Operating results

Operating results, mn USD

Revenue

2009

2010

2011

Change, %

2011/2010

Change, %

2010/2009

Sales of petroleum products, oil and gas

23,773

32,176

43,268

34.5%

35.3%

Other sales

532

736

904

22.8%

38.3%

Total

24,305

32,912

44,172

34.2%

35.4%

Costs and expenses

Cost of purchased oil, gas and petroleum products

5,335

7,459

10,817

45.0%

39.8%

Operating,costs

1,896

2,126

2,464

15.9%

12.1%

Sales, general and administrative costs

1,287

1,660

1,779

7.2%

29.0%

Transportation costs

2,262

2,886

3,391

17.5%

27.6%

Wear, depletion and depreciation

1,503

1,649

1,963

19.0%

9.7%

Export duties

3,948

6,631

8,092

22.0%

68.0%

Taxes, except income tax

4,027

5,301

8,038

51.6%

31.6%

Costs of geological exploration

147

91

74

(18.7)%

(38.1)%

Other sales costs

297

436

575

31.9%

46.8%

Loss from asset sales

142

(100.0)%

Total

20,844

28,239

37,193

31.7%

35.5%

Operating income

3,461

4,673

6,979

49.3%

35.0%

Other income / (costs)

Income from stakes in associates

212

229

248

8.3%

8.0%

Income from investments

470

9

104

1,055.6%

(98.1)%

Interest receivable

108

48

66

37.5%

(55.6)%

Interest payable

(380)

(347)

(329)

(5.2)%

(8.7)%

Other costs, net

(1)

(309)

(65)

(79.0)%

30,800.0%

(Negative) / positive effect of exchange rate changes, net

45

(24)

(172)

616.7%

(153.3)%

Total

454

(394)

(148)

(62.4)%

(186.8)%

Income before tax

3.,915

4,279

6,831

59.6%

9.3%

Income tax expense

801

884

1,173

32.7%

10.4%

Expense / (income) from deferred income tax

13

(43)

71

(265.1)%

(430.8)%

Total

814

841

1,244

47.9%

3.3%

Net,income

3,101

3,438

5,587

62.5%

10.9%

Less: net income from non-controlled share holding

(75)

(287)

(235)

(18.1)%

282.7%

Net income attributable to JSC Gazprom Neft

3,026

3,151

5,352

69.9%

4.1%

Operating income, mn USD

Source: Company data

download xls

Sales total

 

2009

2010

2011

Change, %
2011/2010

Change, %
2010/2009

Crude oil, (mn t)

Exports and sales on international markets

15.57

15.94

13.08

(17.9)%

2.4%

Exports to CIS

3.32

3.02

2.99

(1.0)%

(9.0)%

Sales on the domestic market (except Gazprom Neft Orenburg)

0.25

0.01

0.20

1,900.0%

(96.0)%

Sales on the domestic market (Gazprom Neft Orenburg)

0.56

0.55

0.53

(3.6)%

(1.8)%

Total sales of crude oil

19.70

19.52

16.80

(13.9)%

(0.9)%

Gas, (bn m3)

Sales on the domestic market (except Gazprom Neft Orenburg)

3.43

4.88

9.31

90.8%

42.3%

Sales on the domestic market (Gazprom Neft Orenburg)

0.70

0.84

0.91

8.3%

20.0%

Total gas sales on the domestic market

4.13

5.72

10.22

78.7%

38.5%

Petroleum products, (mn t)

Export sales

11.36

12.31

12.63

2.6%

8.4%

Exports and sales on international markets

2.29

2.61

2.43

(6.9)%

14.0%

Exports and sales in CIS

1.90

1.74

2.05

17.8%

(8.4)%

Sales on the domestic market

17.43

20.54

24.29

18.3%

17.8%

Total sales of petroleum products

32.98

37.20

41.40

11.3%

12.8%

Average actual selling prices, USD/t

 

2009

2010

2011

Change, %
2011/2010

Change, %
2010/2009

Crude oil, (USD/t)

Exports and sales on international markets

433.46

560.92

791.13

41.0%

29.4%

Exports to the CIS

298.19

414.57

415.05

0.1%

39.0%

Petroleum products, (USD/t)

Export sales

453.26

578.07

777.28

34.5%

27.5%

Sales on international markets

914.85

992.34

1,280.66

29.1%

8.5%

Exports and sales in CIS

477.37

658.62

780.00

18.4%

38.0%

Sales on the domestic market

432.07

520.45

673.08

29.3%

20.5%

Growth of revenues by 34.2% in 2011 compared to 2010 was due to rising prices for crude oil and petroleum products and to increase of sales volumes.

Export sales of crude oil

The increase of revenues from crude oil exports and sales on international markets by 15.7% in 2011 compared with 2010 was due to a 41.0% growth in oil prices, which was partly offset by a 17.9% fall in sales volumes.

Crude oil exports and sales on international markets dropped by 17.9% in 2011 compared with 2010, due to 6.8% growth in refining at the Company’s own refineries in 2011 against 2010.

Sales of crude oil in the CIS

Growth in revenues from export sales of petroleum products in 2011 by 38.0% compared with 2010 was caused by a 34.5% price increase and a 2.6% increase in sales volumes due to higher demand and 6.8% growth in refining.

Revenues from export sales of petroleum products grew by 38.2% in 2010 compared to 2009, due to an 8.4% increase in sales volumes and price rises of 27.5%.

Sales of petroleum products on international markets

Revenues from sales of petroleum products on international markets grew by 20.2% in 2011 against 2010, as a result of a 29.1% price rise, partly offset by a 6.9% fall in sales volumes.

Revenues from sales of petroleum products on international markets rose by 23.6% in 2010 against 2009, caused by a 14.0% growth in sales volumes and price increase of 8.5%.

Revenues from petroleum products sold in the CIS in 2011 increased by 39.5% against 2010, due to sales volume growth of 17.8%, and an 18.4% rise in prices.

Revenues from sales of petroleum products in the CIS in 2010 were 26.4% higher than in 2009, due to a 38.0% price rise, which was partly offset by an 8.4% decline in sales volumes.

Revenues from sales of petroleum products on the domestic market grew by 52.9% in 2011 against 2010, due to a 29.3% price rise and growth of sales volumes by 18.3%.

Revenues from sales of petroleum products on the domestic market grew by 41.9% in 2010 against 2009, due to 17.8% growth of sales volumes and 20.5% increase of prices. Sales volumes were boosted by a 13.4% growth in refining.

Export sales of petroleum products

2010

2011

Change, %

mn USD

mn t

mn USD

mn t

mn USD

mn t

High-octane gasoline

65

0.10

119

0.13

83.1%

30.0%

Low-octane gasoline

14

0.03

28

0.03

100.0 %

Naphtha

1,131

1.64

942

1.00

(16.7) %

(39.0) %

Diesel fuel

3,179

4.73

4,321

4.66

35.9%

(1.5)%

Fuel oil

2.205

5.08

3.757

6.15

70.4%

21.1%

Aviation fuel

181

0.25

158

0.15

(12.7)%

(40.0)%

Other

341

0.48

492

0.51

44.3%

6.3%

Total

7,116

12.31

9,817

12.63

38.0%

2.6%

2009

2010

Change, %

mn USD

mn t

mn USD

mn t

mn USD

mn t

High-octane gasoline

224

0.45

65

0.10

(71.0)%

(77.8)%

Low-octane gasoline

20

0.04

14

0.03

(30.0)%

(25.0)%

Naphtha

873

1.70

1.31

1.64

29.6%

(3.5)%

Diesel fuel

2,477

4.93

3,179

4.73

28.3%

(4.1)%

Fuel oil

1,249

3.61

2,205

5.08

76.5%

40.7%

Aviation fuel

13

0,02

181

0.25

1,292.3%

1,150.0%

Other

293

0.61

341

0.48

16.4%

(21.3)%

Total

5,149

11.36

7,116

12.31

38.2%

8.4%

Sales of petroleum products on the domestic market


2010

2011

Change, %

mn USD

mn t

mn USD

mn t

mn USD

mn t

High-octane gasoline

4,006

5.44

6,163

7.11

53.8%

30.7%

Low-octane gasoline

513

0.87

577

0.74

12.5%

(14.9)%

Diesel fuel

3,117

6.06

4,791

6.66

53.7%

9.9%

Fuel oil

1,081

3.49

1,498

3.72

38.6%

6.6%

Aircraft fuel

1,033

2.10

1,694

2.50

64.0%

19.0%

Other

940

2.58

1,626

3.56

73.0%

38.0%

Total

10,690

20.54

16,349

24.29

52.9%

18.3%

2009

2010

Change, %

mn USD

mn t

mn USD

mn t

mn USD

mn t

High-octane gasoline

2,772

4.51

4,006

5.44

44.5%

20.6%

Low-octane gasoline

449

0.84

513

0.87

14.3%

3.6%

Diesel fuel

2,050

4.73

3,117

6.06

52.0%

28.1%

Fuel oil

750

3.26

1,081

3.49

44.1%

7.1%

Aircraft fuel

774

1.88

1,033

2.10

33.5%

11.7%

Other

736

2.21

940

2.58

27.7%

16.7%

Total

7,531

17,43

10,690

20.54

41.9%

17.8 %

Sales of petroleum products in the CIS

2010

2011

Change, %

mn USD

mn t

mn USD

mn t

mn USD

mn t

High-octane gasoline

488

0.62

531

0.57

8.8%

(8.1)%

Low-octane gasoline

79

0.12

149

0.23

88.6%

91.7%

Naphtha

15

0.03

84

0.11

460.0%

266.7%

Diesel fuel

264

0.42

480

0.58

81.8%

38.1%

Fuel oil

1

0.00

28

0.08

2,700.0%

3,900.0%

Aviation fuel

114

0.22

92

0.11

(19.3)%

(50.0)%

Other

185

0.33

235

0.37

27.0%

12.1%

Total

1,146

1.74

1,599

2.05

39.5%

17.8%

2009

2010

Change, %

mn USD

mn t

mn USD

mn t

mn USD

mn t

High-octane gasoline

366

0.60

488

0.62

33.3%

3.3%

Low-octane gasoline

61

0.12

79

0.12

29.5%

Naphtha

86

0.23

15

0.03

(82.6)%

(87.0)%

Diesel fuel

109

0.22

264

0.42

142.2%

90.9%

Fuel oil

5

0.02

1

0.00

(80.0)%

(90.0)%

Aviation fuel

166

0.44

114

0.22

(31.3)%

(50.0)%

Other

114

0.27

185

0.33

62.3%

22.2%

Total

907

1.90

1,146

1.74

26.4%

(8.4)%

Other sales

Other revenues consist mainly of revenues generated by transportation, construction, utilities and other services.

In 2011 and 2010, other revenues grew by 22.8% and 38.3%, respectively, against the previous year, as a result of price rises and growth of sales volumes.

Cost of purchased oil, gas, & petroleum products

The cost of purchased oil, gas, and petroleum products rose by 45.0% in 2011 compared to 2010 as a result of higher prices for crude oil and petroleum products and of increased purchase volumes. The price of Urals crude oil rose by 39.4% in 2011, compared to 2010.

The cost of purchased oil, gas, and petroleum products rose by 39.8% in 2010 compared to 2009 as a result of rising crude oil and petroleum product prices, with a consequent growth in sales.

Production & refining costs

2009

2010

2011

Changes, %
2011/2010

Changes, %
2010/2009

Hydrocarbon production costs (except Orenburg)

1,217

1,282

1,499

16.9%

5.4%

Hydrocarbon production costs (Orenburg)

13

15

22

46.7%

5.1%

USD per BOE

5.13

5.17

5.39

4.3%

0.8%

Costs of refining at own refineries and refineries of associates, accounted by share in equity

666

829

943

13.8%

24.4%

USD/t

19.92

21.86

23.29

6.5%

9.7%

USD per BOE

2.72

2.98

3.18

6.6%

9.7%

Total operating costs

1,896

2,126

2,464

15.9%

12.1%

Costs of hydrocarbon production include costs of materials, maintenance and repairs of equipment used to produce hydrocarbons, costs of labour, fuels, lubricants and electrical power, costs of activities to increase yield, and other costs incurred by the Company’s production units.

Production costs in 2011 grew by 16.9% compared to 2010, as a result of a 3.3% strengthening of the ruble against the dollar, a 12% growth in manufacturer price inflation, and a 12.4% increase of hydrocarbon production by consolidated companies.

The Company’s costs per unit of production in 2011 increased from USD 5.17 to USD 5.39 per BOE, or by 4.3%.

The costs of refining include the costs of materials, maintenance, and repairs of equipment used for hydrocarbon refining, costs of labour, electric power, and other costs incurred by the Company’s refining units.

The costs of refining increased by 13.8% in 2011 against 2010 as a result of the ruble strengthening against the US dollar by 3.3%, a 12% growth in the producers’ inflation rate, and output growth by all refineries.

The Company’s costs per per barrel increased from USD 2.98 in 2010 to USD 3.18 in 2011, or by 6.6%.

As of December 31, 2011, the Company had completed the sale of its interest in an oil field service business.

Starting from 2012, the Company plans to switch to IAS norms in the preparation of its financial reports. The table below discloses the impact of the adoption of IAS norms on the classification of operating costs arising from the sale of the oil field service business:

2009

2010

2011

Change, %
2011/2010

Change, %
2010/2009

Hydrocarbon production costs (US GAAP, except Orenburg)

1,217

1,282

1,499

16.9%

5.4%

USD per BOE

5.13

5.17

5.39

4.3%

0.8%

Effect from sale of oil field service business

122

173

116

(32.9)%

41.8%

Reclassifying changes of production in progress from operating costs to cost of goods sold

8

9

16

77.8%

12.5%

Adjusted operating costs

1,347

1,464

1.631

11.4%

8.7%

USD per BOE

5.68

5.90

5.85

(0.9)%

3.9%

Sales, general & administrative costs

Sales, general and administrative costs include general business costs, labour remuneration (except labour remuneration at our production subsidiaries and our own refineries), social payments, bank services, insurance, legal fees, consulting and auditor fees, charity, costs to create provisions for bad debt, and other costs.

Sales, general and administrative costs increased by 7.2% in 2011 as a result of the growing cost of the business, including growth of premium sales and inflation rate.

Transportation costs

Transportation costs include the costs of bringing crude oil to refineries, and petroleum and products to the end-buyer. They consist of transportation by pipeline, marine/rail freight, handling charges, and other related costs.

An increase in transportation costs for most products in 2011 against 2010 was caused by higher transportation tariffs, growth of the Company’s sales, and a stronger ruble.

Wear, depletion, and depreci ation

Wear, depletion, and depreciation costs include exhaustion of oil and gas assets, and depreciation of other fixed assets.

Wear, depletion, and depreciation costs in 2011 rose by 19.0% compared to 2010. This was caused by the increased value of depreciable assets as the Company’s capital investment program continued.

Export customs duties for crude oil rose by 11.4% in 2011 compared to 2010, due to a 39.4% rise in the price of Urals crude oil, which was partly offset by reduced sales volumes.

Export duties & taxes, except income tax

2009

2010

2011

Change, %
2011/2010

Change, %
2010/2009

Export customs duties for crude oil

2,790

4,631

5,160

11.4%

66.0%

Export customs duties for petroleum products

1,158

2,000

2,932

46.6%

72.7%

Total export customs duties

3,948

6,631

8,092

22.0%

68.0%

2009

2010

2011

Changes, %
2011/2010

Changes, %
2010/2009

Mineral extraction tax

2,256

3,107

4,614

48.5%

37.7%

Excise

1,412

1,743

2,845

63.2%

23.4%

Property tax

127

182

213

17.0%

43.3%

Other taxes

232

269

366

36.1%

15.9%

Total taxes except income tax

4,027

5,301

8,038

51.6%

31.6%

Export customs duties for petroleum products in 2011 rose by 46.6% compared to 2010, as a result of higher export duties for petroleum, partly offset by the cancellation of export duties on petroleum products supplied to Belarus and Kyrgyzstan.

Mineral extraction tax rose by 48.5% in 2011 compared to 2010, due to higher crude oil prices and production increases. The price of Urals crude oil rose by 39.4% in 2011, compared to 2010.

Mineral extraction tax increased in 2010 due to an increase of oil prices, on which the tax is calculated, and because production volumes grew by 2.3%.

Excise duties in 2011 rose by 63.2% compared to 2010 due to an increase in refining volumes at the Company’s refineries, and due to increase in the excise duty rate on January 1, 2011, when the petroleum product excise duty rate was increased under Federal Law No. 306-FZ (effective November 27, 2010).

Other financial items

The change in interest receivable was caused by changes in funds held on current and deposit accounts in banks.

The lower total interest payable in 2011 against 2010 was a result of the Company’s successful efforts to have interest rates reduced.

The effective income tax rate in 2011 was 18.3%, which is comparable to the official income tax rate.

Liquidity and sources of capital

Net cash from operations

Net cash from operating activities increased by 11.3% to USD 6,001 mn in 2011 compared to USD 5,391 mn in 2010. Growth of net cash funds generated by operations was caused by growth of the Company’s net income, and adjusted by the growth in working capital caused by rising petroleum and petroleum product prices.

Net cash from operating activities increased by 54.1% to USD 5,391 mn in 2010 compared to USD 3,499 mn in 2009.

This growth was caused by increased operating income and better management of working capital.

Net cash used for investments

Net cash used for investments increased by 12.4% in 2011 to USD 5,455 mn compared to USD 4,852 mn in 2010, due to an increased number of mergers and acquisitions and a 22.1% increase in capital investments.

Net cash invested fell by 1.1% to USD 4,852 mn in 2010 compared to USD 4,908 mn in 2009. This was caused by lower M&A intensity in 2010 (USD 658 mn less than 2009), partly offset by a 25.3% rise in capital investments.

Net cash (used in)/generated by financing

In 2011, net cash used in financing amounted to USD 752 mn against USD 309 mn in 2010. This change was mostly caused by a USD 146 mn decline in net funds generated by loans and credits, and an increase in dividend payments of USD 320 mn.

Net cash used in financial activities in 2010 amounted to USD 309 mn against USD 185 mn received in 2009. The change was caused by a decline in net funds generated by loans and credits of USD 703 mn, partly offset by a USD 209 mn reduction in dividend payments.

Net cash (used in )/ generated by financing

In 2011, net cash used in financing amounted to USD 752 mn against USD 309 mn in 2010. This change was mostly caused by a USD 146 mn decline in net funds generated by loans and credits, and an increase in dividend payments of USD 320 mn.

Net cash used in financial activities in 2010 amounted to USD 309 mn against USD 185 mn received in 2009. The change was caused by a decline in net funds generated by loans and credits of USD 703 mn, partly offset by a USD 209 mn reduction in dividend payments.

The 22.1% growth in capital expenses in 2011 compared to 2010 was caused by the following factors:

  • Capital expenses in petroleum refining rose by 120.5% as the Company continued its refinery upgrade program. The program includes construction of a hydrotreatment plant for catalytic cracking with 1.2 mn t annual capacity and a hydrotreatment plant for diesel fuel with 3 mn t annual capacity, both at the Omsk Refinery. When they are launched, the units will make motor fuel in environmental Classes 4 and 5, respectively.
  • The 71.9% growth of capital investments in marketing and sales was caused by a rebranding program at filling stations and the purchase of 113 new filling stations.
  • The growth of petroleum refining, marketing and sales costs was partly offset by lower capital expenses in exploration and production, which fell by 2.7% due to optimization of well interventions.
  • Capital expenses in 2010 rose by 25.3%. This was due to the following factors:
  • Strengthening of the ruble by 4.4% against the dollar, along with cost inflation, caused an 18.4% increase in capital investments in exploration and production.
  • A 41.6% increase in capital investments in refining as a result of the Company’s refinery upgrade program;
  • A 68.7% growth of capital investments in marketing and sales, as a result of the program to rebrand the filling station chain.

The Company’s loan portfolio is diversified, and includes pre-export financing, syndicated and bilateral loans, ruble bonds and other instruments.

Efforts to refinance debt and achieve a more balanced borrowing policy extended the average repayment period by 27.0% in 2011 against 2010, from 2.1 years to 2.68 years. The average interest rate decreased by 0.59 pp to 3.37%.

In April 2011, the Company negotiated a reduction in the interest rate on a USD 1.5 bn loan, from LIBOR + 2.1% to LIBOR + 1.6%. In August 2011, the Company placed its second issue of Series 4 bonds for RUB 6.1 bn. In February 2012, the Company issued Series 11 bonds for RUB 10 bn.

Debt & liquidity

(mn USD)

2010

2011

Short-term debt

1,740

1,277

Long-term debt

4,942

5,420

Cash and equivalents

(1,146)

(914)

Short-term deposits

(109)

(8)

Net debt

5,427

5,775

Short-term debt / Total debt, %

26.0%

19.1%