ROSN.L Regulatory News (ROSN)

OPERATING RESULTS FOR 4Q 2021 AND 12M 2021

ESG

In December 2021, the Company's Board of Directors approved a new strategy 'Rosneft-2030: Reliable Energy and Global Energy Transition' targeting reduction of greenhouse gas emissions along with further improvement of the Company's operational and financial efficiency of. As part of the new strategy, Rosneft sets a 'Net Zero' target on Scope 1 and 2 operational emissions by 2050. The Company aims to reach it particularly via actions aimed at reducing emissions,  use of low-carbon power generation, energy-saving technologies, carbon capture and storage technologies and natural forest offsets.

Moreover, within the new strategy, the Company plans to reach a qualitatively new level of HSE performance, highlighting the pursuit of zero fatality accident rate (FAR, including contractors) and zero process safety events rate (PSER-1) as a priority. Thanks to the implementation of measures to prevent accidents, in 2021 the number incidents related to the safety of technological processes decreased at the Company's subsidiaries. A decline in PSE-1 by 21% and PSE-2 by 39% YoY in the Upstream testifies this statement.

Rosneft pays priority attention to biodiversity conservation in all regions of the Company's presence, and takes all the necessary steps to ensure environmental protection, conservation and restoration of natural resources. In particular, Rosneft is implementing the largest Arctic exploration program since the Soviet times. As part of the 4-year Program for assessing the sustainability of Arctic ecosystems based a study of the dynamics of the condition of the key species, in 2021, expeditionary researches were conducted to study the polar bear, Atlantic walrus and wild reindeer, listed in the Red Books of various levels. The research results form the basis for planning the Company's production activities and arranging environmental monitoring. Furthermore, the data obtained will be used in the Company's thematic printed publications, namely atlases and brochures, the release of which is scheduled for 2022-2023.

Rosneft continues to strengthen its positions in international ESG ratings. For instance, in November 2021, Rosneft became one of the leaders among oil and gas companies participating in CDP international climate rating. After an independent survey, Rosneft was assigned the B rating, which is one notch above the average score of the global climate rating participants. Moreover, S&P Global upgraded Rosneft's industry sustainability S&P Global ESG Scores rating to 67 (percentile). In December 2021, Rosneft became the best in the oil and gas industry according to the independent European rating agency RAEX-Europe.

Hydrocarbon production

In 2021, liquids production amounted to 1,425.2 mln barrels (192.1 mln tonnes), average daily liquids production amounted to 3.91 mln barrels per day. The production dynamics in the reporting period was contingent on the fulfillment of directives to ease production cuts under the OPEC+ Agreement as well the implementation of the asset optimization program held since the end of 2020. Taking into account the assets in operation as of the year-end (excluding the assets disposed of in 2020-2021), the average daily liquids production increased by 2.3% YoY.

In 4Q 2021, liquids production amounted to 367.0 mln barrels (49.5 mln tonnes), average daily liquids production was 3.99 mln barrels per day. Excluding the assets sold in 3Q 2021, the production growth was 1% QoQ.

In 2021, gas production increased by 3.1% YoY and amounted to 64.75 bln cubic meters. Average daily gas production reached 177.4 mln cubic meters per day. Taking into account the assets in operation as of the year-end (excluding the assets disposed of in 2020-2021), the average daily gas production growth amounted to 15.9% YoY. The positive dynamics is mainly due to an increase in natural gas production at the Rospan project, an increase in sales of gas produced at the Zohr field (Egypt), as well as an increase in gas production by Sibneftegaz. In 4Q 2021, gas production amounted to 16.94 bln cubic meters, average daily gas production reached 184.1 mln cubic meters per day.

As a result, 2021 hydrocarbon production amounted to 1,819.5 mln boe (245.3 mln toe), average daily hydrocarbon production was 4,985 th. boe per day. Taking into account the assets in operation as of the year-end, the average daily hydrocarbon production growth amounted to 4.9% YoY.

In 4Q 2021, hydrocarbon production amounted to 470.2 mln boe (63.4 mln toe), average daily hydrocarbon production was 5,110 th. boe per day. Excluding the assets sold in 3Q 2021, the hydrocarbon production growth was 1.3% QoQ.

Geological exploration, development drilling and new wells commissioning

In 2021, the Company conducted over 1.1 th. linear km of 2D seismic works and about 5.7 th. sq. km of 3D seismic works on the Russian onshore, which is almost a third higher YoY. Total volume of 2D seismic works exceeded 1.9 th. Linear km, while total volume of 3D seismic works amounted to over 6.6 th. sq. km. Rosneft tested 93 exploration wells with a 90% success rate. As a result of geological exploration, in 2021 the Company discovered 256 new deposits and 2 new fields with total AB1C1+B2C2 hydrocarbon reserves amounting to about 0.5 bln toe.

A unique in terms of reserves volume gas condensate field named after. E. Zinichev in the Krasnoyarsk region with 384 bln cubic meters of AB1C1+B2C2 recoverable gas reserves, as well as a large Kederginskoye gas field in Yakutia with over 43 bln cubic meters of АВ1С1+В2С2 recoverable gas reserves can be attributed to the largest discoveries in 2021. The share of the reserves discovered by the Company in 2021 accounted for 75% (in oil equivalent) of all the discoveries in the Russian Federation in 2021.

In 2021, development drilling footage amounted to 10.9 mln meters, remaining approximately at the 2020 level. The Company traditionally maintains the share of in-house drilling footage at 50% as a minimum.

In 2021, the number of newly commissioned wells exceeded 3.2 th. units, up by 26% YoY. The number of the most efficient new horizontal wells reached 2.3 th. units, up by 30% YoY, while their share in total number of newly commissioned wells amounted to 70%. In 2021, the share of newly commissioned horizontal wells with multistage hydrofracturing exceeded 1.4 th. units, or 44% of the total number of wells commissioned over the period. Unit production per horizontal well overpassed the indicator for directional wells by more than 2 times.

According to the results of the hydrocarbon reserves audit conducted by DeGolyer & MacNaughton, Rosneft's SEC proved hydrocarbon reserves as of December 31, 2021 amounted to 38.3 bln boe (5.2 bln toe). An organic proved hydrocarbon reserves replacement ratio amounted to 116%, a replacement ratio for operating assets was 117%. According to the PRMS classification as of December 31, 2021, 1Р, 2P and 3P hydrocarbon reserves stood at 42.2 bln boe (5.7 bln toe), 82.3 bln boe (11.1 bln toe), and 126.4 bln boe (17.1 bln toe), respectively. The results of an independent international reserves audit confirmed a high resource potential of the Vostok Oil project.

Upstream projects development

From 2016 to 2021, the Company launched 14 new major exploration and production projects. In 2021, the Company's share in total liquids production at these projects amounted to 517 th. barrels per day (25.0 mln tonnes), which is 27% higher YoY. The share of these projects reached 13.2% of the total liquids production, up by 3.4 p.p. YoY.

The Company continues to develop its production projects in accordance with the previously announced plans.

In the reporting period, Rosneft continued an active development of a large-scale Vostok Oil project in the north of the Krasnoyarsk Region. As of the end of 2021, the Company conducted 500 sq. km of 3D seismic work, and completed the construction of 3 exploration wells with a 100% success rate. The construction of another 8 exploration wells in the Zapadno-Irkinskiy, Irkinskiy, Peschaniy license areas, as well as at fields of the Vankor cluster continues. As part of the winter season 2021-2022, field seismic surveys are underway at the Payakha cluster.

At the Lodochnoye field (part of the Vankor cluster), 33 new wells and 2 new well pads have been put into operation, production drilling and engineering preparation of facilities, as well as the construction of an oil treatment unit are underway. In the course of exploration work at the field, oil saturation of the Nizhnekhetskaya formation has been proved and its inclusion in the main development targets has been justified. A free flow of anhydrous oil with a flow rate of 225 cubic meters per day was obtained at an exploratory well, which is significantly higher than the new wells' average rate in Russia. As part of the pilot development, 2021 production at the field amounted to 31.1 th. barrels per day, which is 95% higher YoY.

Rosneft has launched a winter navigation campaign along the Northern Sea Route, as well as along the existing river arteries. In the port of Dudinka, the unloading of the first sea vessel with specialized equipment and cargo for the construction of the Suzun-Payakha oil pipeline was completed. The filling of a temporary berth site in the Sever Bay port, which will ensure a prompt reception of sea vessels with priority cargo for the capital construction of the oil terminal facilities, was completed. Bank protection works are underway at the berth's technological platform.

To ensure uninterrupted oil supplies to global consumers, work is underway to build facilities for the oil transportation system. 13 th. piles have been prepared for laying the main oil pipeline, which will connect the fields of the Vankor and Payakha clusters with the 'Sever Bay Port' oil loading terminal under construction. The total length of the pipeline will be 770 km.

Rosneft signed contracts with leading Russian suppliers for large-diameter pipes with a total weight of over 950 th. tonnes, as well as gas turbines, drilling rigs and other logistics facilities. The Company concluded 57 contracts with 11 large construction companies. At quarries, 1.7 mln cubic meters of sand were excavated, and about 1.3 mln cubic meters were dumped at priority facilities, winter roads with a total length of over 640 km were put into operation.

At the Severo-Komsomolskoye field, construction of the main and auxiliary infrastructure, including the one for the preparation and transportation of oil and gas, energy facilities, as well as drilling of production wells with a deviation from the vertical up to 2 km continues. Works on the installation of the zero cycle and the main equipment of large site facilities are underway. More than 40 km of inter-field oil and gas pipelines have been laid, work has been completed on an underwater crossing across the river. As part of the pilot development, 2021production at the field amounted to 11.3 th. barrels per day, up by 2.5% YoY.

Rosneft continues the active development of its key gas projects. Preparations for the launch of the second start-up complex of the Rospan project are at the final stage. At the Kharampur field, welding and insulation of the joints of the gas pipeline linear part, and hydrotesting of absorbers at the gas drying unit of the complex gas treatment unit have been completed, a heat and power unit has been launched. Trench excavation and pipeline laying are almost completed. The construction readiness is 79% for the complex gas treatment unit and over 88% for the external transport gas pipeline. The project is expected to be launched on schedule in 2022.

Oil refining

In 2021, oil refining throughput at the Company's refineries in Russia amounted to 95.1 mln tonnes, up by 2.3% YoY. In 4Q 2021, oil refining throughput amounted to 23.4 mln tonnes, a 1.6% rise YoY due to an increase in plant utilization against the backdrop of growing demand for petroleum products on the domestic market.

In 2021, oil refining throughput at the refineries in Germany amounted to 11.0 mln tonnes, which is 0.3% higher YoY. In 4Q 2021, oil refining throughput amounted to 2.9 mln tonnes, a 5.5% increase YoY due to a gradual rise in demand in the country.

As a result, in 2021 the Company's total refining throughput amounted to 106.1 mln tonnes, up by 2.1% YoY, including 26.3 mln tonnes refined in 4Q 2021. In 2021, oil refining depth amounted to 75.8%, while light product yield was 56.6%.

Refineries development

Rosneft is implementing the largest investment program in oil refining aimed at technical re-equipment, modernization and improvement of the operational efficiency of its refineries. In the reporting period, as part of the program to improve operational efficiency, the Komsomolsk Refinery completed the reconstruction of the primary oil refining unit ELOU-AVT-3 with a capacity of 5.5 mln tonnes per year. Thanks to the measures taken, the light product and vacuum gas oil yield as well as the quality of tar and the efficiency of the delayed coking unit have increased.

In the reporting period, the Komsomolsk Refinery and the Angarsk Petrochemical Company began to produce AI-100 high-octane motor gasoline of ecological class 5. The new fuel has a unique formula, and its efficiency was confirmed by the results of qualification tests by the Russian National Research Institute for Oil Refinery.

Moreover, the Angarsk Petrochemical Company began supplying medical oxygen. More than 17.5 tonnes of liquid medical oxygen was shipped to medical institutions of the Irkutsk region, the demand for which has grown amid the coronavirus pandemic. Multi-stage quality control at each production stage allows obtaining a product of high purity, reaching at least 99.5% of oxygen.

At the Ryazan Oil Refining Company furnace equipment was upgraded and the fuel network was optimized. This allowed switching the operation of furnaces to gas, as well as to reduce fuel consumption. As a result, the enterprise will reduce the annual level of greenhouse gas emissions by 4,000 tonnes of CO2 per year and save 9,000 Gcal of thermal energy per year.

Crude oil and petroleum products sales

In 2021, crude oil supplies to non-CIS countries amounted to 102.5 mln tonnes. In 4Q 2021 the indicator amounted to 28.7 mln tonnes, up by 13.0% QoQ, including 15.3 mln tonnes supplied eastwards, or 53.3% of the total crude oil supplies to non-CIS countries.

In 2021, 8.7 mln tonnes of oil were sold on the domestic market, which is 67.3% higher YoY, including 3.0 mln tonnes sold in 4Q 2021.

In 2021, the Company sold 100.3 mln tonnes of petroleum products, including 24.4 mln tonnes sold in 4Q 2021. The domestic market is a priority for motor fuel supplies for Rosneft. In 4Q 2021, the volume of petroleum products sold on the domestic market increased by 14.1% YoY. At the same time, in 2021, Rosneft sold 98% of the produced gasoline of Euro-5 and higher grades in Russia. The Company's share in the total volume of exchange sales amounted to 44% for motor gasoline and 41% for diesel fuel.

In 2021, the Company sold 7.8 mln tonnes of motor fuel on the St. Petersburg International Mercantile Exchange. In 4Q 2021, the sales totaled 2.2 mln tonnes, which exceeded the required quota by over 2.5 times.

In 2021, the Company supplied to end-consumers, namely domestic and foreign ship owners, a total of 1.7 mln tonnes of bunker fuel, including over 1 mln tonnes of fuel with reduced sulfur content (up to 0.5%) fully complying with the MARPOL regulations.

The Company is developing production and sale of high-tech polymer-bitumen binder, which significantly improves the quality of road surface. In 2021, modified binders sales volume increased by 21% YoY and amounted to 272 th. tonnes.

Retail business

As of the end of 2021, the Company's retail network comprised 3,024 filling stations and complexes, including 2,964 filling stations and complexes in the Russian Federation. In 2021, the retail sales volume at Rosneft's filling stations exceeded the level of 2020 by 11%, while non-fuel margin increased by 19% YoY.

In order to enhance the competitive advantages of the Company's retail network, work is underway to provide additional services for customers of filling stations and complexes, including on-road 'Apteka Auto' pharmacies, parcel stations, equipment for dry-cleaning services. A pilot project to provide household services to customers has been launched. A new sales format for related products using food trucks (mobile outlets) has been tested.

The Company's retail network continues to develop digital services. As of the end of 2021, more than 1,600 filling stations and complexes in the key regions of presence under the Rosneft, bp, Bashneft, PTK brands have been connected to the contactless remote fuel payment service via mobile applications. The service of contactless payment for related products with delivery to the customer's car is available at 110 filling complexes with stores in the Moscow region, comprising 47% of the total number of filling complexes with stores in the region.

The Company's retail business division is developing the sale of environmentally friendly and cost-effective gas motor fuel, acting in accordance with the state priorities for the development of the fuel market. Taking into account the commissioned capacities, the Company possesses 5 CNG filling stations and 16 multi-fuel filling stations equipped with CNG sales modules in 8 regions (Voronezh, Ulyanovsk, Saratov and Orenburg regions, Stavropol territory, Republic of Ingushetia, Udmurtia and Mordovia). Until the end of 2028, it is planned to expand the network to 200 facilities, including 100 CNG filling stations and 100 CNG sales modules at filling stations in locations with high potential demand.

In accordance with demand forecasts and dynamics of the electric vehicle market, Rosneft is developing the charging infrastructure at its filling stations. In 2021, as part of the cooperation with PJSC RusHydro, 4 fast charging stations for electric vehicles were launched at Rosneft filling stations. In total, by the end of 2021, 18 charging stations for electric vehicles were installed and are in operation at the Company's filling stations in the Moscow Region, Vladivostok, Khabarovsk, the Leningrad Region, the Tver region and the Krasnodar Territory. In accordance with the signed cooperation agreements with PJSC Rosseti and PJSC RusHydro, it is planned to install up to 40 electric charging stations in 2022.

Rosneft Information Division

Tel.: + 7 (499) 517-88-97

February 11, 2022

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.

[1] The dynamics are given for the assets in operation as of the year-end (excluding asset disposed of in 2020-2021).

[2] In oil equivalent.