Information Note on the Annual Shareholders' Meeting of OJSC "Oil Company "Rosneft", June 5, 2008
Information for Shareholders’ Meeting
Annual general meeting online
Final press release
Photos from the meeting
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| Billboard |
On June 5, Annual General Shareholders Meeting of OJSC Rosneft Oil Company was held in Moscow. Positive decisions were made on all agenda items.
As a year ago, the shareholders meeting dedicated to Rosneft performance in 2007 was held in one of Expocenter halls. In his greeting speech, Deputy Prime Minister of the Russian Federation and Chairman of Rosneft Board of Directors Igor Sechin noted strong operating results of the company in 2007 as well as positive experience of interaction with minority shareholders.
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| Expocenter, Hall 7 |
Approximately 900 Rosneft shareholders took part in the meeting, including representatives of major holders — BP, Petronas, and CNPC. In his speech at the meeting, Chief Executive of BP Tony Hayward emphasized Rosneft successes since the 2006 IPO and the considerable potential for future growth. In his turn, George Ratilal, Vice-President of Petronas, said he supported all efforts of Rosneft management and the Board of Directors to steer the company to global recognition. In addition, George Ratilal noted that that Petronas would continue investing both in Rosneft and Russia in general and promoting efficient business cooperation.
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| Shareholder registration |
Rosneft President Sergey Bogdanchikov reported that in 2007, Rosneft had the industry-best proved reserve replacement rate of 301%. According to Mr. Bogdanchikov, in 2007, the company produced 101 mln tonnes of crude oil, 25% more than in the previous year, while organic growth amounted to 6.4% — a rate far above the average of Rosneft’s national peers. Rosneft gas production in 2007 amounted to 15.3 bln cubic meters, up 11.7% over 2006.
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| Consultations |
Mr. Bogdanchikov stated that in 2007, Rosneft had the best new well flow rates in the Russian petroleum industry — 101.1 tonnes a day excluding new assets and 97.5 tonnes including acquisitions. According to Rosneft President, the company targets crude oil production of 130 mln tonnes by 2010 and 160 mln tonnes by 2015. In addition, Rosneft plans to invest RUB 60 bln to bring its gas utilization rate to 95% in 2011. In his report, Mr. Bogdanchikov also stated that by 2011, Rosneft would increase power generation to 1,716 mln kWh.
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| Presiding Board |
Rosneft President said that in 2007, the company had the lowest upstream operating expenses in the national petroleum industry — RUB 651 per tonne. Oil refining in 2007 amounted to 40.2 mln tonnes, a 67.5% increase compared to 2006. Mr. Bogdanchikov also said that in 2007, the company’s retail network expanded to 1,766 stations and became the largest in Russia.
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| Shareholders |
Sergey Bogdanchikov reported that Rosneft’s consolidated RAS net income adjusted for the effect of recognition of YUKOS receivables grew 59.1% to RUB 245 bln, while shareholder returns in the period from the 2006 IPO through May 30, 2008 amounted to 42.7% in rubles and 62.5% in US dollars.
According to Sergey Bogdanchikov, Rosneft considerably progressed in reducing debt. During the last six months alone the company’s debt decreased by USD 4 bln, which was appreciated by leading rating agencies including Standard & Poor’s, which upgraded the company to BBB- investment level.
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| Tony Hayward, British Petroleum CEO |
Hans-Joerg Rudloff, Chairman of the Supervisory Board of Barclays Capital, independent member of Rosneft Board of Directors and Head of the Board’s Audit Committee, mentioned Rosneft’s significant progress in improving transparency, internal control, and risk management.
The meeting lasted over 7 hours. Chairman of Rosneft Board of Directors and the company’s top-managers answered numerous questions concerning Rosneft’s plans, prospects, and dividend policy.
Thus, speaking of the dividend policy Rosneft President stated that after 2010 the company could increase dividend payments. “We obviously need to further develop Rosneft, but we also realize that dividend should be increased, which could be done after 2010”, Sergey Bogdanchikov said. He also stressed that in the years to come Rosneft will continue allocating 10—15% of profit for dividend payments.
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| Igor Sechin talking to shareholders |
Rosneft President also emphasized that gaining leading positions in capitalization remained the company’s key objective: “In the medium term, we will do our utmost to become a top 5 company by capitalization, while today we rank 11th, and our long-term objective is to enter the top 3”.
At the meeting, positive decisions were made on all agenda items. Shareholders approved the annual report and the annual accounting statements of Rosneft for 2007, as well as profit distribution. The company’s net profit was approved in the amount of RUB 162 bln 22 mln. Total dividends were approved at RUB 16,957 mln, or RUB 1.6 per ordinary share, an increase of 20% compared to 2006. Dividends will be paid through December 31, 2008. The record-high dividends are largely the result of Rosneft’s continued business growth and improved operating efficiency.
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| Chairman of Rosneft Board of Directors and Company President |
The meeting also resolved to introduce amendments and supplements to the company’s Charter, and approved a number of related-party transactions.
In addition, the Board of Directors and the Internal Audit Committee were elected. The Board of Directors now includes: Deputy Prime Minister of the Russian Federation Igor Sechin, Chief of Staff of the Russian President’ Executive Office Sergey Narishkin, Head of the Federal Agency for Federal Property Management Yury Petrov and his Deputy Gleb Nikitin, General Director of OJSC Oboronprom Andrey Reus, Rosneft President Sergey Bogdanchikov, President-Chairman of the Management Board of VTB Bank Andrey Kostin, Chairman of the Supervisory Board of Barclays Capital Hans-Joerg Rudloff, and Vice-President of the Russian Academy of Sciences Aleksander Nekipelov.
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| Voting |
Immediately following the shareholders meeting, a meeting of the company’s newly elected Board of Directors was held. The Board reelected Igor Sechin as Chairman of the Board of Directors, while Sergey Naryshkin and Gleb Nikitin were reelected as Deputy Chairmen. The Board of Directors also approved the previous composition of its three committees headed by independent directors. Hans-Joerg Rudloff was reelected as Chairman of the Audit Committee, Andrey Kostin as Chairman of the HR and Remuneration Committee, and Alexander Nekipelov was reappointed Chairman of the Strategic Planning Committee.
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| Sergey Bogdanchikov at press-conference |
At the press-conference following the Board meeting, Rosneft President Sergey Bogdanchikov noted that the company’s long-term development strategy through 2020 would be considered by the Board of Directors by the end of 2008. According to Mr. Bogdanchikov, adoption of Rosneft’s medium-term development strategy will be postponed until Russia’s Socioeconomic Development Program through 2020 is approved. Sergey Bogdanchikov said that by 2020, the company would increase its refined products output twofold compared to the current level, and confirmed plans to bring Rosneft’s crude oil output up to 170 mln tonnes by 2020. Mr. Bogdanchikov said that those preliminary targets would yet require approval of the Board of Directors and shareholders. Sergey Bogdanchikov did not specify the amount of respective investments noting that various factors could become central to investment decisions, and tax exemptions in particular.
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| Journalists at Rosneft President’s press-conference |
According to Rosneft Vice-President Peter O’Brien, the company will benefit considerably from anticipated tax exemptions. Mr. O’Brien expects that in 2009, the effect from tax exemptions will exceed USD 1 bln. As Sergey Bogdanchikov said, Rosneft already started developing projects subject to tax exemptions. “We are currently completing documentation under several such projects to fully exploit the benefits of proposed tax exemptions”, Rosneft President said.
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| Platts journalist putting her question |
In addition, Sergey Bogdanchikov said that Rosneft considered the opportunity to acquire an oil refinery in Eastern Europe, and will complete the feasibility study for a new refinery at the end point of the Eastern Siberia — Pacific Ocean pipeline in June—July 2008. “By the fall, the company will be capable to ascertain construction costs”, Rosneft President added. According to Mr. Bogdanchikov, the refinery would include a petrochemical complex to meet the growing demand for petrochemicals in the Asia-Pacific market.
Speaking on debt reduction, Sergey Bogdanchikov said that Rosneft would most likely use syndicated loans for refinancing purposes: “Syndicated loans are a convenient instrument to raise funds for quite a long term and at an acceptable cost”. Rosneft President emphasized that part of debt would be most probably repaid from the company’s cash flow, as it was in early 2008. Sergey Bogdanchikov also mentioned several other financing options, including ruble and Eurobonds.
Answering questions of mass media representatives, Rosneft President stated that Rosneft proposed OJSC Gazprom to commence joint development of the Sakhalin shelf. “As a rule, Sakhalin deposits have the 50:50 split of oil and gas resources. These are usually complex deposits, and their development is associated with high operational and geological risks. As such, a joint project would allow significantly reducing such risks”, Mr. Bogdanchikov said.
Sergey Bogdanchikov also noted that Rosneft’s proposal to develop the Kirinsky Block jointly with Gazprom remained in effect. “This proposal will be maintained, and we already sent a written notification to Gazprom”, Sergey Bogdanchikov specified.
Rosneft Information Division
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