ROSN.L Regulatory News (ROSN)

OPERATING RESULTS FOR Q1 2019

· AVERAGE DAILY HYDROCARBON PRODUCTION AMOUNTED TO 5.90 MMBOE, DEMONSTRATING A 3.4% GROWTH YOY

· AVERAGE DAILY LIQUIDS PRODUCTION REACHED 4.74 MMBBL, INCREASING BY 3.9% YOY

· GAS PRODUCTION WAS UP BY 1.5% AND AMOUNTED TO 17.12 BCM

· MOTOR FUEL SUPPLIES TO DOMESTIC MARKET REACHED 7.2 MMT, UP BY 10.8% YOY

Upstream

Hydrocarbon production in Q1 2019 amounted to 5.90 mmboed (71.7 mmtoe), exceeding Q1 2018 level by 3.4%. Average daily hydrocarbon production decreased by 0.6% QoQ due to the Company's compliance with its obligations under the OPEC+ Agreement.

The reporting quarter liquids production amounted to 4.74 mmbpd (57.6 mmt), exceeding Q1 2018 production level by 3.9%. The key growth factors were active development of greenfields, high operating performance at Yuganskneftegaz, production ramp-up at other brownfields (Samaraneftegaz, Nyaganneftegaz, Varyaganneftegaz). Average daily liquids production reduced by 1.0% QoQ due to compliance with the OPEC+ Agreement obligations.

The Company has substantial potential to promptly increase production on the back of flexible well stock and well operations management approaches. In case of external restrictions ease the Company is able to secure over 4.8 mmbbl of average daily liquids production in Russia by the year-end.

In Q1 2019 development drilling footage amounted to around 2.5 mln meters, while the commercial drilling speed grew by 1.2% at directional wells and by 6.5% at horizontal wells YoY. The share of in-house drilling footage is traditionally maintained at more than 50%. As part of Rosneft-2022 strategy implementation, the Company focuses on construction of hi-tech wells, which ensure more efficient deposit development and enhanced oil recovery compared to directional wells drilling.

As of the quarter-end, the number of new wells commissioned exceeded 720 units. Commissioning of new horizontal wells increased by 23% compared to Q1 2018 level, while its share in the total well stock increased to 53%. The number of newly commissioned horizontal wells with multistage hydrofracturing increased by 25% YoY and reached 34% of the total new wells commissioned.

The program to develop the Company's brownfields is progressing well. The Company's largest asset, Yuganskneftegaz, is demonstrating consistently high production levels. In Q1 2019 crude oil production at the asset amounted to 17.4 mmt (1.43 mmbpd), up by 1.3% from Q1 2018 level. High operating potential is maintained on the back of hard-to-recover reserves development prospects. Orenburgneft launched commercial operations of three new fields in the south of Orenburg Region - Volostnovskoye, Vostocho-Volostnovskoye and Yuzhno-Volostnovskoye. The launch of commercial production at the new fields is part of the large-scale program of developing the Volostnovsko-Zemlyansky cluster with total oil resources estimated at over 13 million tonnes. New infrastructure facilities were constructed to develop the fields. The drilling program and new wells commissioning continues at the Samotlor field on the back of the investment stimuli provided by the Russian Government. As a result of this, the Company demonstrated reduction in the field production decline rate (a 0.9% reduction in Q1 2019 YoY) after several years of 3-5% of annual output decline.

The Company remains the leader of the Russian oil industry in launching greenfield projects. The development of greenfields launched after 2016 is in progress: Suzun, East-Messoyakha, Yurubcheno-Tokhomskoye, Kondinskoye, Tagulskoye, Russkoye, Kuyumbinskoye fields and 2nd stage of Srednebotuobinskoye field. The total hydrocarbon production of these assets in the Company's share amounted to 4.47 mmtoe (368 mmboed) in Q1 2019. The Russian greenfields production (including the projects mentioned above) is expected to reach ~20% of the Company's total liquids output in 2022.

The implementation of the project to develop production blocks located in Iraqi Kurdistan for which the Company signed PSA Agreements in October 2017 continued in accordance with the plan. In Q1 2019 experimental production started at the Bejil field at block 11. Seismic and geological exploration works are to be conducted at the project in the current year.

Gas production in Q1 2019 increased by 1.5% YoY and amounted to 17.12 bcm. Production growth was mainly driven by increased capacity of Zohr project and commissioning of new wells with high gas factor at the Yem-Egovskoye field at Nyaganneftegaz in 2018.

Active stage of infrastructure facilities construction is in progress at Rospan. The project is planned to be launched in the current year with consecutive growth of gas production up to >21 bcma, liquids production up to >5 mmtpa, and propane-butane fraction production up to >1.2 mmtpa.

The Company continues to develop the gas option at Kharampur field, which is the second most promising gas project after Rospan in terms of production volume growth. The project is planned to be launched in the next year with consecutive production plateau at ~11 bcma.

Egyptian offshore Zohr project development is progressing ahead of schedule. The production of gas on the project started in 2017, at the end of Q1 2019 daily production on the field reached ~64 mmcm (100% of the project). In Q1 2019 one production well and two technological lines of the gas processing facility were put into operation. The reporting quarter gas production at Zohr amounted to ~5.5 bcm (0.97 bcm in the Company's share). By the end of 2019, the volume of daily gas production is due to reach the design capacity of 76 mmcm.

More than 1 th. linear km of 2D and over 4 th. sq. km of 3D onshore seismic works were conducted in 1Q 2019 in Russia, 32 exploration and appraisal wells were tested with an 81% success rate. As a result of geological exploration 8 new deposits and 8 new fields were discovered with АВ1С1+B2С2 hydrocarbon reserves amounting to more than 7 mmtoe.

Taking into consideration the large-scale seismic operations carried out in the strategic regions of presence (the Pechora Sea, Sakhalin Island, the Black Sea region of the Caucasus, the Khatanga cluster, the Ural-Volga region, Yakutia), the Company continues to process and interpret the previously obtained significant amount of seismic data, the results of which will be used for exploration and appraisal drilling.

Downstream

Q1 2019 oil refining throughput at the Company's refineries in Russia amounted to 24.5 mmt, which is lower than Q4 and Q1 2018 levels by 8.5% and 0.8%, respectively. The reduction was caused by equipment maintenance works carried out at the Tuapse refinery in February-March 2019 as well as units optimization in the context of the current petroleum products demand. Taking into account the foreign assets, the refining throughput reduced by 9.0% and 2.5% QoQ and YoY, respectively - to 26.9 mmt. Refining throughput at the German refineries in Q1 2019 reduced by 10.7% and 18.5% compared with Q4 and Q1 2018 levels, which was caused by the shutdown to repair the PCK Raffinerie GmbH refinery along with an off-schedule partial shutdown of Bayernoil Raffineriegesellschaft mbH refinery in September 2018.

Refining depth in Q1 2019 amounted to 74.4%, light products yield - 58.2%.

The Company continues to implement development and maintenance projects at Russian refining assets. Ryazan refinery catalytic reforming unit modernization with reactors replacement was completed. As a result of the conducted works the octane number of a gasoline component increased. Moreover, the unit was transitioned to a 3-year overhaul period.

In accordance with the plan to digitalize the Company's refining assets, an enhanced process control system at the crude distillation unit was installed at Komsomolsk refinery. The new system allows for better selection of light fractions and reduction in energy use. Furthermore, the Angarsk refinery laboratories were fitted with new analytical equipment, which improves the precision and speed of analysis and widens the spectrum of measurements.

As part of sustaining and broadening the cooperation with crude end-users, Rosneft signed long-term agreement with Polish PKN Orlen to supply crude oil via Drujba pipeline to Poland and extended the contract with JXTG Nippon to supply ESPO and SOKOL grades crude.

The Company continues to successfully diversify foreign crude supply channels. In Q1 2019 crude supplies in the Eastern direction reached 15.9 mmt, increasing its share YoY up to 46.6% of the total international sales volumes.

As the leading supplier of petroleum products to the domestic market, the Company maintains the stability of the domestic market by acting within the scope of the agreement with the Ministry of Energy and Federal Antimonopoly Service of the Russian Federation "On the Measures to Stabilize and Develop the Domestic Petroleum Products Market", despite the substantial negative effect from the inaccurate adjustment of the "damping" mechanism under the tax maneuver completion. In Q1 2019 Rosneft increased the motor fuels sales in the domestic market up to 7.2 mmt, which is 10.8% higher than Q1 2018 level. Moreover, in the reporting quarter the Company exceeded the quota for exchange-traded gasoline sales volumes by more than 2.5 times and diesel fuel sales volumes by around 2 times.

The Company expands the foreign presence of its bunkering business: the first Grimaldi Group S.P.A. ship was bunkered in the harbor of Hamburg in the beginning of 2019. In Q1 2019 bunker fuel supply volumes amounted to 0.7 mmt, demonstrating significant growth QoQ - 29.9%.

In Q1 2019 petroleum products sales via retail channel grew by 17.9% YoY, revenue from non-fuel sales increased by 3% mainly due to implementation of new product mix policy at all filling stations along with food offer development.

After completion of the new loyalty program roll-out the work proceeded towards increasing the number of participants in "Family Team" and "BP Club" programs. As of the reporting quarter-end 11.7 mln active participants were involved.

Implementation of the project to introduce virtual fuel cards on the basis of a mobile app with payment option proceeds in accordance with the complex digitalization plan as part of the Company's retail business strategy. Until the end of 2019 it is planned to transfer a part of the customer base to use virtual fuel card, introduce personal accounts in the mobile application in order to optimize the product, introduce discount system and implement push-notifications to promote non-fuel products and services.

Construction of appropriate infrastructure for the sale of compressed natural gas as a motor fuel is one of the strategic goals of the Company's retail business with respect to development of ecological fuels. One more filling station was built in Q1 2019 in Ulyanovsk Region. As of the end of Q1 2019, 11 compressed natural gas stations were built in Ulyanovsk, Voronezh, Saratov and Stavropol Region. Over 1.7 thousand cars are refueled at existing stations daily.

International operations

In January 2019 the concession agreement for the operation of export crude oil pipeline in Iraqi Kurdistan came into force. The project capacity of the pipeline is up to 950 kbpd. The term is 20 years with a 5-year extension option. The Company's share in the project is 60%.

Nayara Energy Limited, 49.13% of which is held by Rosneft, at the beginning of 2019 brought into operation the first hi-tech rail depot for petroleum products and lubricants. The depot area with more than 200 th. sq. meters and capacity of about 16 million liters of petroleum products will be an important part of the сompany's Vidarbha region (central India) distribution channel expansion. Petroleum products will be supplied from the Vadinar refinery, Gujarat State. Nayara also expanded its retail network to over 5,000 filling stations. The company's filling station network has grown more than 3 times over four years. Nayara intends to maintain the retail business development rates in India. The company's plans include the possibility to expand the filling station network up to 7,000 units, and enter the Indian petrochemicals market.

Key operational indicators for Q1 2019:

 * According to management data

** Including marine fuel

Information Policy Division

Rosneft

Tel.: +7 (495) 411 54 20

Fax: +7 (495) 411 54 21

May 13, 2019

These materials contain statements about future events and expectations that are forward-looking in nature. Any statement in these materials that is not a statement of historical fact is a forward-looking statement that involves known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements expressed or implied by such forward-looking statements to differ. We assume no obligations to update the forward-looking statements contained herein to reflect actual results, changes in assumptions or changes in factors affecting these statements.