gazprom: 2017 ifrs results...2017 ifrs results disclaimers this presentation has been prepared by...

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below this line 2017 IFRS RESULTS

GAZPROM:

2017 IFRS RESULTS

APRIL 27, 2018

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Alexander Ivannikov

Head of Department

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DISCLAIMERS

This presentation has been prepared by PJSC Gazprom (the “Company”), and comprises the slides for a presentation to investors

concerning the Company. This presentation does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of

any offer to purchase or subscribe for, any shares or other securities representing shares in the Company, nor shall it or any part of it nor

the fact of its presentation or distribution form the basis of, or be relied on in connection with, any contract or investment decision.

Any viewer of this presentation considering a purchase of such securities is hereby reminded that any such purchase should be made

solely on the basis of the information contained in the prospectus or other offering document prepared in relation thereto and will be

subject to the selling restrictions set out therein. The information in this presentation should not be treated as investment advice. Care

has been taken to ensure that the facts stated in this presentation are accurate, and that the opinions expressed are fair and

reasonable. However, the contents of this presentation have not been verified by the Company. Accordingly, no representation or

warranty, express or implied, is made or given by or on behalf of the Company or any of its members, directors, officers or employees or

any other person as to the accuracy, completeness or fairness of the information or opinions contained in or discussed at this

presentation. None of the Company or any of their respective members, directors, officers or employees nor any other person accepts

any liability whatsoever for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection

therewith.

The information in this presentation includes forward-looking statements, such statements may also occur during the Q&A session.

These forward-looking statements include all matters that are not historical facts, statements regarding the Company’s intentions,

beliefs or current expectations concerning, among other things, the Company’s results of operations, financial condition, liquidity,

prospects, growth, strategies, and the industry in which the Company operates. By their nature, forward-looking statements involve risks

and uncertainties, including, without limitation, the risks and uncertainties to be set forth in the prospectus, because they relate to

events and depend on circumstances that may or may not occur in the future. The Company cautions you that forward looking

statements are not guarantees of future performance and that its actual results of operations, financial condition and liquidity and the

development of the industry in which the Company operates may differ materially from those made in or suggested by the forward-

looking statements contained in this presentation. In addition, even if the Company’s results of operations, financial condition and

liquidity and the development of the industry in which the Company operates are consistent with the forward-looking statements

contained in this presentation, those results or developments may not be indicative of results or developments in future periods.

The information and opinions contained in this presentation are provided as at the date of this presentation and are subject to change

without notice. No person is under any obligation to update or keep current the information contained herein.

By attending the presentation you agree to be bound by the foregoing limitations.

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43.7

54.1

42.0

52.9

0

20

40

60

2016 2017

BRENT URALS

MAJOR 2017 AND RECENT EVENTS

Source: Company data. Bloomberg. Bank of Russia website 1 OC - Other countries: including LNG sales

67,0

58,4 60.7 57.6

0

20

40

60

80

2016 2017

USD/RUB AVERAGE RATE

USD/RUB AS OF THE END OF PERIOD

USD/RUB USD/bbl

Market environment in 2017 vs 2016

Jan

2018

-

Apr

2018

• Construction of the TurkStream pipeline continues, first

string is expected to approach Turkish coast in May 2018

• Construction of the Power of Siberia pipeline continues,

over 75% of the first phase laid

• Germany and Finland granted all required approvals to

build the Nord Stream-2 pipeline, additional €0.4 bn

received from European Energy Companies

• Moody's and S&P upgraded Gazprom’s ratings to

investment grade

• Management Committee proposed RUB 8.04 per share

dividend for 2017

USD/mcm

176.0

200.2

0

50

100

150

200

2016 2017

AVERAGE GAZPROM GAS SALES

PRICE IN EUROPE & OC

3,816 3,808

0

1,000

2,000

3,000

4,000

2016 2017

AVERAGE GAZPROM GAS PRICE IN

RUSSIA

RUB/mcm

1

2017

Major

events

• Record-high exports to Europe +8% YoY at 194.4 bcm

• Crude oil production growth +4% YoY at 59.5 mt (incl. JV)

• Supplementary Agreement with CNPC signed to supply

gas via Power of Siberia starting December 20, 2019

• Nord Stream 2: €1.6 bn received from European Energy

Companies

• Access to OPAL pipeline broadened

• BoD approved 50/50 JV with BOTAS for the construction

and operation of the onshore transit gas pipeline in Turkey

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6,546

1,467

714

1,406 1,187

-219

2,068

-300

0

300

600

900

1,200

1,500

1,800

2,100

2,400

2,700

3,000

3,300

3,600

Total net sales Adj. EBITDA Net profit Capex Operating CF FCF Net debt1 2 3 4

1 EBITDA adjusted for changes in impairment provisions 2 Profit for the period attributed to shareholders of PJSC Gazprom 3 Cash capital expenditures 4 Compared to Net debt as of December 31, 2016

SUMMARY OF 2017 IFRS FINANCIAL RESULTS

7%

-24%

18%

11%

2016 vs 2017

RUB bn

RUB bn

-25%

3%

Adjustments needed

for analytical purposes*

*In order to reflect the effects of the bank deposits (reported as part of Other current and

non-current assets) increase

6,600

6,300

6,000

5,700

5,400

Liabilities in accordance

with the court decisions in

favor of Naftogaz were

included in other expenses

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+3%

-5% +3% 420.1

472.1

134.1 131.4

0.0

200.0

400.0

600.0

2016 2017 4q16 4q17

Natural gas Crude oil Gas condensate

Gazprom Group’s volumes produced in Russia

Calculations may diverge due to rounding.

PRODUCTION

bcm mln ton mln ton

+12%

-2% 15.9 15.9

4.2 4.3

0.0

10.0

20.0

2016 2017 4q16 4q17

47.2 48.6

12.5 11.9

0.0

20.0

40.0

60.0

2016 2017 4q16 4q17

Electricity Heat

bn kWh mln Gcal

156.7 155.5

45.7 42.5

0

40

80

120

160

2016 2017 4q16 4q17

128.8 126.5

47.4 43.0

0

50

100

150

2016 2017 4q16 4q17

+1%

-1%

-7%

-2%

-9%

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820 876

289 288

0

200

400

600

800

1000

2016 2017 4q16 4q17

NET SALES TO RUSSIA

+7%

-1%

228 242

67 68

176 200

178

219

0

100

200

0

100

200

300

2016 2017 4q16 4q17

VOLUMES AVERAGE PRICE IN EUROPE & OC

GAS SALES

215 230

75 73

3,816 3,808 3,848 3,942

0

1000

2000

3000

4000

0

100

200

300

2016 2017 4q16 4q17

VOLUMES AVERAGE PRICE IN RUSSIA

RR/mcm bcm

RR bn

Calculations may diverge due to rounding. 1 Net of value added tax (VAT) 2 OC - Other countries: include LNG sales 3 VAT is not charged on sales 4 Net of custom duties and excise tax

2,140 2,221

593 674

0

600

1200

1800

2400

2016 2017 4q16 4q17

NET SALES TO EUROPE & OC

RR bn

bcm

33 35

11 11

154 158 152 157

0

100

200

0

10

20

30

40

50

2016 2017 4q16 4q17

VOLUMES AVERAGE PRICE IN FSU

310 293

95 91

0

100

200

300

400

2016 2017 4q16 4q17

NET SALES TO FSU

bcm USD/mcm USD/mcm

1

Russia Europe & OC2 FSU

3,4 3, 4

RR bn +4%

+14%

-5%

-5%

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31%

61%

8%

OIL AND ENERGY BUSINESS

Calculations may differ due to rounding. 1 Net of value added tax (VAT), excise tax and custom duties.

Net Sales1

542 533 522 561

612

0

200

400

600

800

4Q2016 1Q2017 2Q2017 3Q2017 4Q2017

159 160

103 86

154

0

50

100

150

200

4Q2016 1Q2017 2Q2017 3Q2017 4Q2017

RUB bn

-3%

2016 2017

+13%

Electricity and heat Crude oil and gas condensate; refined products

34%

58%

8%

CRUDE OIL AND GAS CONDENSATE; REFINED

PRODUCTS

GAS BUSINESS AND OTHER REVENUES

ELECTRICITY AND HEAT

RUB bn

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According to Gazprom 2017 IFRS report1:

BANK DEPOSITS

Key features of bank deposits2:

• Early withdrawal clause

• Deposit term of over 3 months

• Are NOT included in Сash and cash equivalents

Impact of substantial increase in bank deposits:

• Decrease in Cash and cash equivalents

• Increase in Net Debt and Net Debt/EBITDA

• Reduction in Cash flows from operating activities3

(changes in working capital)

• Decrease in Free cash flow3

127 144

328 5

42

2

0

100

200

300

400

2015 2016 2017

LT DEPOSITS

ST DEPOSITS

RUB bn

186

132 XX

TOTAL DEPOSITS

1 Source: Gazprom 2017 IFRS report, page 33 2 Reported as a part of Other current assets and Other non-current assets

In 2017 Gazprom substantially increased

bank deposits volumes

Increase in LT and ST bank deposits is aimed at improving the efficiency of liquidity management

3 Affected by ST deposits

330

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28

243

1,458

243

1,187 1,406

-219

24

-300

-150

0

150

300

450

600

750

900

OCF before

working capital

changes

Working

capital

and operating items

changes, tax

OCF

reported Capex

FCF

reported

Adjustment for

increase in

ST deposits

FCF

adjusted

2017 ADJUSTED FREE CASH FLOW BREAKDOWN*

1 Free Cash Flow = Net Cash from operating activities – Cash Capex 2 Free Cash Flow adjusted for changes in the ST bank deposits

FCF adjusted for changes in bank

deposits remained positive at

RUB 24 bn in 2017

Changes in bank

deposits

* Free Cash Flow adjusted for changes in the ST bank deposits

1,300

0

-300

0

150

0

0

1,450

1,150

RUB bn

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3,267

869

2,398

328 2

2,068

1.7

1.4

0

0.6

1.2

1.8

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Total Debt Cash &

equivalents

Net Debt

reported

ST deposits LT deposits Net Debt

adjusted

NET DEBT ADJ./ADJ.EBITDA

RUB bn

KEY DEBT METRICS

2017 adjusted Net Debt structure1

Total Debt breakdown

by currency

Cash, cash equivalents,

bank deposits

breakdown by currency

1 Net Debt adjusted for the bank deposits reported as a part of Other current and non-current assets (see Slide 9 for details)

RUB

19%

USD

37%

EUR

37%

Other

7%

Rating Outlook

Fitch * BBB–

(investment grade) positive

Moody's Baa3

(investment grade) positive

S&P * BBB–

(investment grade) stable

Dagong AAA stable

ACRA AAA (RU) stable

Credit ratings of Gazprom

1,952 1,747 2,068

1,491 1,083

1,199

0.9

1.5 1.4

0.0

0.5

1.0

1.5

0

2000

4000

6000

2015 2016 2017

CASH&CASH EQUIVALENTS (INCL. DEPOSITS)

NET DEBT ADJ.

NET DEBT ADJ./ADJ.EBITDA

RUB bn

Net Debt adjusted on bank deposits1

RUB

59%

USD

24%

EUR

14%

Other

3%

*

* In USD terms

*

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1,641

1,369 1,406

300

418

0

600

1200

1800

2015 2016 2017 4Q2016 4Q2017

Cash Capex

1 CapEx breakdown as provided in Management Report

CAPITAL EXPENDITURES

+39%

RUB bn

33%

22%

20%

15%

4% 6%

TRANSPORT

PRODUCTION OF CRUDE OIL AND GAS CONDENSATE

PRODUCTION, DISTRIBUTION AND STORAGE OF NATURAL GAS

REFINING

ELECTRICITY AND HEAT

OTHER CAPEX

The Group’s 2017 Capex breakdown1

+3%

(17%)

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KEY GAS BUSINESS INVESTMENT PROJECTS

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0.36

2.39

3.85

8.97

5.99

7.2 7.2

7.89 8.0397 8.04

1% 7% 9% 16%

12% 15%

107%

24% 20% 27%

5% 9%

25% 24% 26% 27%

90%

46% 46%

190%

0%

40%

80%

120%

160%

200%

0

2

4

6

8

10

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

DIVIDENDS AS % OF IFRS NET INCOME RAS BASED DIVIDEND PAYOUT RATIO

RUB/ Share

DIVIDEND PAYOUT

Dividend

per share

1 As proposed by the Management Committee

1

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High competiveness

of Gazprom’s gas.

Record exports

Outstanding resource base and

infrastructure Low cost base

UNIQUE

FUNDAMENTALS

Strategic transformative projects

(capex peaking

in 2018 - 2019)

Improving gas markets

outlook.

Spare production and export

capacity

Business growth

in gas and oil

segments; further

growth potential

BUSINESS

GROWTH

STRONGER FINANCIAL

OUTLOOK

Conservative

financial policy,

cost control

Balanced

dividend policy

Improving

FCF profile

BUSINESS GROWTH, ENHANCING SUPPLY SECURITY

INVESTMENT CASE

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ADDITIONAL INFORMATION

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RUSSIAN NATURAL GAS BALANCE

Bcm 2016 2017 4Q2016 4Q2017

Natural gas resources 718.20 770.29 219.75 214.09

Domestic gas production 640.40 691.19 190.99 188.29

Other sources including Central Asian and Azerbaijani gas 22.97 25.33 6.66 6.13

Gas withdrawn from underground storage in Russia, Latvia and Europe 50.98 50.45 21.23 19.05

Decrease in the amount of gas within the gas transportation system 3.85 3.31 0.87 0.61

Natural gas distribution 718.20 770.29 219.75 214.09

Domestic consumption 456.68 468.01 147.19 140.81

including needs of the gas transportation system

and underground storages 32.29 37.81 11.22 11.11

Gas pumped into underground storages 28.54 53.02 2.06 4.13

Gas for LNG production 14.70 15.46 4.24 4.16

Foreign supplies 181.68 197.40 53.64 53.50

FSU supplies 32.11 32.88 10.81 10.58

Increase in the amount of gas within the gas transportation system 4.49 3.52 1.82 1.02

Source: Company Operating Data

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THANK YOU!

gazprom: 2017 ifrs results...2017 ifrs results disclaimers this presentation has been prepared by...

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