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NOVATEK announces consolidated IFRS resultsfor second quarter and first half 2015

Moscow, 29 July2015 . OAO NOVATEK today released its consolidated interim condensed financial statements as of and for the three and six months ended 30 June 2015 prepared in accordance with International Financial Reporting Standards (“IFRS”).

IFRS Financial Highlights
(in millions of Russian roubles)

2Q 2015	2Q 2014		1H 2015	1H 2014
111,574	87,881	Oil and gas sales	224,798	176,414
670	489	Other revenues	1,188	632
112,244	88,370	Total revenues	225,986	177,046
(79,541)	(55,670)	Operating expenses	(153,437)	(109,545)
-	-	Net gain on disposal of interests in joint ventures	-	2,623
(158)	1,791	Other operating income (loss)	(357)	1,750
32,545	34,491	Profit from operations	72,192	71,874
37,968	36,895	Normalized EBITDA of subsidiaries*	83,002	75,862
50,162	40,323	Normalized EBITDA including share in EBITDA of joint ventures*	105,324	83,302
2,130	808	Finance income (expense)	(5,116)	(3,512)
13,004	3,768	Share of profit of joint ventures, net of income tax	17,278	2,046
47,679	39,067	Profit before income tax	84,354	70,408
41,920	31,950	Normalized profit attributable to OAO NOVATEK shareholders*	72,995	55,006
13.88	10.58	Basic and diluted earnings per share(in Russian roubles)	24.17	18.88
13.88	10.58	Normalized basic and diluted earnings per share* (in Russian roubles)	24.17	18.19

* Excluding the effect from disposal of interests in joint ventures in 1Q 2014.

In the second quarter and first half 2015, our total revenues increased by 27.0% and 27.6%, respectively, compared to the corresponding periods of 2014. The growth was mainly due to an increase in liquids sales volumes and net prices in Russian rouble terms. Average net prices of liquid hydrocarbons were positively impacted by the substantial increase in sales volumes of high value-added petroleum products from the Ust-Luga Complex, the decrease in export duty rates and rouble devaluation against the US dollar, which more than offset the decline in international hydrocarbon prices.

The Company’s Normalized EBITDA, inclusive of joint ventures, amounted to RR 50.2 billion in the second quarter 2015 and RR 105.3 billion in the first half 2015, representing an increase of 24.4% and 26.4%, 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 second quarter 2015, the profit attributable to NOVATEK shareholders increased by 31.2% to RR 41.9 billion or RR 13.88 per share. In the first half 2015, the profit attributable to NOVATEK shareholders amounted to RR 73.0 billion (RR 24.17 per share), representing an increase of 32.7% as compared to the profit in the first half 2014 adjusted for the effect on disposal of interests in joint ventures.

In the first half 2015, our free cash flow generation increased to RR 40.4 billion, or by 2.3 times as compared to the corresponding period of 2014.

Hydrocarbon Production and Purchased Volumes

2Q 2015	2Q 2014		1H 2015	1H 2014
16,890	15,239	Natural gas production including proportionate share in the production of joint ventures, million cubic meters (mmcm)	33,041	30,662
12,278	13,131	including production by subsidiaries, mmcm	24,739	26,529
1,615	1,375	Natural gas purchases from joint ventures, mmcm	3,238	1,659
1,596	1,848	Other purchases of natural gas, mmcm	3,145	3,525
15,489	16,354	Total natural gas production by subsidiaries and purchases, mmcm	31,122	31,713
2,198	1,380	Liquids production including proportionate share in the production of joint ventures, thousand tons (mt)	4,189	2,742
996	1,085	including production by subsidiaries, mt	2,052	2,179
2,184	564	Liquids purchases from joint ventures, mt	3,887	1,060
17	6	Other purchases of liquids, mt	21	13
3,197	1,655	Total liquids production by subsidiaries and purchases, mt	5,960	3,252

Hydrocarbon Sales Volumes

2Q 2015	2Q 2014		1H 2015	1H 2014
14,498	15,528	Natural gas, mmcm	30,475	33,300
13,502	14,604	including sales to end-users	28,579	31,281
2,911	1,687	Liquids.mt	5,745	3,232
		including:
1,588	1,087	Stable gas condensate products	3,425	2,052
545	43	Stable gas condensate	821	75
537	331	Liquefied petroleum gas	985	682
238	223	Crude oil	509	418
3	3	Other petroleum products	5	5

Our natural gas sales volumes totalled 14.5 billion cubic meters (bcm) in the second quarter 2015 and 30.5 bcm in the first half 2015, representing a decrease of 8.5% as compared to the first half 2014. The decrease was mainly due to substantial withdrawals of natural gas from the underground storages in the first half 2014 due to colder weather as compared to the first half 2015.

In the first half 2015, the total amount of natural gas recorded as inventory increased by 547 mmcm to 1,596 mmcm as compared to a decrease of 1,675 mmcm in the first half 2014.

In the second quarter 2015, liquid hydrocarbon sales volumes amounted to 2,911 mt, representing a 72.6% increase in volumes sold as compared to the second quarter 2014. In the first half 2015, liquid hydrocarbon sales volumes amounted to 5,745 mt, representing a 77.8% increase as compared to the first half 2014. Higher volumes of gas condensate purchased from our joint ventures due to production growth at the SeverEnergia fields and launch of the Termokarstovoye field, as well as increase of crude oil production by subsidiaries positively impacted our sales during the period.

As at 30 June 2015, 811 mt of liquid hydrocarbons were in transit or storage and recognized as inventory compared to 739 mt as at 31 December 2014.

Selected Balance Sheet Items
(in millions of Russian roubles)

ASSETS	30 June 2015	31 December 2014
Non-current assets	641,485	572,548
Property, plant and equipment	312,306	291,726
Investments in joint ventures	191,620	166,231
Total current assets	129,022	126,591
Total assets	770,507	699,139
LIABILITIES AND EQUITY
Non-current liabilities	183,565	230,807
Long-term debt	156,290	204,699
Current liabilities	138,780	81,208
Total liabilities	322,345	312,015
Equity attributable to OAO NOVATEK shareholders	446,774	384,755
Non-controllinginterest	1,388	2,369
Total equity	448,162	387,124
Total liabilities and equity	770,507	699,139

The full set of 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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