Results of operations

RUB million

2013

2012

Change, %

REVENUES

Sales

1,504,037

1,519,450

(1.0)

Includes excise tax calculated based on the volume of petroleum products sold by the Company’s subsidiary in Serbia.Less export duties and excise tax

(236,434)

(286,801)

(17.6)

TOTAL REVENUE

1,267,603

1,232,649

2.8

COSTS AND OTHER DEDUCTIONS

Purchases of oil, gas and petroleum products

(319,051)

(340,453)

(6.3)

Production and manufacturing expenses

(144,552)

(126,639)

14.1

Sales, general and administrative expenses

(72,005)

(68,389)

5.3

Transportation expenses

(107,837)

(103,556)

4.1

Depreciation, depletion and amortisation

(76,785)

(69,163)

11.0

Taxes other than income tax

(316,070)

(297,824)

6.1

Exploration expenses

(2,876)

(3,431)

(16.2)

TOTAL OPERATING EXPENSES

(1,039,176)

(1,009,455)

2.9

Other loss

(6,310)

(5,268)

19.8

OPERATING PROFIT

222,117

217,926

1.9

Share of profit of equity accounted investments

11,251

12,767

(11.9)

Net foreign exchange gain/(loss)

(2,166)

1,042

Finance income

6,011

3,275

83.5

Finance expense

(11,233)

(11,089)

1.3

TOTAL OTHER INCOME

3,863

5,995

(35.60)

PROFIT BEFORE INCOME TAX

225,980

223,921

0.9

Current income tax expense

(34,823)

(34,108)

2.1

Deferred income tax expense

(4,437)

(5,661)

(21.6)

TOTAL INCOME TAX EXPENSE

(39,260)

(39,769)

(1.3)

PROFIT FOR THE PERIOD

186,720

184,152

1.4

Less: Profit attributable to non-controlling interest

(8,803)

(7,856)

12.1

PROFIT ATTRIBUTABLE TO GAZPROM NEFT

177,917

176,296

0.9

Operating profit, RUB million

Source: Company data

Revenues

RUB million

2013

2012

Change, %

CRUDE OIL

Export

106,665

195,567

(45.5)

Export sales

208,125

346,213

(39.9)

Less related export duties

(101,460)

(150,646)

(32.7)

International markets

1,323

1,740

(24.0)

Export to CIS

48,619

29,783

63.2

Domestic

19,258

13,241

45.4

TOTAL CRUDE OIL REVENUE

175,865

240,331

(26.8)

GAS

International markets

1,461

6,281

(76.7)

Domestic

23,926

17,729

35.0

TOTAL GAS REVENUE

25,387

24,010

5.7

PETROLEUM PRODUCTS

Export

253,429

240,381

5.4

Export sales

352,990

349,049

1.1

Less related export duties

(99,561)

(108,668)

(8.4)

International markets

92,316

69,876

32.1

Sales on international markets

124,376

92,725

34.1

Includes excise tax calculated based on the volume of petroleum products sold by the Company’s subsidiary in Serbia.Excise

(32,060)

(22,849)

40.3

CIS

54,956

54,539

0.8

Export sales and sales in CIS

58,309

59,177

(1.5)

Less related export duties

(3,353)

(4,638)

(27.7)

Domestic

630,359

572,082

10.2

TOTAL PETROLEUM PRODUCT REVENUE

1,031,060

936,878

10.1

OTHER REVENUE

35,291

31,430

12.3

TOTAL REVENUE

1,267,603

1,232,649

2.8

Average Realised Sales Prices

2013

2012

Change,%

CRUDE OIL

RUB PER TONNE

Export sales

25,106

24,519

2.4

Export to CIS

12,005

11,913

0.8

Domestic sales

10,410

10,509

(0.9)

PETROLEUM PRODUCTS

RUB PER TONNE

Export sales

24,161

24,703

(2.2)

Sales on international markets

40,382

38,635

4.5

Export sales and sales in CIS

26,384

25,182

4.8

Domestic sales

24,395

22,747

7.2

2013 RESULTS VS. 2012 RESULTS

Total hydrocarbon production, including the Group’s share in joint ventures, increased 4.3% to 62.26 million TOE due to continued production growth at the Priobskoye field and Orenburg assets, higher associated gas utilisation, higher natural gas output at the Muravlenkovskoye field, and the commissioning of the Samburgskoye field by SeverEnergia.

Refining throughput decreased 1.6% due to planned maintenance at the crude oil distillation plants of the Omsk refinery (September-October 2013) and the Yaroslavl refinery (March-April 2013), as the well as a decline in refining volumes at the Mozyrskiy refinery.

Increased hydrocarbon production and growth in premium segment sales contributed to the growth in adjusted EBITDA (up 4.2%), while foreign exchange loss and amortisation growth reduced the profit attributable to Gazprom Neft shareholders by just 0.9%.

The 1.0% drop in sales was due to a decrease in oil trading on international markets; however, it was partially compensated by the growth in petroleum product sales.

Petroleum Products Exports

2013

2012

Change, %

RUB million

RUB million

RUB million

High octane gasoline

7,855

9,827

(20.1)

Low octane gasoline

6,060

5,585

8.5

Naphtha

34,166

33,809

1.1

Diesel

142,134

117,812

20.6

Fuel oil

125,195

129,435

(3.3)

Jet fuel

10,003

7,545

32.6

Marine fuel

14,258

27,042

(47.3)

Other

13,319

17,994

(26.0)

TOTAL

352,990

349,049

1.1

Petroleum Products Sales on International Markets
Petroleum Products Sales in CIS

2013

2012

Change, %

RUB million

RUB million

RUB million

High octane gasoline

20,863

18,928

10.2

Low octane gasoline

4,314

4,785

(9.8)

Naphtha

1,012

Diesel

17,267

14,346

20.4

Fuel oil

2,541

2,842

(10.6)

Jet fuel

7,905

9,074

(12.9)

Other

5,419

8,190

(33.8)

TOTAL

58,309

59,177

(1.5)

Domestic Sales of Petroleum Products

2013

2012

Change, %

RUB million

MM tonnes

RUB million

MM tonnes

RUB million

MM tonnes

High octane gasoline

241,733

8.06

214,569

7.71

12.7

4.5

Low octane gasoline

5,526

0.20

9,147

0.37

(39.6)

(46.0)

Naphtha

305

0.02

Diesel

200,883

7.16

183,501

7.38

9.5

(3.0)

Fuel oil

19,168

1.66

21,000

1.91

(8.7)

(13.1)

Jet fuel

68,808

2.83

62,019

2.65

11.0

6.8

Marine fuel

43,978

2.45

38,966

2.12

12.9

15.6

Other

49,958

3.46

42,880

3.01

16.5

15.0

TOTAL

630,359

25.84

572,082

25.15

10.2

2.7

Other Revenue

Other revenue includes, primarily, revenue from transport, construction and other services.

  • The increase in other revenue of 12.3% year-on-year was primarily driven by changes in volumes sold.
Purchases of Oil, Gas and Petroleum Products
  • Purchases of oil, gas and petroleum products decreased 6.3% primarily due to a decrease in the volume of crude oil purchased on international and domestic markets.
Production and Manufacturing Expenses

RUB million

2013

2012

Change, %

UPSTREAM EXPENSES

72,491

63,926

13.4

Subsidiaries

58,034

50,911

14.0

RUB per TOE of production

1,350

1,263

6.9

Translated to USD at the average exchange rate for the period.USD per BOE of production

5.78

5.54

4.4

Proportionally consolidated companies

14,457

13,015

11.1

RUB per TOE of production

1,543

1,342

15.0

Translated to USD at the average exchange rate for the period.USD per BOE of production

6.61

5.89

12.3

DOWNSTREAM EXPENSES

37,293

32,737

13.9

Refining expenses at subsidiaries’ refineries

21,558

17,602

22.5

RUB per tonne

633

521

21.4

Translated to USD at the average exchange rate for the period.USD per barrel

2.71

2.29

18.5

Refining expenses at joint ventures’ refineries

11,139

10,530

5.8

RUB per tonne

1,300

1,099

18.3

Translated to USD at the average exchange rate for the period.USD per barrel

5.57

4.82

15.5

Lubricants manufacturing expenses

4,596

4,605

(0.2)

TRANSPORTATION EXPENSES TO REFINERIES

23,747

21,946

8.2

OTHER OPERATING EXPENSES

11,021

8,030

37.3

TOTAL

144,552

126,639

14.1

  • Upstream expenses include expenditure on raw materials and supplies, maintenance and repairs of extraction equipment, labour costs, fuel and electricity costs, oil recovery improvement activities, and other similar costs at the Group’s upstream entities.
  • Upstream expenses in the subsidiaries increased 14.0% year-on-year due to increased hydrocarbon production, including the acquisition of new assets (Novoportovskoye, Yuzhno-Kinyamskoye, Baleykinskoye fields) and expansion of the Muravlenkovskoye gas field.
  • Specific upstream expenses in the subsidiaries increased by 6.9% year-on-year due to:
    • Acquisition of the Novoportovskoye field with high operating expenses at the pilot development stage;
    • Increased Geological and engineering operationsGEO activities to maintain production levels and electricity price increases (+13.2%);
    • Increased water cut at mature fields.
  • Refining expenses at the subsidiaries’ refineries include expenditure on raw materials and supplies, maintenance and repairs of production equipment, labor and electricity costs, and other similar costs at Gazprom Neft’s upstream entities.
  • Refining expenses at the subsidiaries’ refineries increased 22.5% year-on-year primarily due to natural monopolies charging higher tariffs, increased material costs incurred in connection with product quality improvement, the launch of new processing units at the Omsk and Moscow refineries, and maintenance at the Company’s refineries.
  • Refining expenses at the joint ventures’ refineries increased 5.8% year-on-year due to the launch of new processing units.
  • Despite the increase in tariffs of natural monopolies, lubricant manufacturing expenses reduced by 0.2% year-on-year, owing to the implementation of a cost saving policy.
Sales, General and Administrative Expenses

Sales, general and administrative expenses include general business expenses, wages, salaries (except wages and salaries at our production and refining subsidiaries), insurance, banking commissions, legal fees, consulting and audit services, allowances for doubtful accounts and other expenses.

  • Sales, general and administrative expenses increased by 5.3% year-on-year due to business expansion and higher premium sales.
Transportation Expenses

Transportation expenses include the cost of transporting crude oil and petroleum products to end customers. These costs include pipeline transportation, sea freight, railroad, shipping, handling, and other transportation costs.

  • The increase in transportation expenses year-on-year was driven by higher tariffs and increased sales volumes.
Depreciation, Depletion and Amortisation

Depreciation, depletion and amortisation expenses include the depreciation of oil and gas properties, refining and other assets.

  • Depreciation, depletion and amortisation expenses increased 11.0% year-on-year in line with the increase in depreciable assets driven by capital expenditure.
Taxes Other than Income Tax

RUB million

2013

2012

Change, %

Mineral extraction taxes

214,023

201,305

6.3

Excise

77,701

76,408

1.7

Property tax

7,938

7,814

1.6

Other taxes

16,408

12,297

33.4

TOTAL TAXES OTHER THAN INCOME TAX

316,070

297,824

6.1

  • Mineral extraction tax (Mineral extraction taxMET) expenses increased 6.3% year-on-year due to increased oil production by the subsidiaries and proportionally consolidated entities and a higher tax rate. Despite a 2.3% year-on-year fall in the oil price in the Urals, the average MET rate for oil increased by 5.2% as the fall in oil price was offset by the increase in the base rate from RUB 446 per tonne to RUB 470 per tonne.
  • Excise tax expenses increased 1.7% year-on-year due to the introduction of higher rates on January 01, 2013 and on July 01, 2013. The increase in rates was offset by the growth in production of high-grade motor fuels that are subject to lower excise rates.
Share of Profit of Equity Accounted Investments

RUB million

2013

2012

Change, %

Slavneft

9,538

12,229

(22.0)

SeverEnergia

(131)

(170)

(22.9)

Other companies

1,844

708

160.5

SHARE OF PROFIT OF EQUITY ACCOUNTED INVESTMENTS

11,251

12,767

(11.9)

  • The Group’s share of profit of Slavneft decreased mainly due to a decline in production, and increase in the MET rate and foreign exchange losses in 2013 (profit in 2012) driven by a revaluation of the Group’s debt portfolio that is denominated mostly in United States US dollarsdollars.
Other Financial Items
  • Foreign exchange gains/losses were mainly driven by a revaluation of the portion of the Group’s debt portfolio that is denominated in foreign currencies.
  • Finance income increased year-on-year due to increased cash and cash equivalents and funds in bank deposits.