ADDRESS BY THE CHAIRMAN
OF THE BOARD OF DIRECTORS
A YEAR OF NEW OPPORTUNITIES
In 2013, Gazprom Neft met all its business plan targets and continued to work towards attaining its strategic objectives. The Company’s two key strategic focus areas are: the continuing modernisation of refineries in order to ensure industry-leading positions; and the development of fields in new regions, including the Arctic shelf. Gazprom Neft remains one of the leaders in the oil industry in terms of efficiency and ranks first by key indicators such as return on capital and total shareholder yield.
Dear shareholders and investors,
The Board of Directors of Gazprom Neft is pleased to announce another year of steady financial and operating growth for the Company in 2013. These results confirm that Gazprom Neft has implemented effective strategic initiatives, and remains one of the most efficient companies in the industry.
Last year, Gazprom Neft once again reported industry-leading growth per Barrels of oil equivalentBOE produced (with adjusted operation profit subject to the performance of joint ventures. ) Gazprom Neft’s operating and net profit also demonstrated strong yields at year-end, despite a higher tax rate, an increase in interest rates and a decline in international oil prices.
The Company continues to implement large projects that will enable Gazprom Neft to achieve its strategic development goals . One of last year’s most significant projects was the launch of commercial development at the Prirazlomnoye field. This event is truly historic, as we became the first company ever in Russia to produce oil on the Arctic shelf. All field production operations, such as drilling, oil production and storage, preparation and shipment of finished products, are made possible by the Prirazlomnaya ice-resistant offshore stationary platform. This is the first international hydrocarbon production project on the Arctic shelf to use such a platform. It is designed to operate under extreme climatic conditions, meets the strictest safety requirements and is able to withstand the maximum ice load.
The Company’s achievements in refining are also impressive — it has switched to Class 5 fuel production over two years ahead of the deadline set by the Technical Regulations. This is especially important for large cities where the use of this fuel will have a beneficial effect on the environment. The next stage will involve the implementation of deeper refining projects at Gazprom Neft refineries. We aim to achieve a A refining indicator defined as the percentage ratio of obtained petroleum products, not including bulk fuel oil, to the original quantity of crude oil. Measured in %refining depth of 95% by 2025.
The Company’s sales segment is also actively developing — GAZPROM filling stations, which were first launched outside Russia at the end of 2012, expanded last year into Bulgaria, Bosnia and Herzegovina, and their number is growing in Romania and Serbia. By the end of 2015, the GAZPROM chain in the Balkans will number at least 250 filling stations.
We would like to acknowledge the efforts of Gazprom Neft management in their contribution to our financial performance. With worsening market conditions and an increasing tax burden, the profit growth demonstrated by Gazprom Neft at the end of 2013 was only possible due to the optimisation of commodity flows and expenses, as well as other management actions aimed at improving the Company’s efficiency and overall performance.
Another achievement was our shareholders’ dividend yield, which remains the highest among our industry peers. A new Company dividend policy was also approved last year. The payout will be 25% of net income, as calculated under IFRS. Gazprom Neft was the first company to start paying interim dividends. This decision will enable the Company to follow best corporate practices, while Gazprom Neft shareholders will be able to obtain their share of the Company’s profit more expediently.
In 2013, we set new milestones for the further development of Gazprom Neft and approved the Company’s strategy up to 2025. Gazprom Neft intends to maintain production level at 100 million tonnes of oil equivalent per year, and keep the current reserves level, which is currently about 20 years. Gazprom Neft’s production priorities until 2025 remain the same: to retain its leading positions when implementing projects in the north of the Yamalo-Nenetz Autonomous District (Yamal-Nenets Autonomous DistrictYaNAD),; to develop shelf operations, use non-conventional reserves through the application of high-end technology and develop actively overseas. After an intensive modernisation programme, the Company’s Russian refining facilities will reach global configuration standards. This will enable Gazprom Neft to actively continue increasing its shareholder value.