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The Gazprom Neft Board of Directors reviews the outcomes of the company’s 1H 2016 investment programme

, press release

The Gazprom Neft Board of Directors has reviewed the latest information on the implementation of the company’s investment programme in the first half of 2016. Directed at the implementation of the company’s medium- and long-term strategic objectives, the programme is being implemented on the basis of plans previously approved by the Board of Directors.

Hydrocarbon production at Gazprom Neft in the first half of 2016 increased by 10 percent year-on-year to 41.82 million tonnes of oil equivalent (mtoe) — the greatest production growth of all companies in Russia’s oil industry. This increase in production volumes had been made possible through increased production at the company’s Prirazlomnoye, Novoportovskoye and SeverEnergia (Arktikgaz) fields, through greater monetisation of gas at its fields in the Khanty-Mansiysk Autonomous Okrug and Orenburg Regions, and through maintaining production volumes at its mature assets.

Refining volumes at Gazprom Neft’s refineries and jointly-owned refining assets totalled 20.65 million tonnes in the first half of 2016. Adverse market conditions notwithstanding, the company succeeded in increasing sales of oil products through its own retail network by 3.6 percent, to 4.93 million tonnes.

First half-year results for 2016 show Gazprom Neft retaining its market-leading position among Russian oil companies in terms of return on investment (ROI). Thanks to increased production growth and management decisions on optimising refining volumes, the company’s product range and the structuring of the company’s output, adjusted EBITDA* (earnings before interest, taxes, depreciation and amortization) in 1H 2016 increased by 1.9 percent year-on-year, to RUB204 billion, becoming the only company in the Russian oil industry to show a positive EBITDA figure for this period. After one-time adjustments (arising from provision charges for impairment, as well as advances against fixed (non-current) assets), net profits attributable to shareholders in Gazprom Neft PJSC in the first six months of 2016 totalled RUB104 billion, a year-on-year increase of 7.1 percent**.

Gazprom Neft continued its implementation of new major projects located in the Yamalo-Nenets Autonomous Okrug throughout 2016, with a major event in 1H 2016 being the commencement of year-round oil transportation from the Novoportovskoye field via the unique “Arctic Gates” offshore terminal. Oil production at the Prirazlomnoye field — the only Russian upstream project on the Arctic Shelf — continued to increase, with preparatory works also being completed prior to the Vostochno-Messoyakhskoye field being brought into commercial production.

Work also continued on the second phase of the modernisation of Gazprom Neft’s refining facilities, with the company commencing preparations for the construction of a new crude oil distillation unit (CDU) and deep oil refining complex at its Omsk Refinery, while projects for the construction of an integrated oil refining facility for the production of Euro+ fuels and construction of the biological treatment facility “Biosfera” at the Moscow Refinery are currently in active development.

The Gazprom Neft Board of Directors decided to maintain the company’s 2016 investment programme at the level previously agreed.

The Board of Directors was also provided with information on the activities of the company’s Internal Audit department throughout 2016.

The Internal Audit department conducted a total 47 internal audits in the first half of 2016. Assessments of the effectiveness of internal controls were undertaken in various areas, including oilfield services procurement, the accounting of oil and oil products, inventory management, and more. Audits were undertaken on information technology (IT), the company’s financial activities, and capital construction. Based on the results of these inspections, and consistent with recommendations from the Internal Audit department, various initiatives, directed at improving the effectiveness of internal controls over business processes, have been developed and implemented.

The company’s “anti-corruption” hotline remains in operation. Work in risk management was focussed on improving the methodological basis for risk identification and assessment, as well as developing initiatives for integrating the risk management system with business planning processes and the management of major investment projects.

* Adjusted EBITDA includes that proportion of EBITDA arising from associated or jointly controlled companies, calculated in terms of equity participation.

** Net profits for the first six months of 2015 were adjusted to take into account a one-off gain arising from writing off liabilities in respect of Tomskneft. Adjusted EBITDA reflects deduction of profits tax.

Tags: management, strategy
Distribution channels: Companies