Oil Company LUKOIL
-
Upload
akashag11111 -
Category
Documents
-
view
366 -
download
2
Transcript of Oil Company LUKOIL
Oil Company LUKOILLeonid FedunVice President
2001 Oil and Gas ConferenceNew Horizons
London June 7-8, 2001
II. Launching Pad for Future Growth
0.0
5.0
10.0
15.0
20.0
1995 1996 1997 1998 1999 2000
Oil Gas
8.211.6 10.6 11.0
14.2 14.9
Strong Reserve Growth
Proven Oil & Gas ReservesBN BOE
8,580 8,412 8,437
370 360548
4,5132,4121,776
0
5,000
10,000
15,000
1998 1999 2000
W. Siberia E. Russia Int'l
Proven Oil & Gas Reserves ShiftMM BOE
• Proven reserves up by 70% since 1995
• Reserve growth has come from
– Continued exploration
– Targeted acquisitions
• Reserve base continues to shift out of the higher cost Western Siberia
– Accounts for only 53% of proven reserves today
– International reserves account for nearly 20% of total proven reserves*
*This includes estimated proven reserves in West Qurna
1,147 1,169 1,247 1,2841,513 1,555
0
300
600
900
1,200
1,500
1,800
1995 1996 1997 1998 1999 2000
Russia International
Consistent Production Growth
• Crude production up every year since 1995
– 33% increase over 5 year period
– Annualized CAGR of 7.9%
• International production currently accounts for only 3% of total production
– But growth rate is very high
– Production outside of Russia has more than tripled from 1997 - 2000
3.0%
2.0%
1.0%
0.0%
Int’l production as a %of LUKOIL’s total production
LUKOIL’s Production
‘000 BBL/day
Improving Upstream Efficiencies
• Marked improvement in operational efficiencies over the last 5 years
• Average flow rates up by 15% in West Siberia
• Efficiencies achieved through
- Shut in of marginal wells
- Continuing shift to higher quality reservoirs
- Increased application of new technologies
MM BBL
Oil Production
0
100
200
300
400
500
1995 1996 1997 1998 1999 2000
Traditional Technologies
New Technologies
Average Daily Flow Rate(W. Siberia)
70
61
55
60
65
70
75
1996 1997 1998 1999
BBL/day
Strong Growth in Refining
Russia International
0
200
400
600
800
1,000
1995 1996 1997 1998 1999 2000
380 386 380359
581647
• Refining output is up sharply 70% increase since 1995
• International expansion has been key driver of our refining growth
- Accounts for 2/3 of our growth over the last five years
- Today accounts for nearly 40% of our refining throughput
Refining runs
‘000 BBL/day
30.0%
20.0%
10.0%
0.0%
Int’l refining as a %of LUKOIL’s total production
International Downstream Assets
LUKOIL has built a leading position in R&M in South Eastern Europe
Moscow
Novorossiysk
Odessa
Ventspils
Baku
Perm
Arkhangelsk
Volgograd
Neftokhim
Petrotel
UkhtaLUKOIL’s Primary European Refining Assets
Refinery Capacity Production Utilization Ownership
MMTY MMTY % %
Petrotel (Romania) 4.7 1.2 25.53% 51.00%
Neftochim (Bulgaria) 10.5 5.3 50.48% 58.00%
Odessa Refinery Plant (Ukraine) 3.8 0.9 23.68% 51.90%
LUKOIL’s Primary Refining AssetsOperating Data
Advantaged International Assets
$0
$1
$2
$3
$4
$5
$6
$7
Jan-95 Jul-96 Jan-98 Jul-99 Jan-01 Jul-02
Margin Urals Crack US$/BBL
• Strategically advantagedrefineries
• low-cost crude supply• able to sell product to export
markets– Strong regional refining
margins projected through2002
• Cost savings being achieved throughrefinery optimization
• Upgrading underway to meet new EUspecifications
$0
$5
$10
$15
$20
$25
$30
$35
Jan-95 Jul-96 Jan-98 Jul-99 Jan-01 Jul-02
Urals Med US$/bbl
Mediterranean Refining Margins1995 - 2002E
Urals Price1995 - 2002E
Morgan Stanley estimates
Management of International Operations
Upstream - LUKOIL Overseas Holding:
• Moscow based
• Headed by Andrei Kuzyaev
• Manages upstream projects outside of Russia
Downstream - LUKOIL Europe Holding
• London based
• Headed by Ralif Safin
• Manages European downstream assets
LUKOIL Overseas Holding
(London - Moscow)
LUKOIL Europe Holding(London - Moscow)
Safin
OAO LUKOIL
Kazakhstan
IraqEuropean
R&MUSAR&MCaspian
World Class Reserves and Production
4,725
6,081
9,504
10,687
11,660
14,900
15,548
19,882
22,060
2000 Reserves (Billion BOE)
0.70
1.19
1.59
1.64
2.11
2.74
3.30
3.75
4.47
2000 Production (M BOE/d)
Source: Company data
• LUKOIL ranks as a world-class company in terms of reserves and production
• Our expansion strategy will deliver greater international diversification on par with other oil majors
Strong Financial Growth
1998
6 months, ended June 30
US$ MM
1999 1999 2000
Total revenues
Income before taxation
Net income
Cash and marketable securities
Financial debt
Total assets
Net cash provided by operating activities(before changes in the working capital)
Operating profit
(as of December 31/June 30)
(as of December 31/June 30)
(as of December 31/June 30)
6,619 7,376 6,2462,890
(510) 1,692 325 1,887
877 1,249 108
729
1,735
1,062 1,45292
674158 1,024393
2,074 2,497 2,156
9,643 12,503
2,705
752
10,102 14,634
1,426 1,688235
Monitoring Key Ratios to Maximize Efficiency
1998 1999
Return on sales
Return on equity
Sales on assets
ROACE
Net debt to net debt plus equity
Return on assets
11.0 14.4 23.23.2
7.6 8.5 0.9 9.9
13.1 15.0 1.6
68.6
16.8
59.0 42.728.6
11.0 13.4 2.4 31.2
15.323.819.5
All data shown as %, unless otherwise noted
25.6
6 months, ended June 30
1999 2000
, E a r n in g s p e r s h a r e in U S d o lla r s 1 .1 5 1 .6 9 2 .2 50 .1 4
Rational Deployment of Capital
• High rates of reinvestment are ensuring continued growth
• Special emphasis placed on R&M investments over last three years
• up by 35%
• targeted at balancingproduction and refiningcapacity
Annual Capital ExpendituresUS$ MM
0
100
200
300
400
500
600
700
800
E&P R&M Other
1998 1999 2000
Proposed Dividend Payout and Share Swap
LUKOIL’s dividend payout has grown steadily over the last four years
The proposed share swap will benefit all shareholders
• Strong recentperformance in the prefshares
• Simplify share structure
• More equitabledistribution of futuredividends
$4
$8
$12
$16
$20
11-Apr-200001-Jun-2000
24-Jul-200013-Sep-2000
03-Nov-200026-Dec-2000
15-Feb-200109-Apr-2001
Lukoil Ord. Lukoil Pref.
LUKOIL Share Price PerformanceLast Twelve Months, US$ per share
0.04 0.02 0.120.29
0.16 0.19
0.7
2.11
0.00
0.50
1.00
1.50
2.00
2.50
Ord. Dividend Pref. Dividend
LUKOIL Historical Dividend PaymentsUS$ per share
II. Growth and Efficiency Strategic Overview
Upstream Strategy - Potential and Efficiency Growth
• Continue steady production growth
– Selective development of existing reserves
– Opportunistic acquisitions
• Lower production costs
– Improve efficiencies in existing operations
– Production expansion in lower cost regions (Timan Pechora, Caspian and Middle East)
• Strengthen netbacks: Shifting production will...
– lower transportation costs
– increase proportion of sales in international market
– improve quality of crude
Sustainable Growth Strategies
Prospective Growth of Oil Production
Timan Pechora2000 - 10.7 MM tons of oil2010-2015Е - 20-25 MM toe
European Russia
2000 - 14.2 MM tons of oil2010-2015Е - 13-15 MM toe
Western Siberia2000 - 50.8 MM tons of oil2010-2015Е - 45-50 MM toe; 30-40 bn cubic m of gas
Caspian region
2000 - 2 MM tons of oil2010Е - 15 MM toe2015Е - 20-25 MM toe
Iraq2010Е - 15 MM tons of oil2015Е - 20-25 MM toe
Downstream Strategy - Open New Markets
Expansion into Central and South Eastern Europe R&M
• Exploit advantage as the low-cost crude supplier to region
• Capture strong Mediterranean refining margins
• Benefit from projected demand growth in region
• Improve efficiencies through optimising operations among our regional refining assets
Global Strategies: LUKOIL International Operations
LUKOIL is active today in more than 20 countries
Our main strategic assets are situated in• Western Siberia• Timan Pechora• The Caspian Basin• S.E. Europe• N.E. United States
LUKOIL’s most recent discovery in the Yamal region of Siberia will position us to become a major gas exporter
LUKOIL’s Principal Areas of Operation
Global Strategies: LUKOIL’s Regional Expansion
LUKOIL is rapidly expanding its downstream and upstream operations into neighboring regions
• Upstream:• Caspian• Kazakhstan• Middle East
• Downstream: • Central Europe• Atlantic Basin
LUKOIL is poised to become Russia’s first truly international oil major
Moscow
Novorossiysk
Odessa
Ventspils
Baku
Perm
Arkhangelsk
Volgograd
Neftokhim
Petrotel
Ukhta
Downstream: Expansion into Central Europe
and Atlantic Basin
Upstream: Expansion
into Caspian
Kazakhstan and Middle
East
Global Strategies: Why Expand Beyond Russia?
• Reduce our exposure to “single market risk”
• Exploit competitive advantages
– Low cost crude supplier
– Superior knowledge of markets and geology
• Shift production to lower cost reserves
• Expand R&M business in markets with higher product prices
• Capture margins further down value chain in markets supplied by our crude
Global Strategies: New Markets
Expansion into Atlantic Basin Marketing
• Region will increasingly become net product importer
• Upgrade our export-oriented refining assets to deliver to this market
• Secure a market for future Timan Pechora production
• Take market share from declining, higher-cost North Sea production
– 2 MM BBL/day decline by 2010
6.24 6.6 6.62 6.37
4.72
6.716.526.456.155.98
4.22
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
1990
1995
1996
1997
1998
1999
2000
2001E
2002
E
2005E
2010E
2MM BBL/day declinein 2010
North Sea Production
MM BBL/day
Corporate Growth: 2001 - 2005
Setting and Achieving Targets
Not less than 15%
To 600,000 - 700,000 BBL/day
To 300,000 BBL/day
Lower than global average
US$20 - 25 bn @ $20/BBL
US$3.5 BN
US$2.5-3 BN p.a.
15-20% of net income
Crude Oil Production
Domestic Refining
International Refining
Cost Control
Sales
Net Income
Capital Investment
Dividends
Creating Relative Value Among Peers
Leading the Way in Corporate Standards
• Commitment to upholding international corporate governance and transparency standards
• Progressive dividend policy
• Upholding minority shareholder rights
– Shareholder rights charter
• High-caliber international management team and ethical standards
• Participation in educational and philanthropic programs
• International sponsorship and brand-building
Predictability and Accountability
Delivering for the Investment Community
• LUKOIL has embarked on a regular process of reporting financial and operating results to the international financial community, which will include:
– Interim publishing of US GAAP financial statements
– By press release and over the web
– Quarterly analyst conference calls for discussion of results
– Semi-annual roadshows for discussions with investment community
– Improved investor relations web site
LUKOIL’s Competitive Advantages
• Russia’s most balanced integrated oil company
– Growing downstream presence provides cushion from downward oil price movements
• Superior asset base
– Growing geographical diversification
• International experience unique among peers
– International mergers and acquisitions expertise
– Shares are legitimate acquisition currency
• Strategic foothold in the North American downstream market
• Financial discipline and reporting standards to judge opportunities according to strict strategic and financial return standards
Crude Oil Production % of Russia’s total
Crude Oil Export Sales% of Russia’s total
Sustainable Production Growth
• Production growth well above the Russian average
– Nearly a quarter of Russia’s 2000 production
– Sustainable growth since the beginning of privatization (1995)
• Sustainable growth of the share in Russian crude exports
Macroconditions for Growth
– Economic growth. GDP growth tendency is not less than 3-4% p.a. Budget surplus. Growth of gold and currency reserves. Improved solvency and tax collection
– Favorable market environment. Long-term supply and demand forecast under a regulating OPEC role shows that Russian crude oil price will be maintained at the level not lower than $18-20/barrels. Convergence of domestic and international oil and petroleum product prices
– Improvement of legislation. Stabilization of the PSA regime is in its final stage. Enhancement of taxation regime, including taxation regime for oil companies. Nondiscriminative access of oil companies to gas transportation facilities
– Complications. Inflation growth. Low pace of structural reforms in Russia
LUKOIL’s International Operations. Case Study: Bulgaria
• Operations launched in 1999. Largest refinery in the Balkans. Retail chain. 2001 revenues amounted to $1.5bn, an equivalent to 7% of GDP and 25% of tax revenues of the country
• Active development of the Mediterranean markets (Turkey, Greece, Serbia, Macedonia and other countries) in the sphere of oil, petrochemical products and polymers. Annual sales growth by 3-15%
• Over 2 years Neftochem became profitable. $120m of old debt was paid. Production of petroleum products in accordance with European standards. Output growth by 20%. Environmental safety
• Attractive perspectives in terms of supplies of various types of products, including liquefied gas, in the Balkans and on the Black Sea. Raising of product quality to international standards. Joint integrated efficient development with Petrotel (Romania) and Odessa refinery (Ukraine)
LUKOIL Overseas Holding participates in major projects in highly prospective hydrocarbon basins
• Russia
– JV mature production
• Caspian & Kazakhstan
– exploration
– early production
• Middle East
– new ventures
• North Africa
– JV production
Focus Regions of LUKOIL Overseas Holding
MAP
Efficiency
• Diversify E&P portfolio
• Find and develop new, lower cost reserves
• Exploit LUKOIL’s competitive advantages
– regional expertise
– advantaged logistics
• Mitigate “single market risk”
Goal: Increase share of international efficient projects in LUKOIL’s production portfolio
Geographic Breakdown of Production, MM tons/year
Expanding Production Outside RussiaExpanding Production Outside Russia
73 79
2
15
10
0
20
40
60
80
100
120
1999 2010
Russia Caspian ROW
Strategic Interest in Getty Petroleum Marketing
■ Upon completion of Timan-Pechora and its associated refinery, LUKOIL plans to deliver gasoline to the United States East Coast
—The sale of gasoline directly through controlled sites could enhance profit margins by 18 to 20%
■ Getty Petroleum Marketing ("GPM") key strategic strengths:
—Over 1 billion gallons of annual gasoline sales
—1,300 retail sites in the northeastern United States
—Strong brand recognition
—Significant market share in core urban areas
■ The acquisition of GPM is expected to be the beginning of a significant expansion in the eastern U.S. retail market
GPM: Growth Strategy
■ Ancillary Business Expansion
— Formalize, modernize and revitalize “other uses”
— New revenue streams
— Mitigate earnings volatility
— Support volume growth
■ Discretionary Spending
— Internal growth
— Image upgrade
— Improve customer experience
— Attractive return characteristics
■ Acquisitions
— Ample opportunities
— Increase utilization of distribution capacity more quickly
■ Capitalize on Parent Company Resources
LUKOIL Going Global
• Introduction
• Update on Company Strategy
• Focus on International Growth
– Upstream: Former Soviet Union and Middle East
– Downstream: Eastern Europe and Atlantic Basin
• Growth Targets
• Update on Other Recent Developments
• US GAAP Financials
• Dividend and Proposed Preference Share Conversion
• Corporate Governance Initiatives
AGENDA