Performance in 2014

This reporting year was a challenging one for the entire oil and gas industry. The significant decline in global hydrocarbon prices had a major impact on the sector’s development. Gazprom Neft was able to meet the challenges of the changing macroeconomic environment and demonstrated steady growth in production figures: the Company secured an increase in reserves, production, and refining throughput, and also increased premium sales volumes. These results confirmed that the Company's chosen strategy, with a focus on stable growth and efficiency, was the right one. In 2015, Gazprom Neft will maintain its production growth rate and the high degree of efficiency in refinery operations, achieving the goals set out in the Company's 2025 Development Strategy.

Operational results

During the reporting year, Gazprom Neft produced a total of 66.25 million TOE.

In 2014, Gazprom Neft began deliveries of new Arctic oil grades to European consumers: ARCO from the Prirazlomnoye field and Novy Port from the Novoportovskoye field on the Yamal Peninsula.

Commercial production began at the Badra field in Iraq. This is the Company's largest foreign production project. The development of projects in Russia and internationally has allowed Gazprom Neft to achieve production growth of over 6%. At the end of 2014, Gazprom Neft's had 2.55 billion TOE in proven and probable reserves, an increase of more than 11% compared with 2013.

Innovations in production

One of the Company's major focuses in 2014 was the introduction of new technologies to mature fields.

New technologies led to production growth at assets which have been in operation for decades. These results were achieved by increasing the proportion of high-technology wells. Today, the Company holds a leading position in Russia’s oil and gas sector in this area.

Modernization of oil refining assets

The Company’s refining throughput increased by 1.99% for the year, amounting to 43.48 million tonnes.

Following completion of a quality programme and transition to the production of Euro 5-standard fuels, in 2014 Gazprom Neft launched the second phase of its oil refinery modernization programme to increase refining depth and the output of light petroleum products.

Growth of sales channels

The Company continued to upgrade its tank farms, and actively developed premium sales channels for its petroleum products. In 2014, sales in high-margin market segments increased by 7.5%.

Last year, the Company took a major step in the development of its bitumen business by creating a specialized operator: Gazpromneft — Bitumen Materials. In 2014, Gazprom Neft acquired the largest asset for the production of polymer-modified bitumen in Russia, Ryazan Petrochemical Experimental Plant, and began the production of new generation G-Way Styrelf bitumens at the Moscow Refinery in partnership with France’s Total. This has positioned Gazprom Neft as a market leader in modern bitumen materials.

Financial performance

Gazprom Neft paid out 25% of the Company’s net profit in interim dividends to its shareholders, according to IFRS. During the reporting year, the Company maintained its leading position in the industry for efficiency, and was the top Russian oil company in terms of return on invested capital.

An increase of 1.7% in adjusted EBITDA was constrained by the negative impact of a temporary export duty lag. The negative impact of the exchange rate resulting from the revaluation of loans reduced the profits attributable to Gazprom Neft shareholders for the reporting year by 31.4%.