• PRODUCTION OF LIQUID HYDROCARBONS INCREASED BY 3.9% YOY TO  4.0 MLN BARRELS PER DAY IN 9M 2023

• GAS PRODUCTION INCREASED BY 33.0%, EXCEEDING 1.5 MLN BOE PER DAY IN 9M 2023

• EBITDA INCREASED BY 19.3% TO RUB 2,403 BLN IN 9M 2023

• NET INCOME ATTRIBUTABLE TO ROSNEFT SHAREHOLDERS REACHED RUB 1,071 BLN IN 9M 2023

Rosneft Oil Company PJSC (hereinafter – Rosneft, the Company) publishes its results for 3Q and 9M 2023 prepared in accordance with International Financial Reporting Standards (IFRS).

* Adjusted for the allocation of the final purchase price of Angaraneft LLC.

Igor Sechin, Chairman of the Management Board and Chief Executive Officer of Rosneft, said:

"The results of the reporting period once again confirmed the resilience of Company's business model. In 9M 2023, hydrocarbon production increased by almost 11% due to the development of existing projects and launch of greenfields. Efficiency improvements, cost control, including reduction in G&A expenses and continued leadership in unit lifting costs, resulted in incremental EBITDA increase.

At the same time, the Company continues to be adversely affected by ongoing ill-considered changes in the industry taxation, such as the damper cut that triggered the crisis at the domestic fuel market in August-September. And as soon as in October Ministry of Finance initiated further changes in the method for determining oil price for tax purposes, which is a key parameter for oil industry taxation.

In particular, the changes provide for economically unjustified reduction in Russian oil price discount to Brent. At the same time, the Ministry continues to use this irrelevant for Russia price benchmark (Brent) and disregards transformative shift in Russian oil industry – new crude delivery destinations and pricing approach.

Moreover, the changes stipulate unreasonable cost of freight based on non-existent supply routes to Europe, not taking into account transportation, other logistical costs, as well as insurance, conversion, and interest payments.

I would also like to mention one more change adopted without comprehensive analysis and industry discussion – namely, gas price differentiation to various groups of industrial consumers. The change would result in gas market imbalance and gas shortages for socially essential industries. Moreover, gas MET increase (in the next 3 years the Company’s MET payments would increase by 25%) would reduce the industry’s investment and working capital and impair ability to sustain production levels in the future.

These changes impede long-term investment planning and further implementation of existing projects.

Since July, there have been progressive key interest rate increases that adversely affect the cost of financing for the Company, its suppliers and contractors leading to higher project costs and delivery time. It also affects our net income, which is the basis for dividends. The increases had an impact on the financial performance of the reporting period - in 9M 2023, interest expenses went up by 15% - and the compounded effect of CBR’s key interest rate decisions will amplify this impact in the coming periods.

I would also highlight the stepped up sanctions pressure as almost every round introduces restrictions that one way or the other negatively impact Company’s activities. Amid the tightening of sanctions, Bank of Russia has not yet created a reliable means for executing cross-border payments in different currencies, which impedes timely deposit of export revenue.

Shareholder interests remain one of our key priorities. On 10 November, the Board of Directors recommended an interim dividend of RUB 30.77 per share in full compliance with the dividend policy. A total of RUB 326 billion, or 50% of net income for 1H 2023, is recommended to be distributed for dividend payments".

Operational performance

Exploration and Production

In 9M 2023, liquids production totalled 4.0 mln barrels per day, up 3.9% YOY which is mainly due to the restart of production at the Sakhalin-1 project. In Q3 2023, liquids production remained almost unchanged at 3.9 mln barrels per day amid the introduction of the oil production cap in Russia since March 2023.

In 9M 2023, the Company's gas production increased by 33.0% YOY reaching 1.5 mln boe per day. The growth was attributable to higher production at existing projects, as well as the launch of greenfield gas projects in the Yamalo-Nenets Autonomous District in 2022. In Q3 2023, gas production was 1.5 mln boe per day.

As a result, in 9M 2023, the Company's hydrocarbon production reached 5.5 mln boe per day, up 10.7% YOY. In Q3 2023, daily hydrocarbon production amounted to 5.4 mln boe.

Production drilling totalled 9.1 mln metres in 9M 2023, up 7.0% YOY. Rosneft commissioned 2.4 th. new wells, 71% of which were horizontal wells. The share of new horizontal wells with multistage hydraulic fracturing was 48%. The unit production per a horizontal is twice as much as per one directional well.

Vostok Oil Project

As part of the flagship Vostok Oil Project, in 9M 2023, the Company conducted over 2.2 th. linear km of 2D seismic and 1.6 th. square km of 3D seismic while interpretation of the acquired data is in progress. Rosneft completed 3 exploration wells and started drilling of another 5 wells with 8 more being tested.

In the course of pilot development of the Payakha cluster, in 9M 2023, the Company drilled 34 th. metres and completed drilling of 11 production wells. As part of the pilot development of the Ichemminskoye and Baikalovskoye fields, pre-drilling work is under way, with drilling rigs being mounted. Before the end of 2023, the Company plans to start drilling the first wells.

Rosneft continues construction of the Vankor–Paiyakha–Bukhta Sever trunk oil pipeline and the Port Bukhta Sever oil terminal. Construction of storage and transshipment facilities in the Yenisei basin is underway, as well as construction of hydraulic engineering installations and expansion of coastal and berthing infrastructure.

During the summer navigation period, the project facilities received over 850,000 tons of cargo delivered via the Northern Sea Route, and Yenisei and Ob-Irtysh river basins. In total, 1.1 mln tons of cargo were delivered by waterborne transport in 9M 2023.

Refining

In 9M 2023, the Company processed 65.8 mln tons, which is 3.3% higher compared to 9M 2022. Light product yields increased to 58.2%, while the refining depth remained at 76.3%. In Q3 2023, the Company refined 21.7 mln tons of crude oil at its refineries in Russia, up 0.9% quarter-on-quarter.

The Company has been consistently working to develop local technologies and import substitution, in particular, providing its refineries with in-house catalysts required for the production of high-quality motor fuel. In 9M 2023, 900 tons of diesel hydrotreatment catalysts and protective layer catalysts were produced. About 80% of this volume was delivered to the Company's refineries, with the remainder supplied to other Russian consumers. The Company's enterprises also produced more than 200 tons of reforming catalysts and about 130 tons of catalysts and adsorbents for hydrogen production units. 475 tons of regenerated diesel hydrotreating catalysts were reactivated (their activity was recovered).

In 9M 2023, the Company sold 31.2 mln tons of petroleum products on the domestic market, of which 11.4 mln tons in Q3 2023, up 12.9% quarter-on-quarter.

Sustainable supply of high-quality motor fuel to Russian consumers is one of Rosneft's key priorities. The Company is an active participant of trading on the Commodity and Raw Materials Exchange (SPIMEX). In Q3 2023, the Company sold 2.25 mln tons of motor fuel on the exchange, which is over 2 times higher than the required level. The Company's share in the total volume of exchange sales of petrol and diesel fuel was about 40%.

Financial performance

Operating performance and the current macroeconomic situation combined with management decisions determined the trends of Rosneft's key financial indicators.

The Company's revenue¹ for 9M 2023 amounted to RUB 6,612 bln, down 8.2% YOY mainly due to lower oil prices. At the same time, revenue for Q3 2023 increased by 33.3% QOQ to RUB 2,732 bln.

EBITDA for 9M 2023 totalled RUB 2,403 bln, up 19.3% YOY. The better dynamics of EBITDA compared to revenue is due to cost control, increased sales volumes in the eastern direction and improved efficiency of export deliveries. In 3Q 2023, EBITDA reached RUB 1,002 bln. The growth of the indicator was due to the revenue dynamics, as well as a decrease in production and operating expenses and general and administrative expenses. The unit cost of hydrocarbon production in the reporting quarter was USD 2.5 per boe.

In 9M 2023, net income attributable to Rosneft shareholders amounted to RUB 1,071 bln, which is 1.8 times higher than in the same period last year and is mainly attributable to EBITDA growth. The figure for Q3 2023 increased to RUB 467 bln.

Capital expenditures for 9M 2023 totalled RUB 909 bln, up 10.6% YoY, due to the scheduled Upstream activites. The figure for Q3 2023 amounted to RUB 310 bln.

Free cash flow for 9M 2023 totalled RUB 1,157 bln, up 50.1% YOY, while the figure for Q3 2023 reached RUB 723 bln.

ESG

In the reporting period, the Company continued its efforts to achieve Sustainable Development Goals under the strategy "Rosneft-2030: Reliable Energy and Global Energy Transition".

Rosneft has been consistently developing an integrity management system for production facilities and equipment with the goal of achieving zero accident rate by 2030 or earlier. In 9M 2023, the PSER-1 process safety rate decreased by 38% compared to 9M 2022, and the PSER-2 rate improved by 36%.

In 9M 2023, no accidents of well control incidents (oil, gas or water show) during well drilling were registered at the Company's facilities. As part of efforts to minimise oil and petroleum product spills, measures are taken to replace infield pipelines.

In 9M 2023, the Company had 60 hectares of legacy lands remediated under the Programme on Elimination of Environmental Legacy.

¹ Includes sales revenue and income from associated organizations and joint ventures.

Information and Advertising Department
Rosneft
November 29, 2023