

• 11%

Diesel fuel, USD/bbl 76.38 78.36

• 3%

Fuel oil, USD/bbl 60.52 55.49 +9%

USD/bbl RUB/USD

Crude oil prices and exchange rates Oil products prices

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

5

HIGHLIGHTS FOR Q1 2019

Indicator Q1 2019 Q1 2018 Comments

Financial Results

Revenue, MUSD

936 866

Increase primarily due to higher crude oil and oil products prices and volumes

EBITDA, MUSD

119 70

Increased profitability of downstream segment due to income on reverse excise tax, increase in sales prices and volumes and stabilization of crude oil price purchased for refining

Net Result, MUSD

82 (18)

Net profit primarily resulted from increased profitability of downstream segment and FX gains

Adjusted Result1, MUSD

17 (19)

Increased profitability of downstream segment

Operational Results

Production, mboe

4.0 4.0

Stable volumes

Refining volumes, mbbl

9.0 9.1

Stable volumes

Throughput, mbbl

8.8 8.9

Stable volumes

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.

Q1 2019 production:

1.2 mboe (31%)1 Timano-Pechora

Q1 2019 production:

0.8 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

Q1 2019 production:

1.9 mboe (48%) Volga-Urals and Kazakhstan

2P oil reserves: 526.9 mboe2 2P gas reserves: 41.7 mboe Q1 2019 production: 4.0 mboe (average daily: 44,480 boepd)

7

UPSTREAM OPERATIONS Crude Oil and Gas Production

Hydrocarbon Production, mboe Hydrocarbon Production, boepd

Implemented 34 well interventions, launched 12 new wells for Q1 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 138 mln of capital commitments for Upstream segment capital construction The Group expects to further stabilize its production trend

44 388 42 912 42 971 44 741 44 480 40 000 42 000 44 000 46 000 48 000 50 000

Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 4,0 3,9 4,0 4,1 4,0

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

Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019

UPSTREAM OPERATIONS Crude Oil Sales

Crude Oil Sales, mbbl

8

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

1,8 1,7 1,8 1,9 1,0 2,2

2 4 6

Q1 2018 Q1 2019

Export Domestic Produced Domestic Re-sold

4,6 5,8

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).

Domestic netbacks affected by tax maneuver since Q1 2019

47,3 58,7 53,0 46,7 46,3 44,8 52,2 52,6 43,6 46,5 10 20 30 40 50 60 70 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 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

324 222 54 33

50 100 150 200 250 300 350

Q1 2018 Q1 2019

Sold volume of gas, kboe Sold volume of gas liqids, kboe

8,7 7,6 7,5 7,5 7,5 41,9 46,6 56,5 54,2 44,4

10 20 30 40 50 60

Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019

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 trading in crude oil purchased from third parties and more favorable domestic netbacks as a result of tax maneuver

93 87 84 91 47 107

50 100 150 200 250 300

Q1 2018 Q1 2019

Export Domestic Produced Domestic Re-sold

224 285

Retail gas stations: 15

The Republic of Buryatia Refining volumes: Q1 2019: 100,427 bopd (Q1 2018: 100,956 bopd) Throughput: Q1 2019: 8.8 mbbl (Q1 2018: 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: 288 Oil depots: 20 (including 8 oil depots conserved) Marine terminals: 3 Jet fuel depot: 1 Railway tankers: 1,451

TOTAL

Retail gas stations: 255 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 Q1 2019, % Refining volumes, bopd Refining throughput, mbbl Light oil products yield,%

13

100 956 100 427 Q1 2018 Q1 2019 8,9 8,8 9,0 9,0 Q1 2018 Q1 2019 63,5% 59,6% Q1 2018 Q1 2019

38% 19% 20% 19% 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 The Group resumed bunkering sales in Q3 2018 (terminated in Q3 2017)

1,5 1,8 3,4 5,3 2,0 1,9 2,2

2 4 6 8 10

Q1 2018 Q1 2019

Export Bunkering Wholesale Retail

8,7 9,5

15

DOWNSTREAM OPERATIONS Oil Products Prices

Oil Products Net Prices, USD/bbl

Retail USD prices decreased Q-on-Q due to RUB depreciation Export and bunkering prices fluctuated roughly in line with crude oil prices The Group resumed bunkering sales in Q3 2018 (terminated in Q3 2017)

65 70 74 64 59 39 54 44 63 67 82 73 88 104 97 94 93 95 20 40 60 80 100 120

Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019

Export Bunkering Wholesale Retail

DOWNSTREAM OPERATIONS Oil Products Sales

Revenue from sales of oil products, MUSD

16

Q-on-Q revenue increased due to increase in both average price and sales volumes

98 107 149 335 178 194 206

200 400 600 800

Q1 2018 Q1 2019

Export Bunkering Wholesale Retail

641 627

FINANCIALS

17

Profit or loss, MUSD

Financial position, MUSD

Cash flows, MUSD

Macro

Q1 2019 Q1 2018

RUB/USD exchange rate, average 66.13 56.88 Brent, average 63.20 66.55 Revenue 936 866 FХ gain/(loss) from non-financing activities 60 (2) Operating income 131 21 EBITDA 119 70 EBITDA Margin 13% 8% FХ gain from financing activities 11 2 Profit/(Loss) for the period 82 (18) Adjusted Result 17 (19) Total assets 3,783 3,948 Cash and cash equivalents 276 238 Total debt 1,854 2,082 Total cash generated from operating activities 235 109 Total cash used in investing activities (49) (39) Total cash used in financing activities (46) (19)

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 more favorable netbacks as a result of tax maneuver Downstream segment revenue increased due to increase in both average price and sales volumes

224 285 627 641 100 200 300 400 500 600 700 800 900 1 000

Q1 2018 Q1 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, share of trading transactions with lower margin in the structure
• f crude oil sales and RUB depreciation resulted in decreased EBITDA Q-on-Q

Downstream segment EBITDA:

• increased due to income on reverse excise tax, higher average price and sales volumes,

stabilization of crude oil price purchased for refining

73 68 14 66

20 40 60 80

Q1 2018 Q1 2019

Upstream Downstream 14,6 11,1 1,7 7,0

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

Q1 2018 Q1 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 increased mineral extraction tax and RUB depreciation

Crude Oil Economics, USD/bbl1 Q1 2019 Q1 2018 Revenue

48.05 47.42

Production Costs

(5.39) (6.54)

Production and Other Taxes

(22.48) (18.56)

SG&A and Other2

(2.00) (3.24)

EBITDA

18.18 19.08

Gas and Gas Liquids Economics, USD/boe Q1 2019 Q1 2018 Revenue

12.29 13.42

Production Costs

(3.42) (2.73)

Production and Other Taxes

(3.56) (3.72)

SG&A and Other

(0.09) (0.08)

EBITDA

5.22 6.89

Crude Oil (resale) Economics, USD/bbl Q1 2019 Q1 2018 Revenue

47.44 48.59

Cost of purchased oil

(47.13) (47.43)

EBITDA

0.31 1.16

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 positively affected by income on reverse excise tax and stabilization of crude oil price purchased for refining

Downstream Economics, USD/bbl1 Q1 2019 Q1 2018 Revenue

67.85 72.24

Refining

(3.16) (3.31)

Crude Oil Transportation

(3.57) (4.39)

Cost of Crude Oil

(39.31) (46.33)

Excise and Other Taxes

(2.49) (8.09)

Oil Products Purchased for Resale

(6.54) (1.97)

SG&A and Other2

(5.82) (6.48)

EBITDA

6.96 1.67

FINANCIALS Debt Portfolio

Cash on balance MUSD 276 Leverage dynamics

22

Total debt of MUSD 1,8543 Net debt of MUSD 1,578 Net debt to EBITDA of 3.82:

• restriction on additional loans and

borrowing Loans and borrowings Maturity Profile1, MUSD Loans and borrowings by currency as of 31 March 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. 406 644 238 303 358 661 302 300 100 200 300 400 500 600 700 Within one year Within second year Within years three and four Five years and more As at 31 December 2018 As at 31 March 2019

1 132 69% 512 31%

RUB bonds and bank loans USD Eurobonds

43; 3% 1 601; 97%

Secured debt Unsecured debt 2 082 2 028 1 943 1 699 1 854 1 844 1 889 1 780 1 566 1 578 4,62 4,19 4,25 4,35 3,82 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

Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 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 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

262 112 73 78 63 147 444 245 60 30 33 24

• 100

200 300 400 500 600 700 800 2013 2014 2015 2016 2017 2018 Upstream Downstream 21 42 38 46 46 5 7 5 7 4

• 10

20 30 40 50 60 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Upstream Downstream