NOVATEK Announces Consolidated IFRS Results for the Third Quarter and the Nine Months 2019

PAO NOVATEK today released its consolidated interim condensed financial statements as of and for the three and nine months ended 30 September 2019 prepared in accordance with International Financial Reporting Standards (“IFRS”). IFRS Financial Highlights (in millions of Russian roubles except as stated)

^* Excluding the effect from disposal of interests in subsidiaries and joint ventures.^** Excluding the effects from the disposal of interests in subsidiaries and joint ventures, as well as foreign exchange gains (losses).

Revenues and EBITDA

In the third quarter of 2019, our total revenues and Normalized EBITDA, including our share in EBITDA of joint ventures, amounted to RR 189.2 billion and RR 104.5 billion, respectively, representing decreases of 13.8% and 11.5% as compared to the prior year corresponding period. The decreases were primarily due to lower hydrocarbons sales prices on international markets in 2019, which were largely offset by an increase in our natural gas sales volumes due to the production launch at the second and third LNG trains at Yamal LNG in July and November 2018, respectively.

In the nine months ended 30 September 2019, our total revenues and Normalized EBITDA, including our share in EBITDA of joint ventures, increased to RR 641.8 billion and RR 338.3 billion, respectively, or by 7.9% and 14.4%, as compared to the corresponding period in 2018. This was largely due to an increase in LNG sales volumes and our domestic average natural gas sales price, which was offset by a decrease in hydrocarbons sales prices on international markets in 2019.

Profit attributable to shareholders of PAO NOVATEK

Profit attributable to shareholders of PAO NOVATEK increased to RR 370.0 billion (RR 122.86 per share), or eight-fold, in the third quarter of 2019 and to RR 820.9 billion (RR 272.59 per share), or nearly seven-fold, in the nine months of 2019 as compared to the corresponding periods in 2018. Our profit was significantly impacted by the recognition of a net gain on disposal of a 10% and a 30% participation interests in Arctic LNG 2 project in March and July 2019, respectively, taken together amounting to RR 675.0 billion. In addition, our profit was impacted by the recognition of non-cash foreign exchange effects on foreign currency denominated loans of the Group and its joint ventures in both reporting periods.

Excluding the effect from the disposal of interests in subsidiaries and joint ventures, as well as foreign exchange differences, Normalized profit attributable to shareholders of PAO NOVATEK totalled RR 48.5 billion (RR 16.12 per share) in the third quarter of 2019 and RR 178.6 billion (RR 59.29 per share) in the nine months of 2019. This represented a decrease of 25.9% and an increase of 7.1%, respectively, as compared to the corresponding periods in 2018.

Cash used for capital expenditures

Our cash used for capital expenditures increased to RR 36.5 billion, or by 47.4%, in the third quarter of 2019 and to RR 110.2 billion, or by 94.9%, in the nine months of 2019 as compared to the prior year corresponding periods. A significant portion of our capital expenditures related to the development of our LNG projects (Arctic LNG 2 project prior to March 2019 and the LNG construction center located in the Murmansk region), the North-Russkoye field, the Beregovoye field, crude oil deposits of the East-Tarkosalinskoye and the Yarudeyskoye fields, and exploratory drilling.Hydrocarbon Production and Purchased Volumes

Total natural gas production, including our proportionate share in the production of joint ventures, for the third quarter and the nine months of 2019 increased by 5.3% and 11.1%, respectively, and our total liquids production increased by 4.5% and 3.3%, respectively, as compared to the corresponding periods in 2018. The main factors positively affecting the production increase were the launch of LNG production at the second and third LNG trains at Yamal LNG in July and November 2018, respectively, and the commencement of crude oil commercial production at the Yaro-Yakhinskoye field of our joint venture Arcticgas in December 2018.Hydrocarbon Sales Volumes

In the third quarter and the nine months of 2019, our natural gas sales volumes totaled 16.7 billion and 57.7 billion cubic meters (bcm), representing increases of 7.1% and 13.1%, respectively, as compared to the corresponding periods in 2018, due to an increase in LNG sales volumes purchased mainly from our joint ventures OAO Yamal LNG and OOO Cryogas-Vysotsk. As at 30 September 2019, we recorded 1.8 bcm of natural gas in inventory balances compared to 2.4 bcm at 30 September 2018 relating mainly to natural gas in the Underground Gas Storage Facilities. Natural gas inventory balances depend on the Group’s demand for natural gas withdrawals for the sale in the subsequent periods.

In the third quarter and the nine months of 2019, our liquid hydrocarbons sales volumes totaled 4.0 million and 12.1 million tons, representing increases of 1.7% and 1.0%, respectively, as compared to the corresponding periods in 2018. The increases were mainly due to crude oil purchases from our joint venture Arcticgas resulting from the commencement of crude oil production at the Yaro-Yakhinskoye field in December 2018. As at 30 September 2019, we recorded 938 mt of liquid hydrocarbons in transit or storage and recognized as inventory as compared to 850 mt at 30 September 2018. Our liquid hydrocarbon inventory balances tend to fluctuate period on period and are usually realized in the following reporting period.Selected Items of Consolidated Statement of Financial Position(in millions of Russian roubles)

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).