NOVATEK: 2018 Resulsts – EBITDA Up 61.9%

PAO NOVATEK today released its audited consolidated financial statements for the year ended 31 December 2018 prepared in accordance with International Financial Reporting Standards (“IFRS”).

In 2018, our total revenues amounted to RR 831.8 billion and Normalized EBITDA, including our share in EBITDA of joint ventures, totaled RR 415.3 billion, representing year-on-year increases of 42.6% and 61.9%, respectively. The increases in total revenues and Normalized EBITDA were largely due to production launch at the first three LNG trains at Yamal LNG and a favourable macro-economic environment with increases in average realized liquids and natural gas prices.

Profit attributable to shareholders of PAO NOVATEK increased to RR 163.7 billion (RR 54.33 per share), or by 4.7%, as compared to 2017. In 2018, our profit was significantly impacted by the recognition of substantial non-cash foreign exchange effects on foreign currency denominated loans of the Group and its joint ventures (the effect of foreign exchange differences in 2017 was less significant). Excluding the effect of foreign exchange differences, as well as the one-time effect from the disposal of interests in joint ventures, Normalized profit attributable to shareholders of PAO NOVATEK increased to RR 232.9 billion (RR 77.29 per share), or by 49.2%, as compared to 2017.

Our operational results for 2018 were significantly impacted by the production launch at the first three LNG trains at Yamal LNG, as well as the acquisitions of new producing fields at the end of 2017 and in the first quarter of 2018 (the Beregovoye, the West-Yaroyakhinskoye and the Syskonsyninskoye fields). As a result, our total natural gas production increased by 8.5%, and our total liquids production changed marginally (increased by 0.2%).

In 2018, our natural gas sales volumes totaled 72.1 billion cubic meters (bcm), representing an 11.0% increase as compared to 2017, due to sales of LNG purchased primarily from our joint venture Yamal LNG to international markets and an increase in volumes sold in the Russian Federation. As at 31 December 2018, we recorded 2.2 bcm of natural gas in inventory balances relating mainly to natural gas in the Underground Gas Storage Facilities, compared to 1.0 bcm at 31 December 2017. Natural gas inventory balances tend to fluctuate period-to-period depending on the Group’s demand for natural gas withdrawal from the UGSF for the sale in the subsequent periods.

In 2018, our liquid hydrocarbons sales volumes aggregated 15.8 million tons, representing a marginal decrease by 0.7% as compared to 2017. As at 31 December 2018, we recorded 1,069 mt of liquid hydrocarbons in transit or storage and recognized as inventory as compared to 962 mt at 31 December 2017. Our liquid hydrocarbon inventory balances tend to fluctuate period-on-period and are usually realized in the following reporting period.

The full set of audited consolidated IFRS financial statements for the year ended 31 December 2018, the notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations are available on the Company’s web site (www.novatek.ru).