ROSNEFT OIL COMPANY: 1H 2022 IFRS Results

ROSNEFTS 1H 2022 IFRS RESULTS

• 1H 2022 NET INCOME ATTRIBUTABLE TO SHAREHOLDERS INCREASED BY 13% YOY AND AMOUNTED TO RUB 432 BLN
• OUTSTANDING PREPAYMENTS AND NET FINANCIAL DEBT DECREASED BY 12% COMPARED TO THE BEGINNING OF THE YEAR

Rosneft Oil Company releases 1H 2022 results prepared in accordance with International Financial Reporting Standards (IFRS).

1Calculations based on average monthly Central Bank of Russia exchange rates.

Commenting on the Companys 1H 2022 results, Rosnefts Chairman of the Management Board and Chief Executive Officer Igor Sechin said:

In 1H 2022, Rosneft was under an unprecedented pressure of adverse external factors and unlawful sanctions. However, thanks to high operational efficiency and appropriate management decisions, we were able to ensure business continuity and demonstrate stable results.

The Companys net income rose 13.1% to Rub 432 million, while debt decreased by 12% compared to the beginning of the year, strengthening the Companys financial resilience.

In the interests of our shareholders and in full compliance with the dividend policy, in June 2022 the Annual General Meeting approved dividends. As a result, our shareholders, including bp, received over RUB 441 bln as dividends for 2021.

1H 2022 financial results form a solid basis for interim dividends payment and a further growth of total payments for 2022.

Operating results

Exploration and production

1H 2022 hydrocarbon production reached 4.85 mln boe per day, a 1.5% increase YoY in a comparable perimeter[1].

In 1H 2022, the Company's share in total production of liquid hydrocarbons at new major projects launched since 2016 amounted to 529 th. barrels per day, which is 7.6% higher YoY. The share of these projects in the total production of liquid hydrocarbons reached 14.2%, a 1.3 p.p. increase YoY.

1H 2022 gas production increased by 9.2% YoY1 to 1.12 mln boe per day, while the  gas share in hydrocarbon production reached a record-breaking 23%.

Vostok Oil

In the course of comprehensive exploration work at the Vostok Oil project the Company has confirmed a substantial increase in crude oil reserves. Based on the drilling results from the wells Zapadno-Irkinskaya 32 and Zapadno-Irkinskaya 54 of the Zapadno-Irkinskoye field at the left bank of the Yenisey River, the Russias State Reserves Committee has confirmed the discovery of two new deposits with recoverable crude oil reserves of 101.4 mln t.

Testing at the Peschanaya-1 well of the Payakhskoye field at the right bank of the Yenisey River, before hydraulic fracturing and in a depth interval of about 3,300 meters, showed free flows of water-free oil at a reservoir pressure of 600 atm. The findings substantially exceeded expectations improving the development efficiency of the Payakhskoye field. Preparation is underway for hydraulic fracturing and drilling of a pad of production wells.

The attained results in combination with the results of 3D seismic surveys conducted at the Taymyr group of fields suggest substantial (about 300 mln t) increase in the projects resource base to 6.5 bln t.

Construction of the projects priority facilities continues as planned. 25,000 piles have been installed and over 100 kilometers of pipes have been welded as part of building of the crude oil pipeline system. Construction of a pipeline passage underwater the Yenisei River has begun. The Company has embarked on the construction of an oil delivery and acceptance point and a main cargo berth for sea vessels in the Sever Bay port. The oil-loading terminal in the Sever Bay port is a strategically important facility that will ensure transshipment of oil from the Vostok Oil fields along the Northern Sea Route. It will become the largest oil-loading terminal in Russia with a fleet for receiving and storing oil.

Over 6.5 mln cubic meters of soil has been developed, 9 berths and 5 storage bases for materials and equipment have been prepared for acceptance and unloading. Rotational camps for 5,000 people have been equipped and construction is underway of camps for another 1,000 people. In 2022-2023 up to 6,000 personnel and up to 2,000 vehicles will permanently work at the project.

During the 2022 summer navigation, over 600 th. t of construction cargo and steelwork have been transported, of which 285 th. t via the Northern Sea Route, over 400 flights have been made.

Refining and marketing

During 1H 2022, the Company processed 45.8 mln tonnes of oil.

1H 2022 oil sales increased by 5.7% YoY. At the same time, oil sales on the domestic market increased more than twofold as compared to as the 1H 2021 level. Petroleum products sales on the domestic market grew by 6.5% YoY.

Financial results

The Companys financial performance in 1H2022 was adversely affected by a number of external factors including significant increase in the cost of logistics, rise in railroad transportation tariffs by 18.6% since the beginning of the year as well as higher electricity costs, which accounted for 30% of total costs. Unprecedented rise of the Banks of Russia key rate to 20% also had a negative impact on the results.

Moreover, the oil industry tax burden, unadapted to the changed external conditions, remained the highest in the country and continued growing. In 1H 2022, Rosnefts tax take reached a record level of Rub 2.1 trln (+20% YoY).

As part of the Companys effort to partially offset the negative impact of these factors, the management strengthened cost control and improved the quality of cost management, prioritizing investments in high-performance projects, taking into account careful ranking, timely transition to long-term contracting for key items and key services with a predictable price formula, as well as effective management of the debt portfolio, raising funds at rates below the key rate of the Bank of the Russia, aimed at improving financial stability.

As a result, the Company's revenues in 1H 2022 increased to Rub 5,172 bln, or by 32.5% YoY. Net income attributable to shareholders grew by 13.1% YoY to Rub 432 bln.

1H 2022 capital expenditures amounted to Rub 527 bln, which is 14.1% higher YoY. The increase was mainly due to the planned growth of investments in the Vostok Oil project.

Outstanding prepayments and net financial debt for the reporting period decreased by 12% as compared to the beginning of the year.

Rosneft Department of Advertising and Information

Rosneft Oil Company

September 15, 2022

These materials contain statements about future events and expectations that are forward-looking in nature. Any statement in these materials that is not a statement of historical fact is a forward-looking statement that involves known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements expressed or implied by such forward-looking statements to differ. We assume no obligations to update the forward-looking statements contained herein to reflect actual results, changes in assumptions or changes in factors affecting these statements.

[1] In a comparable perimeter (excluding assets disposed of in 2021)