NAFTOGAZ GROUP [email protected] [email protected] +380 44 586 3537 Safeguarding energy security www.naftogaz.com @NaftogazUkraine Promoting liberal gas market Naftogaz highlights

The group imports 7% contribution to ’s GDP in 2018 15.5 bcm 7-10 bcm gas production by UGV, Naftogaz of gas per year and provides for upstream susbidiary, in 2018 security of supply to vulnerable consumers in Ukraine

2 3 In 2018, Naftogaz contributed over

share in total National vertically The largest source of gas production integrated oil and gas the group’s revenues UAH bn to support company engaged in full is the integrated gas in Ukraine 1.3 68 386 cycle of operations, one business (42.3% in development of local communities Employees 79% of the key players in the 2018), followed by regional gas market gas transit (28.2%)

The group is 100% Operator of Ukrainian owned by the state and gas transmission system share of Russian overseen by the Cabinet (GTS, being unbundled), of Ministers of Ukraine the largest European gas transit to the underground storage EU and Turkey system (UGS) and ~40% one of the largest oil transportation pipelines in Europe ey financial indicators

inancial Net profit results UGS Integrated Oil midstream Gas domestic Gas 11.6 UAH bn, 2018 gas and downstream Gas transit transmission storage Ukrnafta Other

137.8 Dividend payments for 2017

72.3 29.5 36.1 256.3 27.2 13.0 1.8 1.4 REVENUES1 Tax payments

4 211.0 200.0 5 109.1

96.3 603.7 30.0 15.0 18.3 8.6 Capital investments (+80%) ASSETS 2 30.6 29.0

Net cash generated by operating activities 38.6 6.7 9.3 0.9 NOPLAT3 71.6 3.2 1.3 2.7 1 includes elimination of UAH 33.3 bn for operations within the group 2 unallocated assets - UAH 25.3 bn 3 adjusted operating result net of income taxes Exchange rate as at 31.12.2018: UAH 25.1/USD, UAH 27.7/EUR Role in the gas market and contribution to the state budget

aor player iggest contributor

Gas demand Gas production Gas imports rom financial black hole to the of state budget biggest tax and dividend payer 15% revenue in 2018 34% 0 Western and +174.4 Ukrainian traders 39% 83.1 UAH Positive effect for 00 traders in the bn 6 commercial segment 66% the state budget, 138.6 7 Naftogaz UAH bn

20% -91.3 138.6 Private producers 32% 12 months Incumbent retail suppliers 20.2 -14.9 of 2018 (sell gas produced or -55.5 imported by Naftogaz to households) -96.6

80% 2014 2018 2014 2018 Naftogaz 29% Taxes and dividends Naftogaz paid Naftogaz to the state budget Contributed every seventh hryvnia to end users Direct subsidies provided by the government to lowincome consumers Naftogaz recapitalization from the state budget Naftogaz retail business

Create your own gas reserve

Naftogaz actively promotes a full liberalization of household energy market in Ukraine. Currently the group supplies gas for retail consumers via private incumbents.

In 3Q 2019, Naftogaz rolled out an innovative product for household 8 consumers. These clients now have an opportunity to take advantage 9 of the low summer prices by prepaying their gas volumes for the winter.

While Naftogaz currently has a limited presence in the household segment, the group sees ample opportunities in the market of 12 million households.

The group’s priorities in the retail market are supply of energy and energy efficiency services. Cooperation with international financial institutions and banks Naftogaz has fully repaid USD 500 mn under loan agreement guaranteed by the World Bank and the Ukrainian government

2019 10 11 oan portfolio eighted average interest rate

oans decreased by USD 1 bn or 33% in 2012018 +1.9% and totaled USD 2 bn as of the end of 2018 2018 Naftogaz raises over USD 1 bn via Eurobonds in 2019 19.6 2017 -33% 17.7 Naftogaz successfully placed Eurobonds of EUR 600 mn and USD 335 mn +1.8%

8.5 5-year EUR-denominated bonds at 7.125% and 3-year USD-denominated 3 6.7 -0.2% USD bn bonds at 7.375% ‒ the tightest state-owned entity (SOE) coupons ever 2 issued out of Ukraine USD bn 2.1 2.3

201 2018 UAH USD EUR Gas balance 0.5 Public sector 3.6 and religious organizations 2018, bcm Private importers 2.3** Heat producers for public sector, religious organizations, industrial sector

10.6 7.0 Imports Naftogaz 9.4 Industrial consumers

27.6 10.6 32.3 32.3 Gas consumed Households 15.5 by users 12 Ukrgasvydobuvannya Gas sources Gas usage (direct use) 13 15.4 20.9 Households Production

4.8*** Heat producers for households

1.9 Ukrtransgaz 4.7 Own needs 4.4 and technological Other -0.8 UGS losses 1.0* Gas distribution operations

1.4 Ukrgasvydobuvannya

Ukrnafta * including unauthorized gas withdrawals (~0.9 bcm) 1.1 Ukrnafta 0.3 ** including unauthorized gas withdrawals (~0.6 bcm) *** Source: NJSC Naftogaz of Ukraine Gas Sales Department 0.1 Other Naftogaz capital investment agenda: focus on modernization and sustainability

40 new wells in the pipeline UGV modernized its drilling fleet with 20 new rigs 14 15 Investments in modernization of upstream facilities, UAH bn 13 international drilling companies involved 215

127 370+ fracking operations since 2016 10 new fields explored 54 38 18 21

2013 2014 201 201 201 2018 1.1 UGV fields 0.8 EASTERN OIL AND 2.3 57.4 51% 8.5 51% GAS REGION that produced more than 23 of total production 106.1 86%

Production in 2018, bcm 0.2 2.0 65% Remaining reserves as of 31 December 20182, bcm SUMY % produced to date out of original reserves REGION Kulychyha oil, gas and 0.2 condensate field 0.9 New exploration permits in 20142018 10.8 19% 0.4 85% Tymofiivka oil,gas and 53.0 0.9 WESTERN OIL AND 11.0 63% 0.2 18.8 Borders of Donets basin condensate field 75% GAS REGION 0.3 4.6 75% Yablunivka oil, gas and 8.8 64% condensate field1 Yuliivka gas and Issued exploration licenses Komyshnia gas and condensate condensate field1 0.5 field 0.6 gas and 17.9 44% 30 condensate field1 0.4 REGION 0.06 68% Berezivske gas and 16 1 17 0.3 condensate field 16.2 67% 25 24 7.4 52% 35.5 21 0.08 3.1 91% 20 3.3 85% 0.4 17 18 Svydnytsia gas field Western Khidnovychi 78% LVIV Khrestyshche gas field 15 13 REGION gas and 11 0.06 REGION condensate 6.6 37% field 10 9 8 Mashivka gas and Melyhivka 5.3 Medvedivka gas and 6 condensate field gas and 5 0.09 condensate 5 4 condensate field Yefremivka gas and field 4.0 91% condensate field Shebelynka gas and Letnia gas and Kehychivka condensate field condensate field 0 gas and Bilche-Volytsia gas field condensate Kobzivka field gas and -5 -3 condensate 2013 2014 2015 2016 2017 2018 field 0.1 UGV Private companies 4.8 90% IVANOFRANKIVSK REGION ZAKARPATTIA DNIPROPETROVSK DONETSK REGION REGION REGION Bytkiv-Babche oil, gas and condensate field 1 Gas deposits deeper than 5000 m CHERNIVTSI 2 Estimation based on Ukrainian classification of hydrocarbon reserves and resources REGION Naftogaz enjoys the trust of international investors and partners Transmission European consortium Production of Ukrainian GTS partners: GRTgaz S.A. (France), Partners in gas production: USA, Canada, China, Croatia, Romania N.V. Nederlandse Gasunie (the Netherlands), Snam S.p.A. (Italy), Eustream a.s. (Slovakia) Cooperation with and Fluxys S.A. (Belgium) oil and gas “Big Four” $120+ million in 2018: 18 coiled tubing services ($92 million); 19 3D modeling Storage $73 million sidetracking contract for 26 wells recovery Largest undeground gas storage in Europe Gas storage contracts with 31 $20 million bundle service contract for fishing tools & services foreign companies from Germany, Poland, Italy, Switzerland

Up to 1000 days of storage 6 service lines under multi-service agreement (MSA) without customs clearance Procurement In 2018, the groups enterprises concluded over 11 thousand contracts totaling UAH 1118 bn

Over the past 5 years, 84% Naftogaz group performed with Ukrainebased companies

35 thousand purchases through Prozorro 16% e-procurement system with international companies and saved UAH 21.3 bn 20 ain procurement items in the first half of 2019, USD mn 21 Energy exchange trading

686 Petroleum products 114 Construction materials Goods 66% 30 Chemical products 80 mcm sold by Naftogaz Trading 69 Other during its pilot trading sessions via UEE in July-August 2019. The number of bidders 156 Services related to oil and gas industry 26% 54 Business services increased from 22 to 69 within a month 46 Utilities Services 39 Repair and maintenance services 26 Architectural, construction and engineering services 30 Other mcm 154 8% UEE’s total traded volume in 2018 Works 144 Construction works Russia

Gas transit to Europe Finland 55 Nord Stream Norway bcm

Share of gas from Russia in a country’s gas imports (%) Sweden 55 Nord Stream 2 80+ bcm Estonia 60 to 79 Latvia 40 to 59 146 Traditional route bcm via Ukraine Lithuania 20 to 39 Denmark 0 to 19 39 Yamal – Europe 20 NEL bcm Belarus Traditional route via Ukraine EUGAL bcm UK Poland Nord Stream Turkish Stream 36 OPAL 55 EUGAL NL bcm bcm Ukraine Germany 22 Nord Stream 2 Blue Stream Belgium Czech 23 Republic

Yamal – Europe / Slovakia LNG floating / fixed Moldova 27 Trans-Balkan bcm OPAL regasification unit Austria Baumgarten Gas Hub Hungary Maximum capacity of Ukraine’s GTS used by Gazprom France Romania and total transited volumes, bcm 32 Turkish Stream 112 117 111 112 bcm 88 82 94 87 67 595 16 Blue Stream bcm Serbia Bulgaria

Italy 14 Tabriz-Ankara bcm Spain Turkey Greece 201 201 201 2018 8 months of 2019 max capacity used per day (annualized) total transited volumes NATGA GUP pressnaftogaz.com irnaftogaz.com +380 586 3537 Safeguarding energy security www.naftogaz.com NaftogazUkraine Promoting liberal gas market