Message from Rosneft’s Chief Executive Officer, Chairman of the Management Board

Игорь Иванович Сечин

Igor Sechin

Chairman of the Management Board, Chief Executive Officer of Rosneft

Dear shareholders and investors,

In 2018, not only did Rosneft keep its world leadership among publicly held oil companies in terms of crude oil and liquid hydrocarbons production, but it also set new benchmarks for the industry. The Company cracked a record for hydrocarbons production - 285.5 mmtoe, up 1.3% year-on-year, which was achieved through implementation of improved operating methods and application of new technologies at mature fields, as well as the launch of four new large projects - the Tagulskoye, Russkoye, and Kuyumbinskoye fields and the second development phase of the Srednebotuobinskoye field.

Rosneft maintained its leadership position among global oil and gas majors by total volume of proved reserves. Under the SEC classification, their volume in 2018 grew by 4% - totaling 41.4 bboe - and the proven reserve replacement ratio reached 173%. Development drilling in 2018 exceeded 12  mln meters, while the scope of drilling the high-productive complex multilateral wells doubled. Exploration activities resulted in a disclovery of 230 new deposits and 23 new fields with reserves of 250 mmtoe.

In 2018, the Company's refining throughput grew by 2% and reached 115 mmt. Rosneft continued to heavily invest in modernization of its own refineries - total capex amounts to RUB 1.4 trln, of which over 60% has already been financed.

Rosneft ensures price stability and reliable supply of petroleum products to the domestic market, with a share of more than 40% of total supplies. In 2018, the Company increased the sales of motor fuels on the domestic market by 3.7% to 28.1 mmt. The Company exceeded the sales requirement for gasoline supplies to the exchange by over 2 times and for diesel fuel by over 1.5 times.

Rosneft demonstrated strong financial results for the year. The Company's revenues increased by 37% to a record of RUB  8.2 trln, EBITDA - by 49% to RUB  2.1 trln. Net profit attributable to Rosneft’s shareholders reached RUB 549 bln, up 2.5 times year-on-year. Moreover, the free cash flow for the year grew by 4.6 times and amounted to RUB 1.13 trln, remaining positive for 27 consecutive quarters.

Rosneft’s successful results in 2018 supported the growth of the Company's market capitalization, which increased by more than 48% for the year. As a result, Rosneft for the first time joined Top-10 global oil companies by market capitalization.

Despite external pressures, Rosneft remains an effective channel for integrating Russia into the world economy by means of active work on foreign markets and cooperation with the largest oil companies in the world. The Company operates in 25 countries, partners with seven out of 10 world majors.

Rosneft continues to strengthen its presence on the international market. In 2018, the Company boosted crude oil supplies in the eastern direction - they grew by 24.1% reaching 59.2 mmt - and continues to successfully operate on the traditional markets. Last year crude oil supply contracts were signed with Poland for up to 12.6 mmt and with Germany for up to 10.9 mmt.

In 2018, Rosneft confirmed its status as the largest Russian taxpayer and a backbone company for the government budget. Tax payments for the year hit a new record in the entire history of the Company and amounted to RUB 4 trln - up 1.5 times year-on-year. At the end of the year, shareholders were also paid a record amount of dividends, RUB 225 bln with over RUB 112 bln attributable to the government.

The strong results of the year stem from successful implementation of the Rosneft-2022 Strategy approved in December 2017 which is aimed at improving business efficiency and maximizing returns on existing assets. In 2019, the Company will undertake further efforts along this avenue.

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