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Gazprom Neft Board of Directors reviews investment programme in the light of 2014 half-year results


The Board of Directors of Gazprom Neft has reviewed the company’s progress in the fulfilment of its investment programme (directed at achieving the company’s mid- and long-term goals against business plan targets) in the first half of 2014.

On the basis of half-year results Gazprom Neft has retained its leading position in terms of growth in production and refining, as well as in terms of key indicators including productivity, return on investment, and operational cash flow per barrel of oil equivalent (boe). Production of hydrocarbons in the first half of 2014 reached 31.84 million tonnes of oil equivalent (mtoe), an increase of four percent on the first half of 2013. Total volumes refined in the first six months of 2014 amounted to 21.99 million tonnes, exceeding volumes for the same period last year by 3.8 percent. Sales through premium retail channels were up 11.1 percent, to 12.2 million tonnes. Sales of oil products through the Gazprom Neft filling station network in Russia reached 3.7 million tonnes — 8.8 percent more than in the first half of 2013. Higher production volumes and increased sales through premium retail channels, together with changes in the crude oil price and prices for petroleum products, resulted in sales growth of 13.9 percent (RUB814,508 billion) in the first half of 2014, with earnings before interest, taxes, depreciation and amortisation (EBITDA) increasing by 18.5 percent, to RUB178,282 billion.

The Board of Directors also adopted a number of changes to the Gazprom Neft investment programme in 2014, with the revised programme reaching RUB337.7 billion, an increase of 16 percent on the previously adopted plan. The main change in the extent of the Gazprom Neft investment programme is the result of an increase in its effective ownership of SeverEnergia, and the result of increased production volumes at traditional and new assets, as well as at Serbian fields under the control of NIS.

The company continued its development of new major projects in the Yamalo-Nenets Autonomous Region throughout 2014, with production drilling commencing at the Novoportovskoye field and the first shipments being made by tanker in August. A plan for the development of the Messoyakha field in the Gydan peninsula is expected to be adopted within a year. Production continues at the first ever project for oil extraction on the Arctic Shelf — the Prirazlomnoye field — with the second tanker of new Arctic oil (ARCO) being despatched in September. Geological prospecting is also continuing at the Dolginskoye field. Gazprom Neft is also actively pursuing projects beyond Russia, having begun commercial production at the Badra field, Iraq, with the expectation of receiving a share in such production as soon as next year. Geological prospecting is also under way at three projects in Iraqi Kurdistan.

The company’s investments in refining were, throughout 2014, directed at implementing the second stage of a major refinery modernisation programme aimed at improving the depth of refining. In addition to this, the company is implementing a range of ecological initiatives throughout its refining facilities, as well as implementing various projects to improve energy efficiency in production.

The Board of Directors also reviewed information on the work of the company’s internal audit department, with 34 audits having been conducted in the first half of 2014, 21 of which were directed at examining the effectiveness of business processes throughout Gazprom Neft and its subsidiaries.

Gazprom Neft Chairman Alexei Miller commented: “First-half results for Gazprom Neft testify to the company’s active development, which has enabled us to retain our market-leading position in terms of productivity within the Russian oil sector. It is already obvious that by the end of the year Gazprom Neft’s production growth (in terms of oil equivalent) will have exceeded five percent, and net profits are likely to outreach business plan levels by around 20 percent”.