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NOVATEK announces consolidated IFRS results for third quarter and nine months 2015

Moscow, 28 October 2015. OAO NOVATEK (“NOVATEK” or the “Company”) today released its consolidated interim condensed financial statements as of and for the three and nine months ended 30 September 2015 prepared in accordance with International Financial Reporting Standards (“IFRS”).

IFRS Financial Highlights

(in millions of Russian roubles, except for per share amounts)

3Q 2015	3Q 2014		9M 2015	9M 2014
116,212	84,090	Oil and gas sales	341,010	260,504
1,155	643	Other revenues	2,343	1,275
117,367	84,733	Total revenues	343,353	261,779
(85,096)	(55,870)	Operating expenses	(238,533)	(165,415)
989	-	Net gain on disposal of interests in joint ventures	989	2,623
158	100	Other operating income (expense)	(199)	1,850
33,418	28,963	Profit from operations	105,610	100,837
37,115	34,129	Normalized* EBITDA of subsidiaries	120,117	109,991
52,574	38,757	*Normalized EBITDA including share in EBITDA of joint ventures**	157,898	122,059
(6,174)	(6,019)	Finance expense	(11,290)	(9,531)
(34,713)	(11,777)	Share of loss of joint ventures, net of income tax	(17,435)	(9,731)
(7,469)	11,167	Profit (loss) before income tax	76,885	81,575
(13,405)	7,627	Normalized* profit (loss) attributableto OAO NOVATEK shareholders	59,590	62,633
31,904	24,258	Normalized* profit attributable to OAO NOVATEK shareholders, excluding FX effect	96,505	80,040
10.56	8.03	Normalized* basic and diluted earnings (loss) per share, excluding FX effect (in Russian roubles)	31.95	26.48

* Excluding the effect from disposal of interests in joint ventures.

In the third quarter and first nine months 2015, our total revenues increased by 38.5% and 31.2%, respectively, compared to the corresponding periods of 2014, which was mainly due to an increase in liquids sales volumes and prices for natural gas sales.

The Company’s Normalized EBITDA, inclusive of share in EBITDA of joint ventures, amounted to RR 52.6 billion in the third quarter 2015 and RR 157.9 billion in the first nine months 2015, representing an increase of 35.7% and 29.4%, respectively, as compared to the corresponding periods of 2014. Our Normalized EBITDA was positively impacted by the higher share of liquid product sold in our overall sales volumes mix.

In the first nine months 2015, Normalized Profit attributable to NOVATEK shareholders, totaled RR 59.6 billion (including a loss of RR 13.4 billion in the third quarter 2015) and decreased by 4.9% as compared to RR 62.6 billion in the first nine months 2014.

Our profit dynamics were negatively impacted by the devaluation of the Russian rouble against the US dollar and Euro, which resulted in non-cash foreign exchange losses due to revaluation of the foreign currency debt of NOVATEK and our joint ventures, mainly Yamal LNG. The revaluation does not negatively impact the profitability and financial performance of our business given the currency structure of NOVATEK and our joint ventures cash flows. Net of the foreign exchange effects, our Normalized Profit attributable to NOVATEK shareholders in the third quarter and first nine months 2015 increased by 31.5% and 20.6% respectively compared to the corresponding periods of 2014.

Marketable Hydrocarbon Production and Purchased Volumes

3Q 2015	3Q 2014		9M 2015	9M 2014
17,061	15,196	Natural gas production including proportionate share in the production of joint ventures, million cubic meters (mmcm)	50,102	45,858
11,868	12,901	including production by subsidiaries, mmcm	36,607	39,430
1,851	1,270	Natural gas purchases from joint ventures, mmcm	5,089	2,929
1,699	1,815	Other purchases of natural gas, mmcm	4,844	5,340
15,418	15,986	Total natural gas production by subsidiaries and purchases, mmcm	46,540	47,699
2,346	1,533	Liquids production including proportionate share in the production of joint ventures, thousand tons (mt)	6,535	4,275
969	1,065	including liquids production by subsidiaries, mt	3,021	3,244
2,555	879	Liquids purchases from joint ventures, mt	6,442	1,939
37	33	Other purchases of liquids, mt	58	46
3,561	1,977	Total liquids production by subsidiaries and purchases, mt	9,521	5,229

Hydrocarbon Sales Volumes

3Q 2015	3Q 2014		9M 2015	9M 2014
14,272	14,944	Natural gas, mmcm	44,747	48,244
13,435	14,107	including sales to end-customers	42,014	45,388

3,474	1,697	Liquids, mt	9,219	4,929
		including:
1,613	1,025	Stable gas condensate products	5,038	3,077
975	67	Stable gas condensate	1,796	142
632	361	Liquefied petroleum gas	1,617	1,043
251	241	Crude oil	760	659
3	3	Other	8	8

In the first nine months 2015, our natural gas sales volumes totaled 44.7 billion cubic meters (“bcm”) (including 14.3 bcm in the third quarter 2015), which is 7.2% lower as compared to the same period of 2014 mainly due to warmer weather during the winter peak season. As at 30 September 2015, the total amount of natural gas recorded as inventory was 2.7 bcm.

In the nine months 2015, liquid hydrocarbon sales volumes totaled 9.22 million tons (including 3.47 million tons sold in the third quarter 2015), representing an 87.0% increase as compared to the corresponding period of 2014. Higher volumes of gas condensate purchased from our joint ventures due to production growth at the SeverEnergia joint venture fields and the successful launch of the Termokarstovoye field at the Terneftegas joint venture as well as the increase of crude oil production by subsidiaries positively impacted our liquids sales during the period. As at 30 September 2015, 0.83 million tons of liquid hydrocarbons were in transit or storage and recognized as inventory.

Selected Balance Sheet Items

(in millions of Russian roubles)

	30 September 2015	31 December 2014
ASSETS
Non-current assets	665,729	572,548
Property, plant and equipment	322,064	291,726
Investments in joint ventures	163,549	166,231
Long-term loans and receivables	150,824	94,142
Total current assets	136,720	126,591
Total assets	802,449	699,139
LIABILITIES AND EQUITY
Non-current liabilities	223,367	230,807
Long-term debt	194,726	204,699
Current liabilities	166,366	81,208
Total liabilities	389,733	312,015
Equity attributable to OAO NOVATEK shareholders	411,323	384,755
Non-controlling interest	1,393	2,369
Total equity	412,716	387,124
Total liabilities and equity	802,449	699,139

The full set of non-audited consolidated interim condensed IFRS financial statements, the notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations are available on the Company’s web site (www.novatek.ru).

PAO NOVATEK is the largest independent natural gas producer in Russia, and in 2017, entered the global LNG market by successfully launching the Yamal LNG project. Founded in 1994, the Company is engaged in the exploration, production, processing and marketing of natural gas and liquid hydrocarbons. Upstream activities of the Company’s subsidiaries and joint ventures are concentrated mainly in the prolific Yamal-Nenets Autonomous Region, which is the world’s largest natural gas producing area and accounts for approximately 80% of Russia’s natural gas production and approximately 15% of the world’s gas production. NOVATEK is a public joint stock company established under the laws of the Russian Federation.

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