2 Dec 2016 13:50
Gazprom Neft Group
Interim Condensed Consolidated Financial Statements (unaudited)
As of and for the three and nine months ended 30 September 2016
Gazprom Neft Group
Interim Condensed Consolidated Statement of Financial Position (unaudited)
Currency - RUB millions
Notes | 30 September 2016 | 31 December 2015 | |||
Assets | |||||
Current assets | |||||
Cash and cash equivalents | 6 | 38,913 | 114,198 | ||
Short-term financial assets | 7 | 20,636 | 65,157 | ||
Trade and other receivables | 8 | 123,758 | 95,241 | ||
Inventories | 9 | 90,249 | 102,378 | ||
Current income tax prepayments | 12,546 | 13,903 | |||
Other current assets | 10 | 86,030 | 119,867 | ||
Total current assets | 372,132 | 510,744 | |||
Non-current assets | |||||
Property, plant and equipment | 11 | 1,682,597 | 1,587,653 | ||
Goodwill and other intangible assets | 71,620 | 75,090 | |||
Investments in associates and joint ventures | 12 | 192,448 | 169,611 | ||
Long-term trade and other receivables | 6,271 | 8,867 | |||
Long-term financial assets | 13 | 64,018 | 50,884 | ||
Deferred income tax assets | 10,348 | 22,099 | |||
Other non-current assets | 14 | 98,242 | 60,518 | ||
Total non-current assets | 2,125,544 | 1,974,722 | |||
Total assets | 2,497,676 | 2,485,466 | |||
Liabilities and shareholders' equity | |||||
Current liabilities | |||||
Short-term debt and current portion of long-term debt | 15 | 96,070 | 147,319 | ||
Trade and other payables | 16 | 88,627 | 104,830 | ||
Other current liabilities | 24,172 | 32,870 | |||
Current income tax payable | 1,673 | 1,096 | |||
Other taxes payable | 17 | 66,918 | 49,011 | ||
Provisions for liabilities and charges | 15,611 | 13,938 | |||
Total current liabilities | 293,071 | 349,064 | |||
Non-current liabilities | |||||
Long-term debt | 18 | 586,313 | 670,779 | ||
Other non-current financial liabilities | 19 | 106,303 | 115,375 | ||
Deferred income tax liabilities | 75,395 | 68,752 | |||
Provisions for liabilities and charges | 37,373 | 31,065 | |||
Other non-current liabilities | 1,942 | 1,942 | |||
Total non-current liabilities | 807,326 | 887,913 | |||
Equity | |||||
Share capital | 98 | 98 | |||
Treasury shares | (1,170) | (1,170) | |||
Additional paid-in capital | 44,212 | 44,326 | |||
Retained earnings | 1,223,511 | 1,078,626 | |||
Other reserves | 44,795 | 35,189 | |||
Equity attributable to Gazprom Neft shareholders | 1,311,446 | 1,157,069 | |||
Non-controlling interest | 85,833 | 91,420 | |||
Total equity | 1,397,279 | 1,248,489 | |||
Total liabilities and equity | 2,497,676 | 2,485,466 | |||
A. V. Dyukov | A. V. Yankevich | ||||
Chief Executive Officer | Chief Financial Officer | ||||
PJSC Gazprom Neft | PJSC Gazprom Neft |
The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.
Gazprom Neft Group
Interim Condensed Consolidated Statement of Profit and Loss and Other Comprehensive Income (unaudited)
Currency - RUB millions (except per share data)
Notes | 3 months ended 30 September 2016 | 3 months ended 30 September 2015 | 9 months ended 30 September 2016 | 9 months ended 30 September 2015 | |
Sales | 450,249 | 434,988 | 1,221,326 | 1,238,248 | |
Less export duties and sales related excise tax | (40,804) | (50,262) | (110,206) | (138,428) | |
Total revenue from sales | 27 | 409,445 | 384,726 | 1,111,120 | 1,099,820 |
Costs and other deductions | |||||
Purchases of oil, gas and petroleum products | (94,534) | (90,392) | (252,862) | (251,236) | |
Production and manufacturing expenses | (51,464) | (52,630) | (145,270) | (149,723) | |
Selling, general and administrative expenses | (26,976) | (29,652) | (77,397) | (74,497) | |
Transportation expenses | (31,493) | (33,925) | (98,228) | (99,694) | |
Depreciation, depletion and amortisation | (29,026) | (24,623) | (84,330) | (70,490) | |
Taxes other than income tax | 17 | (104,530) | (88,408) | (273,662) | (276,145) |
Exploration expenses | (9) | (229) | (308) | (531) | |
Total operating expenses | (338,032) | (319,859) | (932,057) | (922,316) | |
Other (loss) / gain, net | 20 | (2,626) | (5,899) | (19,704) | 7,243 |
Operating profit | 68,787 | 58,968 | 159,359 | 184,747 | |
Share of profit of associates and joint ventures | 12 | 8,437 | 6,984 | 24,468 | 24,249 |
Net foreign exchange gain / (loss) | 21 | 3,933 | (40,238) | 20,043 | (40,981) |
Finance income | 22 | 3,038 | 3,547 | 8,302 | 10,493 |
Finance expense | 23 | (7,845) | (7,663) | (26,283) | (21,401) |
Total other income / (expenses) | 7,563 | (37,370) | 26,530 | (27,640) | |
Profit before income tax | 76,350 | 21,598 | 185,889 | 157,107 | |
Current income tax expense | (5,554) | (11,717) | (13,690) | (26,763) | |
Deferred income tax (expense) / benefit | (10,269) | 10,209 | (19,925) | 2,950 | |
Total income tax expense | (15,823) | (1,508) | (33,615) | (23,813) | |
Profit for the period | 60,527 | 20,090 | 152,274 | 133,294 | |
Other comprehensive (loss) / income | |||||
Currency translation differences | (2,350) | 41,841 | (31,119) | 26,830 | |
Cash flow hedge, net of tax | 2,692 | (13,159) | 31,469 | (4,137) | |
Other comprehensive income / (loss) | 4 | 29 | (77) | (99) | |
Other comprehensive income for the period | 346 | 28,711 | 273 | 22,594 | |
Total comprehensive income for the period | 60,873 | 48,801 | 152,547 | 155,888 | |
Profit attributable to: | |||||
- Gazprom Neft shareholders | 57,085 | 18,527 | 147,480 | 130,881 | |
- Non-controlling interest | 3,442 | 1,563 | 4,794 | 2,413 | |
Profit for the period | 60,527 | 20,090 | 152,274 | 133,294 | |
Total comprehensive income / (loss) attributable to: | |||||
- Gazprom Neft shareholders | 58,252 | 35,863 | 157,086 | 147,033 | |
- Non-controlling interest | 2,621 | 12,938 | (4,539) | 8,855 | |
Total comprehensive income for the period | 60,873 | 48,801 | 152,547 | 155,888 | |
Earnings per share attributable to Gazprom Neft shareholders | |||||
Basic earnings (RUB per share) | 12.10 | 3.93 | 31.26 | 27.74 | |
Diluted earnings (RUB per share) | 12.10 | 3.93 | 31.26 | 27.74 | |
Weighted-average number of common shares outstanding (millions) | 4,718 | 4,718 | 4,718 | 4,718 | |
The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.
Gazprom Neft Group
Interim Condensed Consolidated Statement of Changes in Shareholders' Equity (unaudited)
Currency - RUB
Attributable to Gazprom Neft shareholders | ||||||||
Share capital | Treasury shares | Additional paid-in capital | Retained earnings | Other reserves | Total | Non-controlling interest | Totalequity | |
Balance as of 1 January 2016 | 98 | (1,170) | 44,326 | 1,078,626 | 35,189 | 1,157,069 | 91,420 | 1,248,489 |
Profit for the period | - | - | - | 147,480 | - | 147,480 | 4,794 | 152,274 |
Other comprehensive (loss) / income | ||||||||
Currency translation differences | - | - | - | - | (21,786) | (21,786) | (9,333) | (31,119) |
Cash flow hedge, net of tax | - | - | - | - | 31,469 | 31,469 | - | 31,469 |
Other comprehensive loss | - | - | - | - | (77) | (77) | - | (77) |
Total comprehensive income / (loss) for the period | - | - | - | 147,480 | 9,606 | 157,086 | (4,539) | 152,547 |
Transactions with owners, recorded in equity | ||||||||
Dividends to equity holders | - | - | - | (2,595) | - | (2,595) | (1,131) | (3,726) |
Acquisition through business combination | - | - | (114) | - | - | (114) | 83 | (31) |
Total transactions with owners | - | - | (114) | (2,595) | - | (2,709) | (1,048) | (3,757) |
Balance as of 30 September 2016 | 98 | (1,170) | 44,212 | 1,223,511 | 44,795 | 1,311,446 | 85,833 | 1,397,279 |
Attributable to Gazprom Neft shareholders | ||||||||
Share capital | Treasury shares | Additional paid-in capital | Retained earnings | Other reserves | Total | Non-controlling interest | Total equity | |
Balance as of 1 January 2015 | 98 | (1,170) | 50,074 | 1,005,642 | 11,104 | 1,065,748 | 64,037 | 1,129,785 |
Profit for the period | - | - | - | 130,881 | - | 130,881 | 2,413 | 133,294 |
Other comprehensive income / (loss) | ||||||||
Currency translation differences | - | - | - | - | 20,394 | 20,394 | 6,436 | 26,830 |
Cash flow hedge, net of tax | - | - | - | - | (4,137) | (4,137) | - | (4,137) |
Other comprehensive (loss) / income | - | - | - | - | (105) | (105) | 6 | (99) |
Total comprehensive income for the period | - | - | - | 130,881 | 16,152 | 147,033 | 8,855 | 155,888 |
Transactions with owners, recorded in equity | ||||||||
Dividends to equity holders | - | - | - | (36,809) | - | (36,809) | (1,682) | (38,491) |
Transaction under common control | - | - | (5,748) | - | - | (5,748) | 12,654 | 6,906 |
Total transactions with owners | - | - | (5,748) | (36,809) | - | (42,557) | 10,972 | (31,585) |
Balance as of 30 September 2015 | 98 | (1,170) | 44,326 | 1,099,714 | 27,256 | 1,170,224 | 83,864 | 1,254,088 |
The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.
Gazprom Neft Group
Interim Condensed Consolidated Statement of Cash Flows (unaudited)
Currency - RUB millions
Notes | 9 months ended 30 September 2016 | 9 months ended 30 September 2015 | |
Cash flows from operating activities | |||
Profit before income tax | 185,889 | 157,107 | |
Adjustments for: | |||
Share of profit of associates and joint ventures | 12 | (24,468) | (24,249) |
(Gain) /loss on foreign exchange differences | 21 | (20,043) | 40,981 |
Finance income | 22 | (8,302) | (10,493) |
Finance expense | 23 | 26,283 | 21,401 |
Depreciation, depletion and amortisation | 84,330 | 70,490 | |
Net impairement of receivables and other assets | 11,006 | 6,657 | |
Write-off payables | - | (16,087) | |
Impairment of property, plant and equipment | 11 | 5,028 | - |
Other non-cash items | 1,257 | (1,511) | |
Operating cash flow before changes in working capital | 260,980 | 244,296 | |
Changes in working capital: | |||
Accounts receivable | (45,616) | (13,599) | |
Inventories | 7,366 | (2,861) | |
Other assets | 19,789 | (4,060) | |
Accounts payable | 14,915 | 21,029 | |
Taxes payable | 18,850 | 10,883 | |
Other liabilities | 2,093 | (1,667) | |
Total effect of working capital changes | 17,397 | 9,725 | |
Income taxes paid | (17,336) | (16,285) | |
Interest paid | (27,701) | (20,524) | |
Dividends received | 2,274 | 2,415 | |
Net cash provided by operating activities | 235,614 | 219,627 | |
Cash flows from investing activities | |||
Acquisition of subsidiaries and joint operations, net of cash acquired | (1,040) | 303 | |
Increase in cash due to acquisition of a subsidiary under common control | - | 2,229 | |
Acquisition of associates and joint ventures | (505) | - | |
Bank deposits placement | (24,931) | (108,547) | |
Repayment of bank deposits | 73,238 | 111,804 | |
Acquisition of other investments | - | (661) | |
Proceeds from sales of other investments | 3,181 | - | |
Short-term loans issued | (3,085) | (25,663) | |
Repayment of short-term loans issued | 6,996 | 24,373 | |
Long-term loans issued | (20,301) | (20,037) | |
Repayment of long-term loans issued | 7,209 | 169 | |
Purchases of property, plant and equipment and intangible assets | (266,004) | (234,238) | |
Proceeds from sale of property, plant and equipment | 898 | 1,714 | |
Interest received | 3,771 | 6,738 | |
Net cash used in investing activities | (220,573) | (241,816) | |
Cash flows from financing activities | |||
Proceeds from short-term borrowings | 36,506 | 31,228 | |
Repayment of short-term borrowings | (31,467) | (14,187) | |
Proceeds from long-term borrowings | 57,142 | 66,929 | |
Repayment of long-term borrowings | (141,734) | (51,995) | |
Dividends paid to Gazprom Neft shareholders | (2,598) | (8,735) | |
Dividends paid to non-controlling interest | (1,106) | (2,167) | |
Net cash (used in) / provided by financing activities | (83,257) | 21,073 | |
Decrease in cash and cash equivalents | (68,216) | (1,116) | |
Effect of foreign exchange on cash and cash equivalents | (7,069) | 4,151 | |
Cash and cash equivalents as of the beginning of the period | 114,198 | 53,167 | |
Cash and cash equivalents as of the end of the period | 38,913 | 56,202 |
The accompanying notes are an integral part of these Interim Condensed Consolidated Financial Statements.
Gazprom Neft Group
Notes to the Interim Condensed Consolidated Financial Statements (unaudited)
As of and for the three and nine months ended 30 September 2016
Currency - RUB millions (unless otherwise stated)
1. General
Description of business
PJSC Gazprom Neft (the "Company") and its subsidiaries (together referred to as the "Group") is a vertically integrated oil company operating in the Russian Federation, CIS and internationally. The Group's principal activities include exploration, production and development of crude oil and gas, production of refined petroleum products and distribution and marketing operations through its retail outlets.
The Company was incorporated in 1995 and is domiciled in the Russian Federation. The Company is a public joint stock company and was set up in accordance with Russian regulations. PJSC Gazprom ("Gazprom", a state controlled entity), the Group's ultimate parent company, owns 95.7% of the shares in the Company.
2. Summary of significant accounting policies
Basis of presentation
The Group maintains its books and records in accordance with accounting and taxation principles and practices mandated by legislation in the countries in which it operates (primarily the Russian Federation). The accompanying Interim Condensed Consolidated Financial Statements were primarily derived from the Group's statutory books and records with adjustments and reclassifications made to present them in accordance with International Financial Reporting Standards ("IFRS").
The Interim Condensed Consolidated Financial Statements have been prepared in accordance with International Accounting Standard IAS 34 Interim Financial Reporting.
The Group does not disclose information which would substantially duplicate the disclosures contained in its audited Consolidated Financial Statements for 2015, such as significant accounting policies, estimates and judgements, financial risk disclosures or disclosures of financial line items, which have not changed significantly in amount or composition. Management of the Group believes that the disclosures in these Interim Condensed Consolidated Financial Statements are adequate to make the information presented not misleading if these Interim Condensed Consolidated Financial Statements are read in conjunction with the Group's Consolidated Financial Statements for 2015.
Subsequent events occurring after 30 September 2016 were evaluated through 23 November 2016, the date these Interim Condensed Consolidated Financial Statements were authorised for issue.
The results for the three and nine months ended 30 September 2016 are not necessarily indicative of the results expected for the full year.
The Group as a whole is not subject to significant seasonal fluctuations.
Changes in significant accounting policies
Significant accounting policies, judgements and estimates applied while preparing these Interim Condensed Consolidated Financial Statements are consistent with those applied during the preparation of the Consolidated Financial Statements for 2015, except for those described in the Critical accounting estimates, assumptions and judgments and Application of new IFRS paragraphs.
Foreign currency translation
The following exchange rates for Roubles to US dollars, EURO and Serbian Dinars applied while preparing these Interim Condensed Consolidated Financial Statements:
Reporting date spot rate | ||
30 September 2016 | 31 December 2015 | |
USD 1 | 63.16 | 72.88 |
EUR 1 | 70.88 | 79.70 |
RSD 1 | 0.57 | 0.66 |
3. Critical accounting estimates, assumptions and judgments
Preparing these Interim Condensed Consolidated Financial Statements in accordance with IFRS requires Management to make judgements on the basis of estimates and assumptions. These judgements affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the reporting date, and the reported amounts of revenues and expenses during the reporting period.
Leases
Leases under the terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Risks include the possibilities of losses from idle capacities or technological obsolense and of variations in return because of changing economic conditions. Rewards may be represented by the expectation of profitable operation over the the assets's economic life and of gain from appreciation in value or realization of a residual value.
Other leases are classified as operating leases. In most cases leasing of vessels under time-charter agreements are accounted for as operating leases under IAS 17 Leases.
4. Application of new IFRS
The following standards or amended standards became effective for the Group from 1 January 2016, but did not have any material impact on the Group:
· IFRS 14 - Regulatory Deferral Accounts (issued in January 2014 and effective for annual periods beginning on or after 1 January 2016).
· Amendments to IFRS 11 - Joint Arrangements (issued in May 2014 and effective for annual periods beginning on or after 1 January 2016).
· Amendments to IAS 16 - Property, Plant and Equipment and IAS 38 - Intangible Assets (issued in May 2014 and effective for annual periods beginning on or after 1 January 2016).
· Disclosure Initiative Amendments to IAS 1 - Presentation of Financilal Statements (issued in December 2014 and effective for annual periods on or after 1 January 2016).
· Amendments to IFRS 7 - Financial instruments: Disclosure (issued in September 2014 and effective for annual periods on or after 1 January 2016).
· Amendments to IAS 19 - Employee Benefits (issued in September 2014 and effective for annual periods on or after 1 January 2016).
· Amendments to IAS 34 - Interim Financial Reporting Presentation of Financial Statements (issued in September 2014 effective for annual periods beginning on or after 1 January 2016).
5. New accounting standards
Certain new standards and interpretations have been issued that are mandatory for the annual periods beginning on or after 1 January 2017 or later, and that the Group has not early adopted. The list of such Standards and interpretations was disclosed in the Consolidated Financial Statements as of and for the year ended 31 December 2015.
The following new standards were issued during the nine months period ended 30 September 2016.
The amendments to IAS 12 - Income Taxes: Recognition of Deferred Tax Assets for Unrealised Losses (issued in January 2016 effective for annual periods beginning on or after 1 January 2017) on the recognition of deferred tax assets for unrealised losses clarify how to account for deferred tax assets related to debt instruments measured at fair value.
The amendments to IAS 7 - Statement of Cash Flow (issued in January 2016 effective for annual periods beginning on or after 1 January 2017) require entities to provide disclosures that enable investors to evaluate changes in liabilities arising from financing activities, including changes arising from cash flows and non-cash changes.
Amendments to IFRS 15 - Revenue from Contracts with Customers (issued in April 2016 and effective for annual periods beginning on or after 1 January 2018). The amendments do not change the underlying principles of the Standard but clarify how those principles should be applied. The amendments clarify how to identify a performance obligation in a contract; how to determine whether a company is a principal or an agent; and how to determine whether the revenue from granting a licence should be recognised at a point in time or over time. In addition to the clarifications, the amendments include two additional reliefs to reduce cost and complexity for a company when it first applies the new Standard.
The amendments to IFRS 2 - Share-based Payment (issued in June 2016 effective for annual periods beginning on or after 1 January 2018) clarifies guidance on the following:
· the effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments;
· modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled; and
· share-based payment transactions with a net settlement feature for withholding tax obligations.
The new standards and interpretations are not expected to have significant impact on the Group's Consolidated Financial Statements.
6. Cash and cash equivalents
Cash and cash equivalents as of 30 September 2016 and 31 December 2015 comprise the following:
30 September 2016 | 31 December 2015 | |
Cash on hand | 834 | 986 |
Cash in bank | 22,283 | 39,937 |
Deposits with original maturity of less than three months | 13,480 | 69,891 |
Other cash equivalents | 2,316 | 3,384 |
Total cash and cash equivalents | 38,913 | 114,198 |
7. Short-term financial assets
Short-term financial assets as of 30 September 2016 and 31 December 2015 comprise the following:
30 September 2016 | 31 December 2015 | |
Short-term loans issued | 19,350 | 15,802 |
Deposits with original maturity more than 3 months less than 1 year | 1,177 | 49,206 |
Forward contracts - cash flow hedge | 109 | - |
Financial assets held to maturity | - | 149 |
Total short-term financial assets | 20,636 | 65,157 |
8. Trade and other receivables
Trade and other receivables as of 30 September 2016 and 31 December 2015 comprise the following:
30 September 2016 | 31 December 2015 | |
Trade receivables | 138,397 | 112,572 |
Other financial receivables | 6,730 | 7,254 |
Less impairment provision | (21,369) | (24,585) |
Total trade and other receivables | 123,758 | 95,241 |
Trade receivables represent amounts due from customers in the ordinary course of business and are short-term by nature.
9. Inventories
Inventories as of 30 September 2016 and 31 December 2015 consist of the following:
| 30 September 2016 | 31 December 2015 |
Petroleum products and petrochemicals | 40,846 | 41,692 |
Materials and supplies | 25,800 | 38,782 |
Crude oil and gas | 16,672 | 16,947 |
Other | 8,214 | 8,497 |
Less provision | (1,283) | (3,540) |
Total inventory | 90,249 | 102,378 |
As part of the management of crude inventory, the Group may enter transactions to buy and sell crude oil from the same counterparty. Such transactions are referred to as buy / sell transactions and are undertaken in order to reduce transportation costs or to obtain alternate quality grades of crude oil. The total value of buy / sell transactions undertaken for the nine month ended 30 September is as follows:
2016 | 2015 | |
Buy / sell crude oil transactions for the 9 months ended 30 September | 66,384 | 66,671 |
10. Other current assets
Other current assets as of 30 September 2016 and 31 December 2015 consist of the following:
30 September 2016 | 31 December 2015 | |
Value added tax receivable | 44,307 | 47,616 |
Advances paid | 29,266 | 40,080 |
Prepaid custom duties | 4,888 | 6,728 |
Prepaid expenses | 1,953 | 999 |
Other assets | 25,217 | 33,437 |
Less impairment provision | (19,601) | (8,993) |
Total other current assets | 86,030 | 119,867 |
The impairment provision mainly relates to other assets attributable to the Group's Serbian subsidiary and advances paid to a brokerage company in relation to which the Group initiated court proceedings.
11. Property, plant and equipment
Movements in property, plant and equipment for the nine months ended 30 September 2016 and 2015 are as follows:
Cost | O&G properties | Refining assets | Marketing and distribution | Other assets | Assets under construction | Total |
As of 1 January 2016 | 1,355,282 | 308,037 | 152,795 | 17,933 | 369,274 | 2,203,321 |
Additions | 1,961 | 1,233 | - | - | 217,591 | 220,785 |
Acquisitions through business combinations | - | 38 | - | 452 | 16 | 506 |
Changes in decommissioning obligations | 3,830 | - | - | - | - | 3,830 |
Capitalised borrowing costs | - | - | - | - | 9,828 | 9,828 |
Transfers | 119,770 | 16,242 | 6,388 | 1,138 | (143,538) | - |
Internal movement | 25,570 | (6,334) | 5,528 | 1,900 | (26,664) | - |
Disposals | (3,547) | (731) | (1,048) | (257) | (1,175) | (6,758) |
Translation differences | (45,638) | (8,976) | (8,466) | (239) | (14,847) | (78,166) |
As of 30 September 2016 | 1,457,228 | 309,509 | 155,197 | 20,927 | 410,485 | 2,353,346 |
Depreciation and impairment | ||||||
As of 1 January 2016 | (489,288) | (81,461) | (41,440) | (3,479) | - | (615,668) |
Depreciation charge | (59,414) | (9,817) | (8,482) | (1,252) | - | (78,965) |
Impairment | (5,028) | - | - | - | - | (5,028) |
Internal movement | 796 | 1,545 | (1,146) | (1,195) | - | - |
Disposals | 2,661 | 132 | 660 | 248 | - | 3,701 |
Translation differences | 20,763 | 2,117 | 2,221 | 110 | - | 25,211 |
As of 30 September 2016 | (529,510) | (87,484) | (48,187) | (5,568) | - | (670,749) |
Net book value | ||||||
As of 1 January 2016 | 865,994 | 226,576 | 111,355 | 14,454 | 369,274 | 1,587,653 |
As of 30 September 2016 | 927,718 | 222,025 | 107,010 | 15,359 | 410,485 | 1,682,597 |
Cost | O&G properties | Refining assets | Marketing and distribution | Other assets | Assets under construction | Total |
As of 1 January 2015 | 1,120,873 | 260,219 | 134,430 | 18,659 | 245,847 | 1,780,028 |
Additions | 10,351 | 980 | - | - | 198,936 | 210,267 |
Acquisitions through business combinations | - | - | 24 | 283 | 12 | 319 |
Changes in decommissioning obligations | 771 | - | - | - | - | 771 |
Capitalised borrowing costs | - | - | - | - | 10,743 | 10,743 |
Transfers | 112,941 | 19,617 | 11,789 | 1,322 | (145,669) | - |
Internal movement | (7,334) | 2,410 | - | - | 4,924 | - |
Disposals | (7,570) | (667) | (856) | (100) | (1,369) | (10,562) |
Translation differences | 37,860 | 6,126 | 2,695 | - | 16,260 | 62,941 |
As of 30 September 2015 | 1,267,892 | 288,685 | 148,082 | 20,164 | 329,684 | 2,054,507 |
Depreciation and impairment | ||||||
As of 1 January 2015 | (383,053) | (68,395) | (32,593) | (2,187) | - | (486,228) |
Depreciation charge | (50,597) | (8,050) | (7,946) | (703) | - | (67,296) |
Acquisitions through business combinations | - | - | - | (143) | - | (143) |
Disposals | 5,369 | 388 | 834 | 32 | - | 6,623 |
Translation differences | (16,347) | (1,371) | (525) | (10) | - | (18,253) |
As of 30 September 2015 | (444,628) | (77,428) | (40,230) | (3,011) | - | (565,297) |
Net book value | ||||||
As of 1 January 2015 | 737,820 | 191,824 | 101,837 | 16,472 | 245,847 | 1,293,800 |
As of 30 September 2015 | 823,264 | 211,257 | 107,852 | 17,153 | 329,684 | 1,489,210 |
In 2016 the exploration and evaluation assets relating to Garmian block in Iraq region were reclassified to proved oil and gas assets due to start of commercial development. The reclassification is presented as internal movement.
In the second quarter 2016 the Group performed impairment testing and recognised impairment loss in relation to upstream oil and gas assets located in Iraq region in the amount of RUB 5.0 billion.
The Group recognised impairment loss for the amount by which the book value of these assets exceeded its recoverable amount of RUB 79.0 billion. The impairment loss relating to upstream oil and gas asset was due to revision of expected economic performance of the assets (decrease in international oil prices, changes in exploration and development programs and investment plans).
The recoverable amount was determined as present value of estimated future cash flows using available forecasts of oil prices from globally recognised research institutions and production quantities based on reserve reports and long-term strategic plans. The pre-tax discount rate reflects current market assessments of the time value of money and the risks specific to the asset and varies in real terms from 11.9% to 14.1% per annum.
No impairment indicators were identified as of 30 September 2016.
12. Investments in associates and joint ventures
The carrying values of the investments in associates and joint ventures as of 30 September 2016 and 31 December 2015 are summarised below:
Ownership percentage | 30 September 2016 | 31 December 2015 | ||
Slavneft | Joint venture | 49.9 | 94,345 | 83,301 |
SeverEnergy | Joint venture | 46.7 | 82,518 | 72,128 |
Northgas | Joint venture | 50.0 | 9,936 | 8,196 |
Others | 5,649 | 5,986 | ||
Total investments | 192,448 | 169,611 |
The principal place of business of the most significant joint ventures and associates disclosed above is the Russian Federation. The reconciliation of carrying amount of investments in associates and joint ventures as of the beginning of the reporting period and as of the end of the reporting period is shown below:
2016 | 2015 | |||
Carrying amount as of 1 January | 169,611 | 150,727 | ||
Share of profit of associates and joint ventures | 24,468 | 24,249 | ||
Dividends declared | (2,292) | (2,862) | ||
Share of other comprehensive income of associates and joint ventures | (77) | - | ||
Other changes in cost of associates and joint ventures | 738 | (3,107) | ||
Carrying amount as of 30 September | 192,448 | 169,007 |
Slavneft
The Group's investment in OJSC NGK Slavneft and various minority stakes in Slavneft subsidiaries (Slavneft) are held through a series of legal entities. Slavneft is engaged in exploration, production and development of crude oil and gas and production of refined petroleum products. The control over Slavneft is divided equally between the Group and PJSC NK Rosneft.
SeverEnergy
The Group's investment in SeverEnergy LLC (SeverEnergy) is held through Yamal Razvitie LLC (Yamal Razvitie, an entity jointly controlled by the Group and OJSC NOVATEK). SeverEnergy, through its subsidiary OJSC Arctic Gas Company (Arcticgas), is developing the Samburgskoye, Urengoiskoe and Yaro-Yakhinskoye oil and gas condensate fields and some other small oil and gas condensate fields located in the Yamalo-Nenetskiy autonomous region of the Russian Federation.
The carrying amount of the Group's investment exceeds the Group's share in the underlying net assets of SeverEnergy by RUB 19.6 billion as of 30 September 2016 due to complex holding structure, current financing scheme and goodwill arising on acquisition (RUB 18.3 billion as of 31 December 2015).
Northgas
The Group's investment in CJSC Northgas (Northgas) is held through Gazprom Resource Northgas LLC which is controlled by the Group and owns a 50% share in Northgas. Northgas is engaged in development of natural gas and oil field.
The summarised financial information for the significant associates and joint ventures as of 30 September 2016 and 31 December 2015 and for the nine months ended 30 September 2016 and 2015 is presented in the tables below.
Slavneft | SeverEnergy | Northgas | ||||
30 September 2016 | 31 December 2015 | 30 September 2016 | 31 December 2015 | 30 September 2016 | 31 December 2015 | |
Cash and cash equivalents | 11,931 | 8,078 | 18,291 | 13,875 | 3,196 | 2,160 |
Other current assets | 19,326 | 15,830 | 15,122 | 13,941 | 3,601 | 3,131 |
Non-current assets | 303,285 | 288,077 | 359,426 | 363,513 | 49,719 | 49,695 |
Current financial liabilities | (33,009) | (49,748) | (30,979) | (31,762) | (14,027) | (6,110) |
Other current liabilities | (24,289) | (18,294) | (9,779) | (9,309) | (2,318) | (2,001) |
Non-current financial liabilities | (62,575) | (54,562) | (164,799) | (185,376) | (14,797) | (24,841) |
Other non-current liabilities | (32,155) | (30,034) | (52,497) | (49,297) | (4,128) | (3,645) |
Net assets | 182,514 | 159,347 | 134,785 | 115,585 | 21,246 | 18,389 |
|
| |||||
Slavneft | SeverEnergy | Northgas | ||||
9 months ended 30 September 2016 | 9 months ended 30 September 2015 | 9 months ended 30 September 2016 | 9 months ended 30 September 2015 | 9 months ended 30 September 2016 | 9 months ended 30 September 2015 | |
Revenue | 158,234 | 173,636 | 96,366 | 90,012 | 19,147 | 21,505 |
Depreciation, depletion and amortisation | (24,123) | (23,833) | (17,468) | (13,314) | (1,914) | (1,654) |
Finance income | 1,281 | 1,584 | 811 | 157 | 997 | 853 |
Finance expense | (5,065) | (3,900) | (20,217) | (18,914) | (2,870) | (4,242) |
Total income tax expense | (6,022) | (4,936) | (1,945) | (4,062) | (816) | (1,340) |
Profit for the period | 23,156 | 17,320 | 19,200 | 23,031 | 2,857 | 5,362 |
Total comprehensive income | 23,033 | 17,880 | 19,200 | 23,031 | 2,857 | 5,362 |
Others
The aggregate carrying amount of all individually immaterial joint ventures and associates as well as the Group's share of those joint ventures' and associates' profit or loss and other comprehensive income are not significant.
13. Long-term financial assets
Long-term financial assets as of 30 September 2016 and 31 December 2015 comprise the following:
30 September 2016 | 31 December 2015 | |
Long-term loans issued | 57,824 | 41,047 |
Available for sale financial assets | 7,669 | 11,534 |
Less impairment provision | (1,475) | (1,697) |
Total long-term financial assets | 64,018 | 50,884 |
14. Other non-current assets
Other non-current assets are primarily comprised of advances provided on capital expenditures (RUB 93.71 billion and RUB 55.2 billion as of 30 September 2016 and 31 December 2015, respectively).
15. Short-term debt and current portion of long-term debt
As of 30 September 2016 and 31 December 2015 the Group has short-term debt and current portion of long-term debt outstanding as follows:
30 September 2016 | 31 December 2015 | |
Bank loans | 26,293 | 24,193 |
Other borrowings | 1,502 | 1,731 |
Current portion of long-term debt | 68,275 | 121,395 |
Total short-term debt and current portion of long-term debt | 96,070 | 147,319 |
Short-term bank loans and other borrowing include interest payable on short-term debt. Current portion of long-term debt includes interest payable on long-term borrowings.
16. Trade and other payables
Accounts payable as of 30 September 2016 and 31 December 2015 comprise the following:
30 September 2016 | 31 December 2015 | |
Trade accounts payable | 76,895 | 76,372 |
Dividends payable | 2,342 | 2,659 |
Forward contracts - cash flow hedge | 1,029 | 23,545 |
Other accounts payable | 8,361 | 2,254 |
Total trade and other payables | 88,627 | 104,830 |
17. Other taxes payable
Other taxes payable as of 30 September 2016 and 31 December 2015 comprise the following:
30 September 2016 | 31 December 2015 | |
VAT | 24,680 | 17,578 |
Mineral extraction tax | 21,549 | 14,898 |
Excise tax | 11,670 | 6,738 |
Social security contributions | 3,993 | 4,275 |
Other taxes | 5,026 | 5,522 |
Total other taxes payable | 66,918 | 49,011 |
Tax expense other than income tax expense for the three and nine months ended 30 September 2016 and 2015 comprise the following:
3 months ended 30 September 2016 | 3 months ended 30 September 2015 | 9 months ended 30 September 2016 | 9 months ended 30 September 2015 | |
Mineral extraction tax | 63,745 | 63,052 | 166,473 | 204,236 |
Excise tax | 33,054 | 19,691 | 83,464 | 53,432 |
Social security contributions | 4,400 | 3,270 | 13,490 | 11,252 |
Other taxes | 3,331 | 2,395 | 10,235 | 7,225 |
Total taxes other than income tax | 104,530 | 88,408 | 273,662 | 276,145 |
18. Long-term debt
As of 30 September 2016 and 31 December 2015 the Group has long-term outstanding debt as follows:
30 September 2016 | 31 December 2015 | |
Bank loans | 320,958 | 451,887 |
Loan participation notes | 244,137 | 280,193 |
Bonds | 81,281 | 51,748 |
Other borrowings | 8,212 | 8,346 |
Less current portion of long-term debt | (68,275) | (121,395) |
Total long-term debt | 586,313 | 670,779 |
Bank loans
In February and August 2016 the Group performed principal repayment in the total amount of USD 348 million (RUB 24.6 billion) under the Club term loan facility with the syndicate of international banks (facility agent - SMBC) according to the payment schedule. The loan is fully repaid.
In February 2016 the Group signed RUB 5.15 billion term loan facilities with PJCS Bank VTB with the maturity date in June 2021. As of 30 September 2016 the Group borrowed RUB 5.15 billion under the agreement.
In March and September 2016 the Group performed partial principal repayment in the total amount of USD 200 million (RUB 13.2 billion) under the Club term loan facility with the group of international banks (facility agent - Commerzbank) according to the payment schedule.
In March and September 2016 the Group performed partial principal repayment in the total amount of USD 614 million (RUB 41.5 billion) of Club term loan facility with the group of international banks (facility agent - Mizuho) according to the payment schedule.
In June 2016 the Group performed pre-scheduled partial repayment RUB 10 billion under the term loan facility with PJSC Rosselkhozbank.
The loan agreements contain financial covenant that limits the Group's ratio of "Consolidated financial indebtedness to Consolidated EBITDA". The Group is in compliance with the covenant as of 30 September 2016.
Bonds
In February 2016 the Group redeemed Rouble bonds (series 8, 9 and 11) with the total par value of RUB 30 billion, including RUB 9.6 billion of series 11 repurchased by the Group in February 2015.
In March 2016 the Group placed thirty-year Rouble exchange traded bonds (series BO-02 and BO-07) with the total par value of RUB 25 billion. The bonds bear interest of 10.65% per annum. The issue has an embedded five-year put-option, providing the bondholders with the right to make the Group to repurchase them, and a two-year call option, allowing the early redemption of the bonds at the Group's decision.
In June 2016 the Group placed thirty-year Rouble exchange traded bonds (series BO-03) with the total par value of RUB 10 billion. The bonds bear interest of 9.8% per annum. The issue has an embedded three-year put-option, providing the bondholders with the right to make the Group to repurchase them.
In August 2016 the Group placed thirty-year Rouble exchange traded bonds (series BO-01 and BO-04) with the total par value of RUB 15 billion. The bonds bear interest of 9.4% per annum. The issue has an embedded five-year put-option, providing the bondholders with the right to make the Group to repurchase them.
19. Other non-current financial liabilities
Other non-current financial liabilities as of 30 September 2016 and 31 December 2015 comprise the following:
30 September 2016 | 31 December 2015 | |
Deferred consideration | 65,530 | 60,603 |
Forward contracts - cash flow hedge | 38,527 | 52,714 |
Other liabilities | 2,246 | 2,058 |
Total other non-current financial liabilities | 106,303 | 115,375 |
20. Other loss / gain, net
Other loss / gain, net for the three and nine months ended 30 September 2016 and 2015 comprise the following:
Notes | 3 months ended 30 September 2016 | 3 months ended 30 September 2015 | 9 months ended 30 September 2016 | 9 months ended 30 September 2015 | |
Impairment of assets | 11 | - | (44) | (5,028) | (147) |
Provisions | (336) | 110 | (11,396) | 1,440 | |
Penalties | 125 | 117 | 318 | (7) | |
Write-off payables | - | 133 | - | 16,240 | |
Other losses, net | (2,415) | (6,215) | (3,598) | (10,283) | |
Total other (loss) / gain, net | (2,626) | (5,899) | (19,704) | 7,243 |
21. Net foreign exchange gain / loss
Net foreign exchange gain / loss for the three and nine months ended 30 September 2016 and 2015 comprise the following:
3 months ended 30 September 2016 | 3 months ended 30 September 2015 | 9 months ended 30 September 2016 | 9 months ended 30 September 2015 | |
Net foreign exchange gain / (loss) on financing activities, including: | 5,362 | (72,373) | 49,628 | (68,334) |
foreign exchange gain | 7,405 | 9,683 | 80,428 | 46,795 |
foreign exchange loss | (2,043) | (82,056) | (30,800) | (115,129) |
Net foreign exchange (loss) / gain on operating activities | (1,429) | 32,135 | (29,585) | 27,353 |
Net foreign exchange gain / (loss) | 3,933 | (40,238) | 20,043 | (40,981) |
22. Finance income
Finance income for the three and nine months ended 30 September 2016 and 2015 comprise the following:
3 months ended 30 September 2016 | 3 months ended 30 September 2015 | 9 months ended 30 September 2016 | 9 months ended 30 September 2015 | |
Interest income on loans issued | 2,043 | 1,672 | 5,454 | 4,619 |
Interest on bank deposits | 521 | 1,327 | 1,463 | 4,017 |
Other financial income | 474 | 548 | 1,385 | 1,857 |
Total finance income | 3,038 | 3,547 | 8,302 | 10,493 |
23. Finance expense
Finance expense for the three and nine months ended 30 September 2016 and 2015 comprise the following:
3 months ended 30 September 2016 | 3 months ended 30 September 2015 | 9 months ended 30 September 2016 | 9 months ended 30 September 2015 | |
Interest expense | 11,225 | 9,300 | 34,325 | 25,984 |
Decommissioning provision: unwinding of discount | 594 | 560 | 1,786 | 1,696 |
Less: capitalised interest | (3,974) | (2,197) | (9,828) | (6,279) |
Finance expense | 7,845 | 7,663 | 26,283 | 21,401 |
24. Fair value measurement
The following assets and liabilities are measured at fair value in the Interim Condensed Consolidated Financial Statements: derivative financial instruments (forward exchange contracts and interest rate swaps used as hedging instrument), Stock Appreciation Rights plan (SARs) and financial investments classified as available for sale except for unquoted equity instruments whose fair value cannot be measured reliably that are carried at cost less any impairment losses. Derivative financial instruments and SARs refer to Level 2 of the fair value measurement hierarchy, i.e. their fair value is determined on the basis of inputs that are observable for the asset or liability either directly or indirectly. The fair value of the foreign exchange contracts is determined by using forward exchange rates at the reporting date with the resulting value discounted back to present value. The fair value of the liability under the SAR plan is estimated using the Black-Scholes-Merton option-pricing model by reference primarily to the Group's share price, historic volatility in the share price, dividend yield and interest rates for periods comparable to the remaining life of the award. There were no transfers between the levels of the fair value hierarchy during the interim period. There are no significant assets or liabilities measured at fair value categorised within Level 1 or Level 3 of the fair value hierarchy.
As of 30 September 2016 the fair value of bonds and loan participation notes is RUB 331,501 million (RUB 307,493 million as of 31 December 2015). Carrying value of other financial assets and liabilities approximate their fair value.
25. Commitments and contingencies
Taxes
Russian tax and customs legislation is subject to frequent changes and varying interpretations. Management's treatment of such legislation as applied to the transactions and activity of the Group, including calculation of taxes payable to federal, regional and municipal budgets, may be challenged by the relevant authorities. The Russian tax authorities may take a more assertive position in their treatment of legislation and assessments, and there is a risk that transactions and activities that have not been challenged in the past may be challenged later. As a result, additional taxes, penalties and interest may be accrued. Generally, taxpayers are subject to tax audits for a period of three calendar years immediately preceding the year in which the decision to carry out a tax audit has been taken. Under certain circumstances tax audits may cover longer periods. The years 2013, 2014 and 2015 are currently open for tax audit. Management believes it has adequately provided for any probable additional tax accruals that might arise from these tax audits.
Russian tax legislation on tax control over prices applied for tax purposes in related party transactions ("transfer pricing rules") was amended starting from 1 January 2012 to introduce significant reporting and documentation requirements regarding market environment at the date of transaction. Compared to the old rules the new transfer pricing rules appear to be more technically elaborate and better aligned with the Transfer Pricing Guidelines developed by the Organisation for Economic Cooperation and Development (OECD). The transfer pricing rules allow the tax authorities to make transfer pricing adjustments to the respective tax bases and impose additional tax liabilities in respect of controllable transactions (transactions with related parties and some transactions with unrelated parties), in cases where the prices of such transactions do not correspond to the ranges of prices deemed to be fair market prices for tax purposes defined in compliance with the said rules.
The compliance of the prices of the Group's controllable transactions with related parties with the transfer pricing rules is subject to regular internal control. Management believes that the transfer pricing documentation that the Group has prepared to confirm its compliance with the transfer pricing rules provides sufficient evidence to support the Group's tax positions and related tax returns. In addition in order to mitigate potential risks, the Group regularly negotiates approaches to defining prices used for tax purposes for major controllable transactions with tax authorities in advance. Twelve pricing agreements between the Group and tax authorities regarding major intercompany transactions have been concluded in 2012-2015.
However, given that the practice of enforcement of the new transfer pricing rules has not yet developed and some clauses of the applicable law are ambiguous and contain contradictions, the impact of the transfer pricing rules on the Group's tax liabilities cannot be reliably estimated.
Economic environment in the Russian Federation
The Russian Federation displays certain characteristics of an emerging market. Tax, monopoly, currency and customs legislation of the Russian Federation is subject to varying interpretations and contributes to the challenges faced by companies operating in the Russian Federation. The political and economic instability, uncertainty and volatility of the financial markets and other risks may have negative effects on the Russian financial and corporate sectors. The future economic development of the Russian Federation is dependent upon external factors and internal measures undertaken by the government to sustain growth and to change the tax, legal and regulatory environment. Management believes it is taking all necessary measures to support the sustainability and development of the Group's business in the current business and economic environment.
In 2014 the U.S., the EU and certain other countries imposed sanctions on the Russian energy sector that partially apply to the Group. The information on the main restrictions related to sanctions was disclosed in the Consolidated Financial Statements for 2015. There were no significant changes in sanctions during the nine months ended 30 September 2016.
Environmental matters
The enforcement of environmental regulation in the Russian Federation is evolving and the enforcement posture of government authorities is continually being reconsidered. The Group periodically evaluates its potential obligations under environmental regulation. Management is of the opinion that the Group has met the government's requirements concerning environmental matters, and therefore the Group does not have any material environmental liabilities.
Capital commitments
As of 30 September 2016 the Group has entered into contracts to purchase property, plant and equipment for RUB 345,185 million (RUB 342,544 million as of 31 December 2015).
26. Related party transactions
For the purpose of these Interim Condensed Consolidated Financial Statements parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operational decisions as defined by IAS 24 Related Party Disclosures. Related parties may enter into transactions which unrelated parties might not, and transactions between related parties may not be effected on the same terms, conditions and amounts as transactions between unrelated parties.
The Group has applied the exemption as allowed by IAS 24 not to disclose all government related transactions, as the parent of the Company is effectively being controlled by the Russian Government. In the course of its ordinary business the Group enters into transactions with natural monopolies, transportation companies and other companies controlled by the Russian Government. Such purchases and sales are individually insignificant and are generally entered into on market or regulated prices. Transactions with the state also include taxes which are detailed in Notes 10 and 17. The tables below summarise transactions in the ordinary course of business with either the parent company or associates and joint ventures.
The Group enters into transactions with related parties based on market or regulated prices. Short-term and long-term loans provided as well as debt are based on market conditions available for not related entities. The tables below summarise transactions in the ordinary course of business with either the parent company or associates and joint ventures.
As of 30 September 2016 and 31 December 2015 the outstanding balances with related parties were as follows:
30 September 2016 | Parent company | Parent's subsidiaries and associates | Associates and joint ventures |
Cash and cash equivalents | - | 6,115 | - |
Short-term financial assets | - | 987 | 18,549 |
Trade and other receivables | 6,228 | 3,538 | 12,534 |
Other assets | 594 | 2,502 | 513 |
Long-term financial assets | - | - | 54,264 |
Total assets | 6,822 | 13,142 | 85,860 |
Short-term debt and other current financial liability | - | 7,581 | 1,470 |
Trade and other payables | 1,777 | 2,530 | 3,079 |
Other current liabilities | 2,692 | 586 | 100 |
Long-term debt and other non-current financial liability | 67,748 | 63,158 | - |
Total liabilities | 72,217 | 73,855 | 4,649 |
31 December 2015 | Parent company | Parent's subsidiaries and associates | Associates and joint ventures |
Cash and cash equivalents | - | 15,402 | - |
Short-term financial assets | - | 3,135 | 14,901 |
Trade and other receivables | 1,232 | 2,895 | 17,941 |
Other assets | - | 4,527 | 1,253 |
Long-term financial assets | 10 | 503 | 30,791 |
Total assets | 1,242 | 26,462 | 64,886 |
Short-term debt and other current financial liability | - | - | 1,672 |
Trade and other payables | 3,203 | 2,737 | 1,567 |
Other current liabilities | 2,107 | 1,107 | 241 |
Long-term debt and other non-current financial liability |
62,650 |
72,883 |
- |
Total liabilities | 67,960 | 76,727 | 3,480 |
For the nine months ended 30 September 2016 and 2015 the following transactions occurred with related parties:
9 months ended 30 September 2016 | Parent company | Parent's subsidiaries and associates | Associates and joint ventures |
Crude oil, gas and oil products sales | 20,422 | 26,105 | 37,779 |
Other revenue | 35 | 4,187 | 4,305 |
Purchases of crude oil, gas and oil products | - | 29,162 | 67,563 |
Production related services | 25 | 14,187 | 14,434 |
Transportation costs | 5,277 | 1,337 | 4,056 |
Interest income | - | 122 | 4,802 |
Interest expense | 4,927 | 2,907 | 114 |
9 months ended 30 September 2015 | Parent company | Parent's subsidiaries and associates | Associates and joint ventures |
Crude oil, gas and oil products sales | 14,675 | 26,139 | 43,298 |
Other revenue | 6 | 671 | 20,480 |
Purchases of crude oil, gas and oil products | - | 30,195 | 77,457 |
Production related services | 21 | 11,434 | 14,200 |
Transportation costs | 4,427 | 1,398 | 4,852 |
Interest expense | 4,423 | - | 113 |
Interest income | 370 | 1,273 | 2,700 |
Transactions with Key Management Personnel
For the nine months ended 30 September 2016 and 2015 the Group recognised RUB 1,254 million and RUB 1,076 million, respectively, as compensation for key management personnel (members of the Board of Directors and Management Committee). Key management remuneration includes salaries, bonuses, quarterly accruals of SAR and other contributions.
27. Segment information
Presented below is information about the Group's operating segments for the nine months ended 30 September 2016 and 2015. Operating segments are components that engage in business activities that may earn revenues or incur expenses, whose operating results are regularly reviewed by the chief operating decision maker (CODM), and for which discrete financial information is available.
The Group manages its operations in 2 operating segments: Upstream and Downstream.
Upstream segment (exploration and production) includes the following Group operations: exploration, development and production of crude oil and natural gas (including joint ventures results), oil field services. Downstream segment (refining and marketing) processes crude into refined products and purchases, sells and transports crude oil and refined petroleum products.
Eliminations and other adjustments section encompasses elimination of inter-segment sales and related unrealised profits, mainly from the sale of crude oil and products, and other adjustments.
Intersegment revenues are based upon prices effective for local markets and linked to market prices.
Adjusted EBITDA represents the Group's EBITDA and its share in associates' and joint ventures' EBITDA. Management believes that adjusted EBITDA represents useful means of assessing the performance of the Group's ongoing operating activities, as it reflects the Group's earnings trends without showing the impact of certain charges. EBITDA is defined as earnings before interest, income tax expense, depreciation, depletion and amortisation, foreign exchange gain (loss), other non-operating expenses and includes the Group's share of profit of associates and joint ventures. EBITDA is a supplemental non-IFRS financial measure used by Management to evaluate operations.
9 months ended 30 September 2016 | Upstream | Downstream | Eliminations | Total |
Revenue from sales: | ||||
External customers | 75,383 | 1,035,737 | - | 1,111,120 |
Inter-segment | 376,860 | 16,444 | (393,304) | - |
Total revenue from sales | 452,243 | 1,052,181 | (393,304) | 1,111,120 |
Adjusted EBITDA | 230,502 | 94,367 | - | 324,869 |
Depreciation, depletion and amortisation | 59,656 | 24,674 | - | 84,330 |
Impairment of assets | 5,028 | - | - | 5,028 |
Capital expenditure | 181,523 | 84,481 | - | 266,004 |
9 months ended 30 September 2015 | Upstream | Downstream | Eliminations | Total |
Revenue from sales: | ||||
External customers | 52,886 | 1,046,934 | - | 1,099,820 |
Inter-segment | 402,099 | 14,273 | (416,372) | - |
Total revenue from sales | 454,985 | 1,061,207 | (416,372) | 1,099,820 |
Adjusted EBITDA | 207,347 | 104,876 | - | 312,223 |
Depreciation, depletion and amortisation | 50,672 | 19,818 | - | 70,490 |
Capital expenditure | 184,765 | 49,473 | - | 234,238 |
The geographical segmentation of the Group's revenue and capital expenditures for the nine months ended 30 September 2016 and 2015 is presented below:
9 months ended 30 September 2016 | Russian Federation | CIS | Export and international operations | Total |
Sales of crude oil | 67,146 | 19,354 | 180,854 | 267,354 |
Sales of petroleum products | 552,932 | 52,924 | 281,789 | 887,645 |
Sales of gas | 21,893 | - | 1,441 | 23,334 |
Other sales | 33,263 | 1,528 | 8,202 | 42,993 |
Less custom duties and sales related excises | - | (925) | (109,281) | (110,206) |
Revenues from external customers, net | 675,234 | 72,881 | 363,005 | 1,111,120 |
9 months ended 30 September 2015 | ||||
Sales of crude oil | 61,230 | 22,219 | 131,389 | 214,838 |
Sales of petroleum products | 561,821 | 57,835 | 328,047 | 947,703 |
Sales of gas | 20,972 | - | 3,115 | 24,087 |
Other sales | 45,978 | 1,571 | 4,071 | 51,620 |
Less custom duties and sales related excises | - | (744) | (137,684) | (138,428) |
Revenues from external customers, net | 690,001 | 80,881 | 328,938 | 1,099,820 |
Russian Federation | CIS | Export and international operations | Total | |
Non-current assets as of 30 September 2016 | 1,763,711 | 11,934 | 339,551 | 2,115,196 |
Capital expenditures for the 9 months ended 30 September 2016 | 247,786 | 435 | 17,783 | 266,004 |
Impairment of assets for the 9 months ended 30 September 2016 | - | - | 5,028 | 5,028 |
Non-current assets as of 31 December 2015 | 1,548,036 | 13,861 | 390,726 | 1,952,623 |
Capital expenditures for the 9 months ended 30 September 2015 | 202,887 | 687 | 30,664 | 234,238 |
Adjusted EBITDA for the three and nine months ended 30 September 2016 and 2015 is reconciled below:
3 months ended 30 September 2016 | 3 months ended 30 September 2015 | 9 months ended 30 September 2016 | 9 months ended 30 September 2015 | |
Profit for the period | 60,527 | 20,090 | 152,274 | 133,294 |
Total income tax expense | 15,823 | 1,508 | 33,615 | 23,813 |
Finance expense | 7,845 | 7,663 | 26,283 | 21,401 |
Finance income | (3,038) | (3,547) | (8,302) | (10,493) |
Depreciation, depletion and amortisation | 29,026 | 24,623 | 84,330 | 70,490 |
Net foreign exchange gain / (loss) | (3,933) | 40,238 | (20,043) | 40,981 |
Other (loss) / gain, net | 2,626 | 5,899 | 19,704 | (7,243) |
EBITDA | 108,876 | 96,474 | 287,861 | 272,243 |
less share of profit of associates and joint ventures | (8,437) | (6,984) | (24,468) | (24,249) |
add share of EBITDA of associates and joint ventures | 20,899 | 22,967 | 61,476 | 64,229 |
Total adjusted EBITDA | 121,338 | 112,457 | 324,869 | 312,223 |
28. Subsequent events
In October 2016 the Group raised RUB 14,7 billion under the loan agreement with PJSC Bank VTB with final maturity date in October 2021.
For more information, please visit http://ir.gazprom-neft.com/.
The Group's office is
3-5 Pochtamtskaya St.,
St. Petersburg, Russian Federation
190000
Telephone: +7 (812) 363-31-52
Hotline: 8-800-700-31-52
Fax: +7 (812) 363-31-51
www.gazprom-neft.ru
Investor Relations
Tel.: +7 (812) 385-95-48
Email: ir@gazprom-neft.ru