Gazprom Neft Board of Directors reviews debt portfolio management, purchasing structure, and strategic progress

15 February 2013

Gazprom Neft’s Board of Directors has reviewed reports on management of the company’s debt portfolio. In forming its debt portfolio, Gazprom Neft makes diversification its guiding principle, and seeks to attract funds at an optimal interest rate for the long term. In 2012, the company used various methods of structuring its financing. In particular, it issued ruble bonds, obtained loans, and issued Eurobonds for the first time. The agreement to attract 258 million euros in unsecured credit with the support of the Export Credit Agency (ECA) amounted to the biggest loan arranged by the ECA last year in Central and Eastern Europe.

In order to optimize its debt portfolio, the company paid off a total of $700 million in debts in 2012. Gazprom Neft’s total indebtedness amounted to slightly under $7.4 billion at the end of the year. The company seeks to maintain the debt to EBITDA (total earnings before interest, taxes, depreciation, and amortization) ratio at a level of no more than 1.5. At the end of 2012, the ratio was 0.78. At present, long-term loans comprise 80 percent of the company’s loans, and the average loan term in 2012 grew by 50 percent, from 2.75 years to over four years.

Information on the structure of Gazprom Neft’s purchases of materials and equipment was also presented to the Board of Directors for review. In its purchasing procedures, the company ensures that the proposals received from contractors are competitive, and it chooses suppliers by identifying the best applications on the basis of previously approved criteria. Information on future purchases of goods is published on the company’s website, and it is disseminated through an automatic notification system where over 10,000 companies are registered.

Gazprom Neft is increasing the share of Russian producers in the volumes of products purchased. At present, import does not exceed 6 percent of total funds allocated for purchases, and is used for materials and equipment that are not produced in Russia.

The Board took note of progress reports on Gazprom Neft’s development strategy 2020. In 2012, the company managed to take yet another step toward achieving the goals identified in its strategy. Production grew by 4 percent, refining grew by 7 percent, and premium sales (i.e. the sale of petroleum products via high-margin sales channels, including the Gazpromneft gas station network and small-scale wholesale, as well as sales of aviation fuel, marine fuel, and lubricants) grew by 17 percent. Last year, Gazprom Neft had the highest production growth rates in the industry, and recent upgrades have resulted in the company’s oil refineries converting to production of environmental classes 4 and 5 fuels two years earlier than the deadline established in technical regulations.

Analysis of oil companies’ financial indicators shows that Gazprom Neft is among industry leaders on efficiency indicators as well. In 2013, an updated company strategy 2025 will be presented to the Board of Directors.