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Corporate Governance PJSC RussNeft. Annual Report 2018 Table of contents PJSC RussNeft. Annual Report 2018 Table of contents Table of contents About the Company..................................................................................7 Corporate Governance............................................................................85 Business model............................................................................................................................................11 Governing and supervising bodies.........................................................................................................89 Strategy.........................................................................................................................................................15 General Shareholders’ Meeting...............................................................................................................90 Key milestones............................................................................................................................................17 Board of Directors.......................................................................................................................................92 Statement of the Chairman of the Board of Directors.....................................................................21 President.......................................................................................................................................................121 President’s statement................................................................................................................................23 Internal Audit Commission....................................................................................................................122 Management................................................................................................................................................25 Information for shareholders and investors, dividends, share price performance.........................................................................................................................123 Risk management and internal control frameworks......................................................................129 Operational Results..............................................................................29 Situation in the industry and development prospects...................................................................31 Financial Results......................................................................................141 Assets overview.........................................................................................................................................35 Consolidated Financial Statements.......................................................................................................143 Reserves.......................................................................................................................................................39 Development and production...............................................................................................................49 Crude oil and gas sales...........................................................................................................................55 General..................................................................................................211 Financial results........................................................................................................................................59 Glossary.........................................................................................................................................................213 Credit ratings..............................................................................................................................................61 Disclaimer....................................................................................................................................................215 Contacts........................................................................................................................................................217 Corporate Social Responsibility.................................................................63 Environmental protection......................................................................................................................65 Health and safety......................................................................................................................................69 HR..................................................................................................................................................................71 Charity and sponsorship.........................................................................................................................77 3 4 PJSC RussNeft. Annual Report 2018 Table of contents PJSC RussNeft. Annual Report 2018 Table of contents Appendices Report on compliance with the principles and recommendations of the Corporate Governance Code........................................................................................................3 Transactions executed in the reporting year and qualifying as major transactions under the Federal Law “On Joint-Stock Companies”.......................................................................34 Transactions executed in the reporting year and qualifying as Interested-party transactions under the Federal Law “On Joint-Stock Companies”...................................................................................................................35 The Company’s power consumption in the reporting year by power source (nuclear power, heating, electric power, electromagnetic power, oil, petrol, diesel, heating oil, natural gas, coal, oil shale, peat, etc.), in kind and in cash........................41 Independent auditor’s report on RAS accounting statements for the reporting year; RAS financial statements for the reporting year..............................................................................43 About the Report In this Annual Report, the terms “RussNeft”, “we” and the “Company” in various forms shall mean Public Joint Stock Company “RussNeft” and its branches, subsidiaries and divisions whose results are included in the consolidated financial statements prepared in accordance with the International Financial Reporting Standards. The terms “PJSC RussNeft” and the “Issuer” shall mean RussNeft. Unless stated otherwise, financial results included in the Annual Report are presented and calculated based on the consolidated financial statements prepared in accordance with the IFRS. Some figures in tables, charts and diagrams hereof may differ from the sums of addends due to rounding. RussNeft's Annual Report was pre-approved by the Board of Directors on 16 May 2019 [approved by RussNeft's Annual General Meeting of Shareholders on 21 June 2019]. RussNeft's Internal Audit Commission verified the accuracy of the data presented in this Annual Report. 5 6 PJSC RussNeft. Annual Report 2018 About the Company PJSC RussNeft. Annual Report 2018 About the Company Chapter 1 About the Company 7 8 PJSC RussNeft. Annual Report 2018 About the Company PJSC RussNeft. Annual Report 2018 About the Company RussNeft 2018: We Are TechnoLogical! Founded in 2002, RussNeft was Russia’s first oil and gas company to be established from scratch in the free market. RussNeft ranks among Top 10 Russian oil and gas companies by crude oil production. The Company benefits from a diversified asset portfolio in key Russian oil and gas provinces (the Volga Region, Volga-Urals Region, West and Central Siberia) and in Azerbaijan. The Company had total 2P reserves of 210 million tonnes (SPE) at the end of 2018. The Company’s headcount is 9,000+ employees. Over the past 15 years, RussNeft has been expanding and developing in all its areas of operation. However, as the world becomes increasingly technology-savvy, proper development requires the use of innovative solutions and products. To keep pace with the times, we implement state-of-the-art process solutions in all our undertakings. Revenue EBITDA Net profit RUB bn RUB bn RUB bn We are proud to present this Annual Report detailing the technological and innovative development, in management and in oil production, of one of the leading companies in the Russian oil & gas market. Learn more about using Adjusted profit Debt / EBITDA Learn more about Plug & Perf technology RUB bn the Company's financial results on page 19-20 on pages 59-60. 9 10 PJSC RussNeft. Annual Report 2018 About the Company PJSC RussNeft. Annual Report 2018 About the Company Business model RussNeft operates in the upstream segment, meaning the focus is on the prospecting, production and sale Driven by today’s macro environment, we invest in projects with the best returns on invested capital, of hydrocarbons. We aim to both maintain existing production volumes and increase production over the produce greater amounts of high-margin oil and reduce costs by applying innovative, state-of-the-art mid-term horizon. technologies and efficient technical and economic solutions. 11 12 PJSC RussNeft. Annual Report 2018 About the Company PJSC RussNeft. Annual Report 2018 About the Company Crude oil production*, Mineable АВС1+В2С2 oil reserves Kt (Russian-classified) growth, mn tonnes Natural gas production, 1P oil reserves (SPE) growth,
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