ROSNEFT OIL COMPANY: Financial results for 2Q 2021 and 1H 2021

Financial results for 2Q and 1H 2021

• Net income reached RUB 233 bln in 2Q and RUB 382 bln in 1H 2021.
• EBITDA increased by more than twofold to RUB 1,016 bln compared to 1H 2020.
• Unit upstream operating costs stayed at a minimum level of 2.6 USD/boe (194 RUB/boe).
• FCF increased in 1H 2021 by 2.5-fold to RUB 505 bln compared to the level of 1H 2020.
• Since the beginning of the year, total financial debt decreased by 6%, the third consecutive quarter of debt reduction.
• Financial debt and trading liabilities fell by USD 5.9 bln in 1H 2021.
• Net debt/EBITDA was 1.7x, having decreased by a third in 1H 2021.

Consolidated IFRS financial results for 2Q 2021 and 1H 2021:

1Indicator is adjusted for changes in data in the comparable period.

2The calculation includes interest expense on the prepayments on the long-term oil and petroleum products supply agreements.

3Calculated using average monthly Central Bank of Russia exchange rates for the reporting period.

Commenting on 1H 2021 financial results Rosneft's Chairman of the Management Board and Chief Executive Officer Igor Sechin said:

"In the reporting period, despite all the challenges stemming from the COVID-19 pandemic, we managed to ensure continuity of our business and demonstrated strong financial and operating results. Giving priority to the issues of preserving the life and health, as well as the safety of our employees, the Company launched a vaccination program in March, in which more than 263 thousand people have participated to date. The result of the program was the formation of a collective immunity. To further prevent the spread of the disease, we plan to continue implementing the program.

Thanks to the improvement in the macroeconomic environment in 2Q 2021, in particular the recovery of prices for crude oil and petroleum products on international markets, the Company's Net profit level was among the highest in its history, while the EBITDA and Free cash flow more than doubled in the first half of 2021. The high level of operating and production efficiency enabled the Company to significantly improve its financial performance and continue a consistent reduction of the financial debt. The Company's unit upstream operating costs stayed at a minimum level of 2.6 USD/boe.

We are focused on implementation of the major projects with a high level of efficiency and quality reserves. In the second quarter, two production lines were launched at the Rospan gas project, which supported a significant increase in production. As a result, the production unit became the largest asset of the Company in terms of the gas production. As part of implementation of the flagship Vostok Oil project in the Krasnoyarsk territory, Rosneft launched construction of the main infrastructure facilities.

In July, Rosneft completed the dividend payment of RUB 73.5 billion for 2020 ahead of schedule. The strong financial results for the first half of 2021 have set a solid base for the payment of interim dividends and the significant increase in total payments for the full year".

Financial performance

Revenues and equity share in profits of associates and joint ventures

2Q 2021 revenues and equity share in profits of associates and joint ventures amounted to
RUB 2,167 bln (USD 29.8 bln). The increase in revenues quarter-on-quarter was mainly a result of implementation of the production growth program in accordance with the revised OPEC+ Agreement effective from January 2021 and higher crude oil prices.

Revenues increased by 39.6% compared to the same period of 1H 2020 due to the crude oil price growth (+70.2% to the level of 1H 2020) despite of the lower production volumes (-18.3% to the level of 1H 2020) in accordance with the OPEC+ Agreement in effect in 2020.

EBITDA

2Q 2021 EBITDA amounted to RUB 571 bln (USD 7.7 bln). The increase in EBITDA (+28.3%) compared to the level of 1Q 2021 was driven by the following positive factors: higher crude oil prices, positive effect of damping component of the reverse excise tax, an increase in the delivery volume of hydrocarbons and effective management efforts aimed at maintaining the lowest level of unit operating costs in the oil industry that stayed at 194 RUB/boe (2.6 USD/boe) in 2Q 2021.

Higher EBITDA relative to 1H 2020 was mainly a result of higher prices and a positive effect of reverse excise tax in 2021.

Net income attributable to Rosneft shareholders

In 2Q 2021 the Company achieved one of the highest net income levels in its history which reached RUB 233 bln (USD 3.1 bln). The higher Net income compared to 1Q 2021 was mainly a result of the higher operating income.

The significant increase in the Net income compared to the level of 1H 2020 was driven by the higher operating income, reduction of net financial expenses and lower negative impact from non-monetary factors.

Capital expenditures 

Capital expenditures amounted to RUB 237 bln in 2Q 2021, and RUB 462 bln in 1H 2021 which is 25.9% higher compared to 1H 2020. The growth was mainly a result of management efforts aimed at implementation of the Vostok Oil project and the increase in drilling volumes at Yuganskneftegaz.

Free cash flow

Free cash flow amounted to RUB 505 bln (USD 6.9 bln) in 1H 2021, a 2.5-fold increase y-o-y. The increase in Free cash flow compared to 1H 2020 was driven by growth of the operating income.

Financial stability

The implementation of measures aimed at further improvement of financial stability enabled the reduction of financial debt and trading liabilities by USD 5.9 bln, incl. financial debt - by
USD 2.6 bln in 1H 2021. Net debt/EBITDA in USD terms was 1.7x, having decreased by a third in the first half of the year. The high level of financial stability was supported by a low short-term component of the financial debt which in the reporting period was maintained at a level of 14%. Taking into account the amount of available credit lines, the liquid financial assets significantly exceeded the short-term debt as of the reporting date.

Rosneft Information Division

Tel.: +7 (495) 411 54 20

Fax: +7 (495) 411 54 21

August 13, 2021

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.