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Shareholders & Investors / Debt Portfolio Management / Debt Portfolio Management Policy

OJSC Gazprom Neft follows a conservative debt financing policy. The main principle of this policy is to ensure a strong financial position by maintaining a Net Debt/EBITDA ratio no higher than 1.5.

During the reporting period, the Company improved its net debt to EBITDA ratio from 0.71 as of December 31, 2011, to 0.51 as of December 31, 2012, according to IFRS statements.

An important principle in attracting debt financing is extended borrowing periods and a reduced share of short-term (one year or less) credits and loans in the debt portfolio. The average debt repayment period grew from 2.68 years as of December 31, 2011, to 3.81 years as of December 31, 2012, while the proportion of short-term borrowing to total debt was 28.5% as of December 31, 2012.

An important objective of the OJSC Gazprom Neft debt policy is the diversification of its debt portfolio in order to reduce the Company’s dependence on volatility in the debt capital markets. At present, OJSC Gazprom Neft’s credit portfolio includes debt financing tools such as pre-export financing, syndicated and bilateral credits, local bonds and Eurobonds.

In 2012, the Company continued to follow its policy of diversifying external financing sources.

  • In August 2012, an ongoing Euro Medium Term Note (EMTN) program was registered for a total equivalent of USD 10 billion, which included the placement of the Company’s first Eurobond issue in September 2012 for USD 1.5 billion maturing in 2022 with a 4.375% coupon.
  • February and December 2012 saw the placement of two ruble bond issues of 11 and 12 series worth RUB 10 billion each maturing in 2022, with offers and 8.25% and 8.5% coupons in 2015 and 2017, respectively.
  • In July 2012, the Company signed its first-ever ECA debt financing agreement for Euro 258 million.

NET DEBT / EBITDA RATIO

NET DEBT / EBITDA RATIO Source: Company data

Export Credit Agency (ECA) debt financing agreement for Euro 258 million is the largest ECA loan in Central and Eastern Europe (including Russia) in 2012 and has unique conditions for such a transaction (ECA risk coverage).

LIABILITY STRUCTURE

LIABILITY STRUCTURE Source: Company data

The Company’s management places great importance on the cost of borrowing in its decision-making for selecting financing tools. The Company thoroughly analyzes all possible options for debt financing to assess service costs. The average borrowing cost as of the end of the reporting period was 3.48%.

OJSC Gazprom Neft audits its debt portfolio on a continual basis to assess its optimal balance. In 2012, the Company made early repayments of credits in the amount of USD 700 million. At year-end, the total debt of Gazprom Neft Group was slightly less than USD 7.4 billion.

MAIN OBJECTIVES FOR USING BORROWING

The funds borrowed during 2012 were used for corporate-wide purposes.

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Compared to 2011
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