NOVATEK Announces Consolidated IFRS Results for the First Quarter 2018

PAO NOVATEK today released its consolidated interim condensed financial statements as of and for the three months ended 31 March 2018 prepared in accordance with International Financial Reporting Standards (“IFRS”).

In the first quarter of 2018, our total revenues amounted to RR 179.4 billion and Normalized EBITDA, including our share in EBITDA of joint ventures, totalled RR 76.3 billion, representing year-on-year increases of 16.0% and 11.9%, respectively. The increases in our total revenues and Normalized EBITDA were largely due to production launch at the first LNG train at Yamal LNG at the end of 2017 and an increase in average realized liquids and natural gas prices.

The Group’s profits in both reporting periods were significantly impacted by the recognition of substantial non-cash foreign exchange effects on foreign currency denominated loans of the Group and its joint ventures. As a result, profit attributable to shareholders of PAO NOVATEK decreased to RR 43.1 billion (RR 14.30 per share), or by 39.3%, as compared to the corresponding period in 2017. 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 46.9 billion (RR 15.56 per share), or by 5.8%, as compared to the corresponding period in 2017.

Our operational results for the first quarter of 2018 were significantly impacted by the production launch of the first LNG train at Yamal LNG at the end of 2017, 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 2.2%, and our total liquids production declined marginally by 1.0%.

Our natural gas sales volumes totaled 20.3 billion cubic meters (bcm), representing an 8.1% increase as compared to the corresponding period in 2017, due to the commencement of sales of LNG purchased from our joint venture Yamal LNG to international markets from December 2017 and an increase in volumes sold in the Russian Federation. As at the end of the first quarter of 2018, our cumulative natural gas inventory balances mainly in the Underground Gas Storage Facilities, the Gas Transmission System and own pipeline infrastructure totaled 79 mmcm and decreased by 954 mmcm during the quarter as compared to a decrease by 704 mmcm in the corresponding period in 2017.

Our liquid hydrocarbon sales volumes aggregated 3.8 million tons, representing an 8.2% decrease as compared to the corresponding period in 2017. The decrease in our liquids sales volumes was mainly impacted by an increase in liquids inventories by 140 mt in the first quarter of 2018 compared to a decrease by 90 mt in the first quarter of 2017. As at 31 March 2018, we recorded 1,102 mt of liquid hydrocarbons in transit or storage and recognized as inventory as compared to 813 mt at 31 March 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 consolidated interim condensed IFRS financial statements, 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).