Business-model

Company mission

Exploitation of active oil and gas fields in Russia and abroad, ensuring the most efficient and comprehensive extraction of hydrocarbon resources.
Achievement of target KPI values in 2018:
Indicator Unit Indicator weight 2018
Actual Performance
Consolidated revenue MM RUB 5% 98,347 106.7%
EBITDA MM RUB 5% 35,697 120.0%
Dividends amount MM RUB 20% 4,469 100.0%
Return on equity % 10% 8,5% 120.0%
Labor capacity Thous. RUB / man-hour 10% 63.0 120.0%
OPEX reduction (costs) % 10% 3,1% 120.0%
Gross production volume Thous. TOE 15% 5,149 107.5%
Reserves volume Thous. TOE 15% 100,193 120.0%
Innovational activities integral KPI % 10% 100% 100.0%
Corporate KPI performance: 111.5%
Non-exceedance of NetDebt / EBITDA indicator limit Bonus reduction indicator 0.6 Bonus reduction indicators fulfilled
Target revenue figure achievement Bonus reduction indicator 103% Bonus reduction index equal to 1
Total performance: 111.5%

Reserves

1,302.22
MM T.O.E.
Aggregate initial hydrocarbon reserves in-place belonging to the A+B1+C1 and B2+C2 categories of Zarubezhneft Group of Companies in Russia and abroad without account of the Company’s participating share as of January 1, 2019.
477.1
MM T.O.E.
Total initial recoverable hydrocarbon reserves
100,193
THOUS. T.O.E.
Amount of the aggregate recoverable hydrocarbon reserves with account of the Company’s participating share at the beginning of 2019 belonging to the AB1+C1 category (2P category is taken into account for the fields in the Socialist Republic of Vietnam)

Nature Nature

Production

With account of the Zarubezhneft’s share, the hydrocarbon production in 2018 amounted to 5,149 thousand TOE, which is 3.6% lower than last year’s figure. At this, the planned figure (5054 thousand TOE) has been over-performed by 1.9%. The decline in production was due to entry of major fields of JV Vietsovpetro White Tiger and Dragon into the complex final development stage.

The main assets in the production segment in 2018 remained JV “Vietsovpetro”, LLC “JC “RUSVIETPETRO”, ZARUBEZHNEFT-Dobycha Kharyaga LLC.

Hydrocarbon production of Zarubezhneft Group of Companies (with account of share), thousand TOE

Service (R&D)

Arktikmorneftegazrazvedka JSC

The main direction of development of Arktikmorneftegazrazvedka JSC is the implementation of Zarubezhneft’s offshore wells construction projects as a drilling contractor. The 2018 revenue amounted to RUB 557 MM.

Giprovostokneft JSC

The main activities include design and engineering studies of oil production, processing and transportation facilities. In 2018, the revenue from design studies, R&D, designer supervision and other works (services) covered by the activities profile of Giprovostokneft JSC amounted to RUB 1,609 MM, including works performed with own capacities for the amount of RUB 1 229 MM and works performed by subcontractor entities for the amount of RUB 380 MM.

VNIIneft JSC

The main areas of activities of VNIIneft JSC are the scientific and technical support of Zarubezhneft’s projects and R&D. In the structure of revenues gained from all types of activities, the larger specific weight traditionally belongs to revenues from the scientific and technical products. The revenue for 2018 amounted to RUB 712 MM.

RMNTK Nefteotdacha JSC

The company carries out a wide range of oilfield services (well servicing and workover, integrated services for drilling, geological and technical surveys, hydrodynamic surveys and others), including technical and personnel support of service works. The revenue increased by 5% to RUB 1,999 MM, which was due to the growth of works scope for well servicing and workover, downhole wire-works and drilling supervision.

Zarubezhneftestroymontazh LLC

A company organizing the construction, reconstruction, overhaul, construction control and preparation of design documentation that is engaged by the constructor or the customer based on a general contract. The 2018 revenue amounted to RUB 3,977 MM.

Zarnestservice LLC

Enterprise established for the marketing of oil produced by the Zarubezhneft Group of Companies at domestic and external markets, supply of equipment and materials and provision of services as per the requirements of JV “Vietsovpetro”. The 2018 revenue amounted to RUB 6,501 MM.

Downstream

The decrease in the oil refining volume is due to the changes in the production program of Brod Refinery JSC caused by the emergency suspension of the plant’s operation in October 2018.
Oil refining volume of Zarubezhneft Group of Companies, thousand tons
As per the results of the segment’s operations in 2018, the segment’s revenue increased by 17% compared to that of the previous year owing to the growth of the average selling price of oil products against the backdrop of rising global oil prices.
Revenue, MM Euro

Nature Nature

Labor capacity

The “Labor capacity” indicator is included in the key performance indicators (KPI) of the Group of Companies’ activities. The actual value of the indicator in 2018 was 63.0 thousand RUB/man-hours. Labor capacity growth rate amounted to 111%, which proves the efficiency of labor resources use.

Injury rate

This figure in 2018 was 0.62 – this is more than 2 times lower than in 2015 (1.27).
LTIFR indicator dynamics

Revenue

Actual value of consolidated revenue of RUB 98,347 MM corresponds to the KPI performance by 106.7%.
Consolidated revenue dynamics

Nature Nature

Investment program

Investment program volume in 2018, RUB billion
Direction Funding volume
General scope 3.1
Geologic exploration projects 0.9
Expansion of the Corporate Center’s area of activities and modernization of fixed assets 0.3
Kharyaga Field 1.4
Solutions for the Downstream segment 0.5

The volume of intra-group borrowing is RUB 0.8 billion, which is 46% of the total volume of planned intra-group borrowings. The investment program funding in the reporting year was carried out with account of the optimization measures and the current requirements of subsidiaries.

Interaction with stakeholders

The strategic goal of corporate culture development within the Zarubezhneft Group of Companies is the establishment of fundamental values and standards of activities, ethical standards, creative and open to new innovation environments contributing to the high involvement level of each employee in solving the main business problems, all maintained and supported by the Company. In relation to its subsidiaries, the Company performs the function of “Strategic controller”, ensuring strategic, systematic and methodologic control, establishment of a unified methodologic basis, as well as unified rules for operating under key processes within the subsidiaries.

The Company’s Corporate Governance Code and Corporate Ethics Code regulate the processes of its interaction with the external environment and with stakeholders, as well as its inter-employee relations.

  • The Corporate Governance Code regulates the process of interaction between the Company and the members of the Board of Directors, other officials and the sole shareholder – the State.
  • The Corporate Ethics Code is a tool for shaping corporate culture; it stipulates the rules of business conduct, principles of efficient interaction between the Company and its employees, ethical standards of intra-corporate relations as well anti-corruption requirements.

These communications are implemented based on the core values of the Company:

  • Professionalism is deep knowledge of own specialization, a responsible and conscientious attitude to duties, timely performance of objectives and continuous improvement of professional level.
  • Initiative is employees’ activity and independence in optimizing the production process and developing the Company's competitiveness.
  • Mutual respect is respect for one other, mutual support, team spirit in work, goodwill in the joint resolution of tasks.
  • Collaboration is the transparent and honest sharing of information, readiness for joint development of optimal solutions.
  • Continuity is a careful attitude to the Company’s traditions, respect for labor and the experience of elderly people, vocational training and mentoring.

Shareholder and the investment community

The sole shareholder of the Company is the state – the Russian Federation. In its interaction with the shareholder, the Company adheres to a unified and consistent policy based on the generally accepted principles of corporate governance. The fundamental principle of interaction with the shareholder is unconditional observance of all the rights and interests of the shareholder. The company is committed to ensuring the long-term increase of the shareholder’s wealth by increasing capitalization, implementing balanced strategic plans and tasks, as well as decreasing the risks in its activities.

Governmental authorities

Zarubezhneft JSC is the only 100% state-owned oil company in the Russian Federation, which imposes additional responsibility on it in the area of interaction with the Russian federal and regional authorities both in the Russian Federation and abroad in the countries of current and prospective activity. The Company develops and maintains constructive relations with Russian state authorities, being guided by the standards of the current Russian law and the high standards of corporate and business ethics, which contribute to the establishment of a favorable environment for business development. The principle “Excellent Performance for the Benefit of State”, being the basic principle of corporate interaction, implies quality and timely performance of instructions and orders of the governmental authorities.

Business partners

Mutual respect is one of the most important principles of the Company’s interaction with its stakeholders. Zarubezhneft JSC is an active participant of the discussion dedicated to the development of international and Russian fuel and energy complexes and takes part in various interactive sessions. The Company maintains long-term, stable and mutually beneficial relations with its customers based on increasing the stability and reliability of deliveries as well as transparent pricing.

Employees

A system of intra-corporate communications by holding corporate events and publishing articles about them on the corporate portal and in the quarterly magazine “Oil Without Borders” has been widely developed within the Company. All events are included in the communications plan that is developed annually under Zarubezhneft JSC’s Strategy Priority Implementation Measures Plan. Since 2013, Zarubezhneft JSC and its subsidiaries have been carrying out studies on the social and psychological working environment of the Company’s team.

The significant growth of tax payments in 2018 is primarily associated with the growth of the minerals extraction tax costs mostly due to the increase of the Urals price nominated in rubles.

The total amount of tax and other mandatory payments in the Russian Federation in 2018 amounted to RUB 44,802 MM, which is 68% higher than the 2017 level; at this, 70% of all payments belong to the Federal Budget (FB) of the Russian Federation, 26% to the consolidated budgets of the subjects (CBS) and 4% to the non-budgetary funds (NBF).
Tax payments, RUB MM

Nature Nature