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TNK-BP International Ltd. Presentation for investors

TNK-BP International Ltd. Presentation for investors. October 2012. Important n otice. NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY IN OR INTO THE UNITED STATES OF AMERICA

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TNK-BP International Ltd. Presentation for investors

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  1. TNK-BP International Ltd.Presentation for investors October 2012

  2. Important notice NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY IN OR INTO THE UNITED STATES OF AMERICA THE INFORMATION CONTAINED HEREIN DOES NOT CONSTITUTE OR FORM PART OF AND SHOULD NOT BE CONSTRUED AS, AN OFFER TO SELL OR ISSUE OR THE SOLICITATION OF AN OFFER TO BUY OR ACQUIRE SECURITIES OF TNK-BP LTD (THE "COMPANY") OR ANY OF ITS SUBSIDIARIES IN THE UNITED STATES OF AMERICA OR ANY JURISDICTION OR AN INDUCEMENT TO ENTER INTO INVESTMENT ACTIVITY. NO PART OF THIS DOCUMENT, NOR THE FACT OF ITS DISTRIBUTION, SHOULD FORM THE BASIS OF, OR BE RELIED ON IN CONNECTION WITH, ANY CONTRACT OR COMMITMENT OR INVESTMENT DECISION WHATSOEVER. NO REPRESENTATION, WARRANTY OR UNDERTAKING, EXPRESS OR IMPLIED, IS MADE AS TO, AND NO RELIANCE SHOULD BE PLACED ON, THE FAIRNESS, ACCURACY, COMPLETENESS OR CORRECTNESS OF THE INFORMATION OR THE OPINIONS CONTAINED HEREIN. NONE OF THE COMPANY OR ANY OF ITS AFFILIATES, ADVISORS OR REPRESENTATIVES SHALL HAVE ANY LIABILITY WHATSOEVER (IN NEGLIGENCE OR OTHERWISE) FOR ANY LOSS HOWSOEVER ARISING FROM ANY USE OF THIS DOCUMENT OR ITS CONTENTS OR OTHERWISE ARISING IN CONNECTION WITH THE DOCUMENT. THIS DOCUMENT CONTAINS "FORWARD-LOOKING STATEMENTS", WHICH INCLUDE ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS, INCLUDING, WITHOUT LIMITATION, ANY STATEMENTS PRECEDED BY, FOLLOWED BY OR THAT INCLUDE THE WORDS "TARGETS", "BELIEVES", "EXPECTS", "AIMS", "INTENDS", "WILL", "MAY", "ANTICIPATES", "WOULD", "COULD“ OR SIMILAR EXPRESSIONS OR THE NEGATIVE THEREOF. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER IMPORTANT FACTORS BEYOND THE COMPANY'S CONTROL THAT COULD CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKINGSTATEMENTS, INCLUDING, AMONG OTHERS, THE ACHIEVEMENT OF ANTICIPATED LEVELS OF PROFITABILITY, GROWTH, COST AND SYNERGY OF RECENT ACQUISITIONS, THE IMPACT OF COMPETITIVE PRICING, THE ABILITY TO OBTAIN NECESSARY REGULATORY APPROVALS AND LICENSES, THE IMPACT OF DEVELOPMENTS IN THE RUSSIAN ECONOMIC, POLITICAL AND LEGAL ENVIRONMENT, VOLATILITY IN STOCK MARKETS OR IN THE PRICE OF OUR SHARES, FINANCIAL RISK MANAGEMENT AND THE IMPACT OF GENERAL BUSINESS AND GLOBAL ECONOMIC CONDITIONS. SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON NUMEROUS ASSUMPTIONS REGARDING THE COMPANY'S PRESENT AND FUTURE BUSINESS STRATEGIES AND THE ENVIRONMENT IN WHICH THE COMPANY WILL OPERATE IN THE FUTURE. BY THEIR NATURE, FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES BECAUSE THEY RELATE TO EVENTS AND DEPEND ON CIRCUMSTANCES THAT MAY OR MAY NOT OCCUR IN THE FUTURE. THESE FORWARD-LOOKING STATEMENTS SPEAK ONLY AS AT THE DATE AS OF WHICH THEY ARE MADE, AND THE COMPANY EXPRESSLY DISCLAIMS ANY OBLIGATION OR UNDERTAKING TO DISSEMINATE ANY UPDATES OR REVISIONS TO ANY FORWARD-LOOKING STATEMENTS CONTAINED HEREIN TO REFLECT ANY CHANGE IN THE COMPANY'S EXPECTATIONS WITH REGARD THERETO OR ANY CHANGE IN EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENTS ARE BASED. NEITHER THE COMPANY, NOR ANY OF ITS AGENTS, EMPLOYEES OR ADVISORS INTENDS OR HAS ANY DUTY OR OBLIGATION TO SUPPLEMENT, AMEND, UPDATE OR REVISE ANY OF THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS DOCUMENT. THE INFORMATION CONTAINED IN THIS DOCUMENT IS PROVIDED AS AT THE DATE OF THIS DOCUMENT AND IS SUBJECT TO CHANGE WITHOUT NOTICE.

  3. Table of contents • Introduction to TNK-BP • TNK-BP at a glance • Strong competitive position • Business Update 1H12 Highlights Health, Safety & Environment Upstream Downstream • Financial Performance Financial Highlights IFRS Business Environment Net Income – 1H12 v 1H11 Revenues Costs Taxes Net income - 2Q12 v 1Q12 Sources and Uses of Cash Debt and Liquidity • Outlook

  4. TNK-BP at a glance • Russia’s top 3 largest oil company* • 1H12 production 2,035 mboe/d with affiliates • Brownfield assets in West Siberia and Orenburg • Producing greenfields in Uvat and Verkhnechonskoye • Yamal: a new generation of greenfield projects • Growing gas business • Truly international player • Ranking in the world’s top 10 non-state-owned oil producers* • Venezuela: stakes in heavy and light oil projects • Vietnam: stakes in offshore gas and pipeline projects • Brazil: stake in high potential exploration project • Ukraineand Belarus: downstream business Russia Belarus Ukraine • World class reserve base • 39 bn boe of PRMS 3P reserves • Reserve life of 21 years of 1P and 59 years of PRMS 3P reserves • Industry-leading F&D costs and exploration success rate Vietnam Venezuela Brazil • Strong financial profile • Investment grade credit ratings • Strong credit metrics • Robust financial performance • Fully integrated business • Four refineries and 50% stake in YANOS refinery in Russia • Refining capacity of 698 mb/d, refining cover of 38.4% in 1H12 • Extensive retail network with 1,274 retail sites in Russia, Ukraine and Belarus** * - based on total oil production ** - at the end of 1H12

  5. ExxonMobil 2.3 2.2 BP 2.2 1.3 PetroChina** 2.4 1.0 Shell 1.7 1.5 Chevron 1.8 0.8 Petrobras 2.2 0.5 Rosneft 2.4 0.2 Total 1.2 1.1 2011 oil and gas production (incl. equity affiliates), mmboe per day Lukoil 1.8 0.3 TNK-BP 1.7 0.2 ConocoPhilips 0.9 0.8 Statoil 0.9 0.7 ENI 0.8 0.7 Oil Gas Gazprom Neft 1.0 0.1 Sinopec 0.9 0.2 0 1 2 3 4 5 Strong competitive position Among top 10 oil producers globally World class reserve replacement and F&D costs 3Y average SEC LOF RRR (2009-2011) Best capital efficiency among Russian peers 1H12 CAPEX/ boe, USD Source: company reports. *PetroChina productionas of 2010 RRR - reserve replacement ratio F&D – finding and development Source: Consolidated Financial Statement, MD&A reports of companies

  6. 1H12 highlights Continued robust operational performance • 2,035mboe/d - total oil and gas production*, up 4.1% • 18% greenfields contribution toliquids production, up from 12% in 1H11 • 2.0 mln tons retail volumes in Russia, up 19% • Continued refinery modernization with share of Euro-4 and 5 fuelsup from 42% to 66% • USD 5.9 bn EBITDA, down 21% on export dutylag, tax and tariff increases and one-offs • USD 3.9 bn free cash flow, up 9% despite EBITDA decline Note: All data in this presentation are for 1H12 and comparisons are 1H12v1H11, unless otherwise noted * Including affiliates

  7. Health, Safety and Environment Total Recordable Injury Frequency Rate –12 Month Rolling Average Health and Safety • The reduction of TRIFR* by 20% • Thereduction of DAFWC by 10% Environment • Spills frequency continuously improving: • The number of spills per thousand tons produced down 13% • Spilt tons per thousand tons produced down 45% 1H12 Spills Frequency – 12 MonthRollingAverage * Total Recordable Injury Frequency Rate (TRIFR) comprises the total number of fatalities, lost time injuries, restricted work cases and medical treatment cases as per OSHA definitions. ** The International Association of Oil and Gas Producers

  8. Upstream: 1H12 overview Strategy: Resources  Reserves  Production • USD 4.7bn Upstream EBITDA • 1,760 mb/d liquids production*,up 2.6% • 275 mboe/d gas sales*, up 14.3 % • 82.5% associated petroleum gas utilization • 13.8 bn boeproved reserves on PRMS basis** • Focus areas: • brownfields stabilization • new greenfields • challenged reserves * Including affiliates ** As of 31 December 2011

  9. Reserves Strategy: Resources  Reserves  Production Reserve base (PRMS) Reserve life 59years • Large reserve base: 39 bn boe 3P reserves • An established track record of successful reserve replacement: • 145% SEC LOF • 203% PRMS • Best-in-class efficiency: • 72% average exploration success rate for 2009-2011 • USD 4.4/bbl F&D costs (SEC LOF) in 2011 • 137 mmboe of resource adds with new discoveries mainly in Yamal1H12 Reserve life 42 years Reserve life 21 years Reserve replacement ratio

  10. Upstream: Liquids production in 1H12 Changes in liquids production, including affiliates Production – continued growth mb/d • 1,760 mb/d liquids production incl. affiliates, up 2.6% 1H11 Greenfields – increasing contribution • VCNG production at 139 mb/d, up 60% • Uvat production at 126mb/d,up 28% • Share of greenfields in total liquids production at 18%, up from 12% in 1H11 Brownfields – target to stabilize production 1H12 • Orenburg liquids production down 0.6% - operational issues at Sorochinsk in 1Q12 • West Siberia liquids production down 5.6% (6.5% in 1H11)

  11. Upstream: West Siberia • Production decline lowered by 0.9% in 1H12 v 1H11 • Effective WaterfloodManagement • New water shut-off technologies being piloted and scaled up • Plan to reduce water extraction in 2012 by 1% (4.5 mln tons)as result of new technologies moving forward • Organizational capability improvementproject underway including skills assessment, training, peer review from external consultants Innovative technologies in place • 56 pilot projects (425 jobs) are expected to be completed in 2012 • “Asset of the future” concept of online monitoring of the field performance – to be scaled up in 2012 • Improved drilling efficiency • Mean Time Between Failure (MTBF) of electric submersible pumps increased to 630 days (from 615 in 2011) • Low cost access drilling projects with Baker Hughes, Schlumberger and Halliburton • Successful application of multistage fracturing in horizontal wells: • up to 7 stage fracs • 40 jobs performed in 1H12 • over 100 jobs planned for 2012 • tests in difficult layers with 2-3x higher flows than conventional frac • advanced completion technology with fully controlled stage frac in cemented liner

  12. TNK-BP – 600 mln tons of challenged reserves in 7 top fields in West Siberia • Technology pilots in 2012-2015 to scale-up and bring in production Tyumen formation – priority project for challenged reserves development • Multi-stage frac • Multi-stage frac at Kamennoye licence area (LA) • Pilots at Central Ryabchik of Samotlor field • Effective drilling and development • Drilling project for Pad 118 of Severo-Khokhryakovskoye field • PK1-2 Van-Egan - Pilot for viscous oil • Pilot at Em-Yegovsky LA • Waterflood management and water shutoff – integral part of West – Siberia program for 2012-14 • Reconfiguration of waterflood system at Severo-Varyeganskoyefield • Reconfiguration of waterflood system at South TalinskoyeLA

  13. Yamal – major new oil province with 5.5 bn barrels of 3P reserves Suzun2016 Messoyakha(50% share) 2016-18 • Field engineering survey completed for oil treatment facility and gas-turbine power plant • Reserves: 0.32 bn bbl3P PRMS • Agreement with Transneft on oil transportation signed • 2012 E&A program is aimed at viscous oil reserves confirmation • Reserves: 1.14 bn bbl 3P PRMS Russkoye 2018 • Drilling of 7 pilot wells started in June to determine base development scenario • The optimal field infrastructure concept prepared • Reserves: 2.22 bn bbl 3P PRMS Tagul 2019 • Pilot 1 under way, initial rates confirmed for horizontal wells • E&A program under way to prove reserves in least understood zones • 2D/3D seismic to cover oilfield frontier zones • Reserves: 1.7 bn bbl3P PRMS Intrafield pipeline • Intrafield pipeline forecast for completion by end 2015 Russko-Rechenskoe 2019 • Considerable gas reserves discovered (>50 bcm)

  14. Upstream: Gas sales in 1H12 Changes in gas sales, including affiliates mboe/d • 275mboe/d gas sales incl. affiliates, up 14.3% • Increasing APG utilisation in West Siberia (+4.5%) and Orenburg (+19.3%) • 20 mboe/d gas sales from assets in Vietnam and Venezuela 1H11 1H12

  15. International Projects: Vietnam, Venezuela, Brazil Vietnam • Drilling of the 2nd Lan Do production well completed safely in April, plan to deliver first gas from Lan Do in 4Q12 Key performance indicators, 1H12 (TNK-BP share) Venezuela • TNK-BP net share of JVs production up 6% on 1Q12 to 28 mboe/d following successful drilling campaign • Current negative effect on EBITDA due to impact of discounting of outstanding payments from PDVSA Brazil • Joint Operating Agreement Governance structure implemented; first OpsCom and ManCom in May • Drilling operations: 2 wells completed in 2Q12, oil and gas shows in HRT-6, appraisal well HRT-7D dry, drilling of HRT-8 and HRT-9 ended in 3Q12 with hydrocarbons discovery • Exploration program being optimized

  16. Downstream: overview 1H12 Strategy:Maximization of integrated business value of production • USD 1.2bn DownstreamEBITDA • 654mb/drefining throughput • 4 oil refineries and 50% stake in YANOS refinery in Russia • USD 12/bbl refining margin in 2Q12 • High-margin retail sales in Russia: • BP site daily throughput 4xEuropean average

  17. Downstream: Refining 1H12 • Throughput of 618mb/d at Russian refineries in 1H12 v 651 mb/d in 1H11 due to turnarounds • Healthy refining margins of USD 12/bblin 2Q12 v USD 6/bbl in 1Q12 • Focus on Euro-4 and Euro-5 product delivery • Turnarounds at Yanos and Ryazan (RNPK) refineries completed successfully • Transition completed to a 3 year turnaround cycle for AT-6 crude distillation complex at RNPK • LINIK refinery operations are still suspended Increasing share of Euro-4 and Euro-5 fuels Note: Share of Euro-4 and Euro-5 fuels in total gasoline and diesel output of TNK-BP Russian refineries

  18. Downstream: Retail and B2B 1H12 • Retail • Expansion to new regions continues with 3 sites purchased in Samara, 8 in Orel and 3 land plots acquired in Volgograd • Launch of 7 new BP sites in Moscow and St.-Petersburg and commissioning of 2 BP and 11 TNK sites after reconstruction • The number of Carbon loyalty program participants reached 650,000 , , , , , • B2B • Share of jet fuel sales directly to airlines in 1H12 increased to 73% v 45% in 1H11 • Jet deliveries started to air companies Tatarstan and I-Fly • Development of TNK-Alfabit continues with bitumen laid at M1 federal highway, Rublevsky highway and F1 race track in Volokolamsk • Distribution agreement for Valvoline lubricants signed with sales starting in July

  19. Financial highlights

  20. 1H11 under IFRS • 1H11 and 2Q11 numbers have been restated for comparative purposes • The main change relates to deferred tax, with higher forex driven volatility under IFRS:

  21. Business environment • Weak environment both y-o-y and q-o-q, with severe negative duty lag affecting performance • 1H12 v 1H11: • Urals up 3% to USD 111.7/bbl • Negative duty lag: USD 9.0/bbl • 2Q12 v 1Q12: • Urals down 9% to USD 106.5/bbl • Negative duty lag: USD 20.0/bbl • 1H12 v 1H11 and 2Q12 v 1Q12: negative impact of weaker rouble on deferred tax partly offset by costs benefit • 1H12 average roublerate at 30.6, 7% down • 2Q12 average rouble rate at 31.0, 2% down

  22. Net income – 1H12 v 1H11 • Environment: • Price & Duty lag: negative duty lag – USD 9.0/bbl, partly offset by 3% higher Urals and 60/66 duty regime benefit • Forex: negative impact on deferred tax partly offset by forex benefit on rouble denominated costs • Tariffs & Tax: primarily increases in MET and excise (USD 0.5 bn) rates and transportation tariffs (USD 0.1 bn) • Performance: • Operations: total TNK-BP oil and gas production up 79 mboe/d (+4.1%), MET relief utilization offset by costs increase and lower petroleum production volumes • One-offs: primarily due to 1Q12 Linikimpairment (USD 0.2 bn) vs. 1Q11 Kovykta disposal gains (USD 0.2 bn)

  23. Revenues • Price: 2% sales growth, on the back of a 3% Urals price increase • Volume and Mix: • 4 mmboe volume increase in crude and products due to 2.3% own crude production growth; • sales mix: products share decreased primarily due to a turnaround at the Ryazan refinery in 2Q and suspension of crude refining at Linik since March that were partly offset by processing at Mozyr • Other sales: • Primarily 8 mmboe increase in sales of gas, condensate and gas products as a result of production growth (incl. 4 mmboe Vietnam contribution) 1H11 1H12 • Sales volumes up 12 mmboe, or 3% • Products share* 41% in 1H12 vs47% in 1H11 366 mmboe 378 mmboe * Share from combined crude and oil products sales

  24. Costs • Transportation costs: • 7% weighted-average increase in Transneft and rail tariffs partly offset by forex (6%) • Changes in routes and in sales mix resulted in costs growth by 1% due to increased crude export volumes via higher margin routes • Opex& SD&A dynamics reflecting inflationary pressure mitigated by a weaker rouble: • Costs down by 7% due to a weaker rouble • Volume & Mix factor reflecting production growth • One-offs: legacy environmental provision in 1H11 (USD 0.1bn)

  25. Taxes • Export duties and Taxes other than income tax up 16% to USD 15.6 bn primarily due to higher Urals price and negative duty lag • Increase in MET and excise rates starting 1 January 2012 • MET reliefs: sustaining production at depleted fields in Orenburg and increase in non-taxable VCNG production • Volume&Mix, other: primarily increase in crude export leading to growth in export duties • Income tax increased by 15% to USD 1.3 bn primarily through the foreign exchange impact on the deferred tax charge, non-deductible LINIK impairment and operating losses in Ukraine • 1H12 effective tax rate was 27.1%, above the 20% statutory rate primarily due to the foreign exchange impact on deferred tax and non-deductible costs

  26. Net income – 2Q12 v 1Q12 • Performance: • Operations: increased liquids production by 6 mb/d, partly offset by changes in mix in favor of oil • One-offs: largely due to 1Q12 Linik impairment • Environment: • Price: Urals down USD 10/bbl (9%) • Duty lag: negative duty lag - USD 20.0/bbl • Forex: primarily negative impact on deferred tax

  27. Income statement – 2Q12 v 2Q11

  28. Sources and Uses of Cash • Cash from operations (before WC and income tax paid) of USD 6.2 bnis net oftaxes other than income tax and export duties payment of USD 15.6 bn • Capex: field development, associated gas, refinery and retail network modernization • Acquisitions: exploration assets in Brazil and jet fueling complex Koltsovo • Net Borrowings: decrease primarily due to $0.5 bn Eurobond and other debt repayment

  29. Debt and liquidity • Borrowing • No new borrowings in 2Q12 • Two committed lines for the total amount of USD 200 mln renewed • Gearing level at 23% • Average portfolio life at 3.53 years • Liquidity • Strong cash balances maintained • Five undrawn committed lines in the total amount of USD420 mln • Smooth repayment profile • Ratings • Investment grade ratings maintained, however negative outlook assigned by Moody's to Baa2 rating (related to shareholder ownership uncertainty) • Strong credit metrics maintained TNK-BP Financial indebtedness(1) Financial indebtedness maturity profile as of 30 June 2012 , , , , • Financial Indebtedness and Gearing are calculated based on IFRS • Finance Debt includes outstanding indebtedness under loan agreements and Eurobonds • Represents deferred payment obligation in favor of HRT related to Brazil assets acquisition • 2Q2012 and 1Q2012 calculation includes the letter of credit; 2Q2011 Gearing calculated based on USGAAP amounts to 22%

  30. Outlook International diversification Gas monetization Margin enhancement  Reserves Production • Progress with exploration program in Brazil with focus on oil prone areas and gas monetization • Consider additional expansion opportunities in Vietnam • Progress with refinery modernization program • Increase retail presence in core markets • Launch new products and promote the new highway offer • Prepare for Rospan full field development • Negotiate long-term sales agreements for Rospan gas • Increase associated gas utilization • Lower production decline in West Siberia • Pilot development of challenged reserves • Prepare to launch Yamal fields in 2016-2019 Health, Safety and Environment: continues as a top priority Portfolio: pursue select M&A opportunities

  31. TNK-BP Holding – public subsidiary with leading investor returns Cash returns 2006-11 as a share of Mcap at end 2005* TNK-BP Holding dividends attributable to non-controlling interest* mln USD * Amounts are stated in years to which dividends are attributable. Dividend calculation based on Company and registrar data * Cash returns are calculated as the share buyback, dividends and change in net debt Source: Bloomberg; Troika estimates • ¾ of 44 bn USD 2005 market cap returned to shareholders as of end August 2012 • USD 1.63 bn attributable to non-controlling interest since 2005 • 16% dividend yield – highest in the industry* • 98% - average dividend payout ratio based on RAS net income amounts * Source: Troika Dialog research, report dt. 21/09/12

  32. Board of Directors Mikhail Fridman Chairman The Rt Hon Lord (George) Robertsonof Port Ellen Deputy Chairman Michael Townshend President of BP Iraq Evert HenkesIndependent Director Len Blavatnik Chairman, Access Industries Brian Gilvary Group CFO, BP Alexander Shokhin Independent Director Alex Knaster Chairman of Pamplona Capital Management David Peattie Head of BP Russia TBC Independent Director Viktor Vekselberg Chairman, Renova Group representativesof AAR representatives of BP independent directors

  33. TNK-BP corporate structure

  34. Management structure of TNK-BP Chairman of the Management BoardVacant Executive Director – Vice PresidentDownstream A. Barrios Executive Director –Advisor to the Chairman of the MBV. Vekselberg Executive Director – Vice PresidentUpstream A. Dodds Chief Financial OfficerJ. Muir Executive Director G. Khan Executive Vice President Support Services A. Tyomkin ExecutiveVice PresidentStrategy and New BusinessDevelopment M. Slobodin Executive Vice President Legal I. Maydannik members of the Management Board

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