tnk-bp investor presentation april 2010. 2 2 important notice these materials include statements...

TNK-BPInvestor PresentationApril 2010

2

2

Important noticeThese materials include statements that are, or may be deemed to be, ‘‘forward-looking statements’’. These forward-looking statements can be identified by the use of forward-looking terminology, including, but not limited to, the terms ‘‘believes’’, ‘‘estimates’’, ‘‘anticipates’’, ‘‘expects’’, ‘‘intends’’, ‘‘may’’, ‘‘target’’, ‘‘will’’, or ‘‘should’’ or, in each case, their negative or other variations or comparable terminology or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. They include, but are not limited to, statements regarding the intentions, beliefs and statements of current expectations of TNK-BP International Limited and its subsidiaries (“TNK-BP”) concerning, amongst other things, TNK-BP’s results of operations, financial condition, liquidity, prospects, growth, potential acquisitions, strategies and as to the industries and locations in which TNK-BP operates. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances that may or may not occur. Forward-looking statements are not guarantees of future performance and the actual results of TNK-BP's operations, financial condition and liquidity and the development of the country, regions, political environment and industries in which TNK-BP operates may differ materially from those described in, or suggested by, the forward-looking statements contained in these materials. TNK-BP does not intend, and does not assume any obligation, to update or revise any forward-looking statements or information set out in these materials, whether as a result of new information, future events or otherwise. TNK-BP does not make any representation, warranty or prediction that the results anticipated by such forward-looking statements will be achieved.

These materials contain reserves data for TNK-BP which has been extracted without material adjustment from the Reserves Reports prepared for TNK-BP by independent petroleum engineers using three different methods. These methods include the U.S. Securities and Exchange Commission ("SEC") standards, the U.S. Society of Petroleum Engineers, Inc. ("SPE") standards and a variation of the SEC standards pursuant to which reserves are calculated through the economic life of the fields ("SEC-LOF"). The SEC-LOF standards differ in certain material respects from the SEC standards and the SPE standards. Unless otherwise indicated reserves data contained in these materials are based on the SEC-LOF standards as in effect on the date of the Reserve Report from which such data has been extracted. The SEC has adopted significant revisions to the SEC standards on oil and gas reporting, which became effective on 1 January 2010. The main revisions that may have an impact on TNK-BP’s reserve quantities relate to the use of a 12-month average price to estimate reserves rather than the price on the last day of the year and to the use of new technology and the enlargement of the areas for which reserves may be determined.

These materials do not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire any securities in any jurisdiction or an inducement to enter into investment activity. No part of these materials, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever.

These materials may not be forwarded, distributed or reproduced in whole or in part, in any manner whatsoever, without TNK-BP’s express consent.

3

3

1. Company introduction

2. Corporate governance

3. Business update

– Performance highlights

– Upstream

– Gas

– Downstream

4. Financial overview

5. 2010 outlook

Table of contents

Company introduction

5

5

0.0

0.5

1.0

1.5

2.0

2.5

Rosnef

t

Lukoi

l

TNK-BP

Surgu

tnef

tega

s

Gazpr

om N

eft

Tatne

ft

Slavn

eft

Russn

eft

Bashne

ft

mmbpd

TNK-BP – one of the leading oil companies globally

• Ranks in the top ten private oil producers in the world

• Third largest oil company in Russia

• 2009 liquids production 1,489 mbpd*

Source: EIA Short-Term Energy Outlook, April 2009, daily liquids production in 2009

Russia leads global oil production TNK-BP 3rd largest oil producer in Russia

Source: CDU TEK, TNK-BP data, daily liquids production in 2009 without JVs

* All TNK-BP data on reserves and production in this presentation are shown without Slavneft unless otherwise stated

0

5

10

Russi

a US

Saudi A

rabi

a

China Ira

n

Canad

a

Mex

ico

mmbpd

6

6

East Siberia

Reserves: 1.9bn boe

West Siberia

Reserves: 18.3bn boe

Yamal (early development)

Reserves*: 5.8bn boe

Orenburg

Reserves: 2.4bn boe

Refineries

Greenfield projects

YANOS refinery, 50/50 ownedwith Gazprom Neft

TNK-BP at a glance

Liquids

Reserves: 27.4bn boe

Production: 1,489 mbpd

Gas

Reserves: 3.4bn boe

Sales: 12.1 bcm

Refining

Throughput: 675 mbpd

Refining cover: 42%

Retail

1,466 sites under BP and TNK brands

EBITDA

2009 – $9.0bn

2008 – $10.1bn

2007 - $9.6bn

Financials

Net income

2009 – $5.0bn

2008 – $5.3bn

2007 – $5.3bn

2009 operations

3P reserves as of 31 Dec 2009 *Incl. Rospan

Brownfield projects

7

7

13

1.5

0

0.5

1

1.5

2

2.5

3

BP

Exxon

Rosnef

t

Chevro

nShel

l

TNK-BP

ConocoTota

lENI

Stato

il

Repso

lOM

V

Liq

uid

s p

rod

uct

ion

, mm

bp

d

0

2

4

6

8

10

12

14

16

18

Res

erve

life

ind

ex (

RL

I), y

ears

Strong competitive positionWorld class F&D costs vs RRRAmong top companies in production and RLI globally

One of the leaders in oil & gas production growth among Russian vertically integrated majors in 2009

Source: UBS Global Integrated Oil & Gas Analyser, 2009Production FY 2009 estimate. Reserve life based on 2008 disclosure and SEC data

Source: CDU TEK, TNK-BP data, daily liquids production in 2009 without JVs

Source: company reports, TNK-BP data

TNK-BP

Rosneft

Gazprom Neft

BPChevron

Conoco Phillips

Exxon Mobil

R&D Shell

0%

20%

40%

60%

80%

100%

120%

140%

160%

0 5 10 15 20 25 30 35 40 45 50

3Y average F&D costs (2007-2009), $/boe

3Y a

vera

ge

org

anic

RR

R (

2007

-200

9)

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

Rosneft TNK-BP Lukoil Tatneft Gazprom Neft Surgutneftegas

8

8

Corporate governance

• Sustain world class business practices and systems

• Promote business ethics and standards

• Increase transparency

• Run a sustainable business that withstands cycles

Monetize our gas portfolioEnhance marginsConvert resources

to reserves to production

• Increase contribution of gas sales

• Exploit significant gas and associated gas resources

• Extend the value chain to end consumers

• Develop gas-to-power

• Pursue strategic partnerships

• Pursue unconventional opportunities

• Optimise refining coverage

• Grow marketing coverage

• Grow in B2B

• Optimize product flow

• Utilise competitive logistics

• Replace a minimum of 100% of our annual production with new reserves

• Innovate and apply new technology

• Sustain production efficiency at brownfields

• Effectively develop new greenfields

• Acquire new subsoil licenses

• Expand international footprint

• Pursue inorganic opportunities

Become a world class oil and gas group, an industry leader in Russia with a clear focus on the sustainability and renewal of its resources and the efficiency of its operations

Inspirational leadership and a dedicated team of international and national professionals

Best-in-class technology to achieve operational efficiency with no damage to people and the environment

Corporate strategy – priorities and goals

9

9

TNK-BP corporate structure1

50%

Upstream Refining Marketing

95%

c.50%

TNK-BP Ltd (BVI)

50%

63%

STBP Holdings Ltd.

100%

RUSIAPetroleum

Slavneft

(JV withGazprom Neft)

TNK-BP Finance S.A. (Luxembourg)

100%

Lisichansk Refinery

(UKRAINE)

c.95%

Alfa, Access/Renova B P

100%

TNK-BP Holding

TNK-BP Management

100%East Siberia Gas

Company

50%

TNK-BP Commerce (UKRAINE)

TNK-BP International Ltd (BVI)

100%

Note: Showing principal holding and operating companies

Corporate governance

11

11

• 11 members - 4 representatives each from BP and AAR plus 3 independent directors• Approves major transactions and key strategic decisions• Key functions: provides strategic directions, reviews strategy and performance of TNK-BP• 3 Board Committees: Audit, Compensation and HSE Committee

11

New Shareholder Agreement

Board of Directors

CEO and Management Board

• Signed in January 2009• Maintains 50:50 ownership structure of TNK-BP Group• Defines the management and financial framework• Includes dead-lock resolution mechanism

• BP nominates the CEO, subject to the Board of Directors unanimous approval• CEO heads the Management Board; personal authority of CEO expanded • Key functions: responsible for TNK-BP’s day-to-day management

Boards of Directors at key subsidiaries

• Boards of Directors at key TNK-BP subsidiaries to have equal number of representatives from BP and AAR and will also have an independent director

• Enhances shareholder governance and prevents deadlock

Financial framework • Target gearing range of 25-35% • Quarterly dividends of not less than 40% of TNK-BP’s net income

Corporate governance update

12

12

Board of Directors

Mikhail FridmanChairman

Alfa Group

Mikhail FridmanChairman

Alfa Group

Lord Robertson of Port Ellen

Deputy Chairman

Lord Robertson of Port Ellen

Deputy Chairman

Viktor VekselbergChairman, Renova Group

Viktor VekselbergChairman, Renova Group

Gerhard SchroederChairman of the Shareholders’ Committee of Nord Stream AG

Gerhard SchroederChairman of the Shareholders’ Committee of Nord Stream AG

Alexander ShokhinPresident of the Russian Union of Industrialists and Entrepreneurs

Alexander ShokhinPresident of the Russian Union of Industrialists and Entrepreneurs

James LengEuropean Chairman, AEA (an American

private equity partnership)Board member of a number of other

international companies

James LengEuropean Chairman, AEA (an American

private equity partnership)Board member of a number of other

international companies

representatives of AAR

representatives of BP

independent directors

Iain MacdonaldDeputy CFO, BP

Iain MacdonaldDeputy CFO, BP

David PeattieExecutive Vice President for Russia and

Kazakhstan, BP

David PeattieExecutive Vice President for Russia and

Kazakhstan, BP

Andy InglisChief Executive of Upstream Business,

BP

Andy InglisChief Executive of Upstream Business,

BP

Len Blavatnik Chairman, Access Industries

Len Blavatnik Chairman, Access Industries

Alex KnasterChairman of Pamplona Capital

Management, Alfa Group

Alex KnasterChairman of Pamplona Capital

Management, Alfa Group

13

13

Management structure

members of the Management Board

CFOJ. MuirCFO

J. Muir

Deputy Executive Director,

Gas business development

A. Ferguson

Deputy Executive Director,


A. Ferguson

EVP Upstream

S. Brezitsky

EVP Upstream

S. Brezitsky

Executive Director, EVP Downstream

D. Baudrand

Executive Director, EVP Downstream

D. Baudrand

EVPTechnology

F. Sommer

EVPTechnology

F. Sommer

EVPSupport Services

A. Tyomkin

EVPSupport Services

A. Tyomkin

EVPStrategy

& BusinessDevelopment

S. Miroshnik

EVPStrategy

& BusinessDevelopment

S. Miroshnik

Chief Legal

Counsel

I. Maydannik

Chief Legal

Counsel

I. Maydannik

CEOInterim

M. Fridman

CEOInterim

M. Fridman

Executive DirectorG. Khan

Executive DirectorG. Khan

СООB. Schrader

СООB. Schrader

Executive DirectorV. Vekselberg

Executive DirectorV. Vekselberg

Deputy CEOM. Barsky*

Deputy CEOM. Barsky*

*M. Barsky to become CEO effective 1 January 2011

Business update Performance highlights

Upstream

Gas

Downstream

15

15

Improving business environment

• Oil price recovered from early 2009– Urals at $36/bbl at end 2008 and $77/bbl at end 2009

• Inflation diminished– 8.8% during 2009 vs 13.3% during 2008

• Forex weakened (with a positive effect on costs)– RUR / USD average 32 for 2009 vs 25 for 2008

Macro environment

Licences

Fiscal

• Corporate income tax rate reduced from 24% to 20% effective 1 Jan 2009

• Export duty calculation methodology changed effective 1 Dec 2008, reducing duty lag effect

• Export duty suspended for oil generated from 22 East Siberian fields (including Verkhnechonskoe, Suzun, Tagul) effective Jan 2010

• Non taxable threshold for mineral extraction tax (MET) up from $9 to $15 per barrel from 1 Jan 2009

• MET holidays introduced to encourage development of new fields in East Siberia, Yamal-Nenets Autonomous District

• Accelerated VAT refund effective from 2010 – positive for working capital

•Renewal: 24 licenses extended during 2008 and 2009

•Accessibility: 10 licenses acquired in federal auctions during 2008 and 2009

16

16

Operations

• HSE: continued improvements in safety metrics and spill rates

- 2009 fatalities lower by 62%, DAFWC down by 26% and spills by 11% relative to 2008

• Reserves: record reserve replacement under PRMS

- 329% total proved reserves reserve replacement ratio (RRR) under PRMS

- 177% total proved RRR under SEC LOF

• Production: continued growth to record production

- 2.9% growth vs 2008 with 9 consecutive quarters of production growth

- average annual growth rate of 5% since 2004

- new production areas commenced on time

• Costs: reduced to 2007 levels

• Exploration: 74% success rate

Financial

• Full investment grade ratings from S&P, Moody’s and Fitch

• EBITDA: $9.0bn; Net Income: $5.0bn

Portfolio

• Selective expansion in retail markets and sale of oilfield services business

2009 performance highlights

17

17

HSE - “the best run companies tend to be the cleanest and the safest”

• Legacy land remediation

– 2,776 hectares of polluted land remediated to end 2009

• Pipeline integrity

– $1bn invested in 2004-2009, with 3,600 kilometres of pipelines reconstructed, resulting in a significant reduction of oil spills

Environment Health and safety

• Occupational safety

– significant reduction in Days Away From Work Cases (DAFWC)

• Transportation safety

– the most significant health and safety risk

– significant reduction in vehicle accident rates

Spill rate: 12 months rolling average,# of spills per ‘000 tonnes produced

DAFWC rate: 12 months rolling average, per 200,000 man-hours

0.04

0.11

OGP Top QuartileOGP 2008 Average

TNK-BP

0.160.14

0.09

0.07

2006 2007 2008 2009

0,09

0,050,04 0,03

0.00

0.05

0.10

2006 2007 2008 2009

0.09

0.050.04 0.03

2006 2007 2008

Spill rate down by two-thirds


Upstream

Gas

Downstream

19

19

0

5

10

15

20

25

30

35

Proved 2P 3P

bn boe

Reserve life19 years

Reserve life> 50 years

Reserve life> 30 years

ProvedProved Proved

Probable Probable

Possible

19

Extensive resource base

Reserve Replacement RatioResource base at YE2009 (PRMS)

258% organic reserve replacement ratio (PRMS)2007-2009 average. 3-year average reserve replacement ratio on SEC-LOF basis 146%

73% exploration success rate2007-2009 average

$3.6 finding & development (F&D) costs per barrel2007-2009 average. $2.2/boe in 2009

11.7 billion barrels of proved reserves and with 19 years reserves life (PRMS)As at end 2009. SEC-LOF reserves of 8.6 billion barrels and 14 years reserve life

104125

156

297

146

329

127149

129

179

82

177

0

50

100

150

200

250

300

350

2004 2005 2006 2007 2008 2009

%

PRMS SEC LOF

20

20

Samotlor

Other West Siberia fields

3P Reserves: 4.8bn boe

2009 prod’n: 295 mbpdMoscow

Orenburg

Nizhnevartovsk

Nyagan

Novosibirsk

Brownfield asset base

Orenburg fields


2009 prod’n: 378 mbpd

Novosibirsk fields



Samotlor field



Nyagan fields



21

21

0

200

400

600

800

1 000

1 200

1 400

1 600

2003 2004 2005 2006 2007 2008 2009

Brownfields

Orenburgneft(Volga-Urals)60-70 years old fields

Samotlor andother brownfields(West Siberia)40 years old fields

• Brownfield production maintained broadly flat through application of select new technology and processes

• Base production decline rate decreased by 1% in 2009 and 4% since 2007

• Samotlor

– delivers 39% of total liquids production

– will remain a reliable producer going forward

– 3P reserves of 7.6bn boe

• Orenburg

– delivers 26% of total liquids production

– 3P reserves of 2.4bn boe

– outstanding growth of 6% in 2009

mboed

Sustaining brownfield production

22

22

Astrakhan

Uvat

Rospan

RusskoeTagul

Suzun

Messoyakha*

Timan-Pechora

Verkhnechonskoye

Greenfields: foundation for production growth

Projects at phase of commercial production

Greenfield projects under development

Gas project

Further exploration focus areas

Verkhnechonskoye3P Reserves: 1.9bn boe

Start-up: 2008


Uvat 3P Reserves: 1.2bn boe

Start-up: 2009


Yamal projects3P Reserves: 3.1bn boe

Start-up: 2012-2014

*Messoyakha (3P reserves - 1.8bn boe) is owned by Slavneft, a 50/50 JV between TNK-BP and Gazprom neft

Kamennoye

Kamennoye3P Reserves: 2.4bn boe

Start-up: 2009 (north)


23

23

Producing greenfields: Verkhnechonskoye• Largest oil field in East Siberia though discovered in 1978, developed in partnership with Rosneft

• 3P reserves c.1.9bn bbl

• 2009 production 24 mbpd

• Expected plateau production - 125 mbpd by 2014

• Total Capex to end 2009 of $1.4bn

• Tax incentives currently apply

Verkhnechonskoye

Verkhnechoskoye and ESPO pipeline

Wells completed Oil productionSource: Reuters

Oil production and wells completed in Verkhnechonskoye

(‘000 tonnes) (# wells)

0

200

400

600

800

1000

1200

1400

2007 2008 2009

0

10

20

30

40

50

60

70

80

90

24

24

Producing greenfields: Uvat• 21 fields in 15 license plots in the south of Tyumen

region, West Siberia, some 700 km away from Tyumen city

– Eastern Hub: a new production centre launched in 2009 with 41 mbpd produced at Urnenskoye and Ust-Tegusskoye fields

– Central Uvat: pilot production commenced at Tyamkinskoye field in 2010

• Development partly financed with government grants as the project stimulates industrial development of the region and creates jobs

• Total Capex to end 2009 of $1.9bn

25

25

25

Yamal - a major new production area for TNK-BP and Russia

• Oil and gas province of global significance

• Next generation of projects which have the potential to account for a significant amount of our output in the future

• Development currently enjoys mineral extraction tax holidays and some fields are temporarily exempt from export duty

• Transportation infrastructure key for effective development

Yamal projects3P resources,

bn boePotential year of first production

Suzun 0.1 2013

Tagul 0.9 2014-2015

Russkoe 2.1 2015

Messoyakha, 50% 0.9 2020

Total 4.0


Upstream

Gas

Downstream

27

27

Strategy: monetize our gas portfolio

• Increase contribution of gas sales

• Exploit significant gas and associated gas resources

• Extend the value chain to end consumers

• Develop gas-to-power

• Pursue strategic partnerships

• Pursue unconventional opportunities


Gas sales and APG utilisation rate

Natural gas

• Rospan: 3P gas reserves of 1.4bn boe, 2009 gas sales 2.4 bcm

• Nizhnevartovsk gas caps

Associated petroleum gas

• Over $1.2bn investments planned for 2010-2012 to increase APG utilisation at brownfields to 95% by 2012

• Associated gas processing JV with Sibur• Orenburg integrated project

• Plan to invest over $700mln in development of power generation projects in 2010-2012

• Construction of power generation facilities launched at Verkhnechonskoye, Kamennoye, Van-Eganskoye, Bahilovskoye and Samotlor fields

• JV with OGK-1 in Nizhnevartovsk to secure long-term sales of gas and purchase electricity

Gas-to-power

2009 A 2008 A

Total gas sales (excl. JV) 12.1 11.3

APG utilisation rate, % 84.8 79.6


Upstream

Gas

Downstream

29

29

Strong refining presence and an extensive marketing network

Nizhnevartovsk

Built in 1998

Capacity: 27 mbpd

Utilisation: 90%

Krasnoleninsk

Built in 1998

Capacity: 4 mbpd

Utilisation: 78%

YANOS (50%)

Modernised in 2006

Capacity: 300 mbpd

Conversion ratio: 63%

Light products output: 57%

Utilisation: 91%

Lisichansk

Modernised in 2008

Capacity: 144 mbpd



Utilisation: 71%

Saratov

Modernised in 2004

Capacity: 132 mbpd



Utilisation: 88%

1,466 retail sites

Moscow

Orenburg

Nizhnevartovsk

Nyagan

Novosibirsk

Retail sites

Refinery assets Ryazan

Modernised in 2006

Capacity: 323 mbpd



Utilisation: 95%

30

30

661701 698 675

80%

90%

100%

2006 2007 2008 2009

0

200

400

600

800

mbpd

Refining throughput, mbpd Operating availability

• Total refining throughput of 675 mbpd in 2009

• Robust refining margins benefiting from fiscal regime

• Scheduled turnarounds at Ryazan and Saratov – incident free and completed ahead of schedule

• Operating availability of over 93%

Stable throughput and high operating availability

Refining• Continued modernization of refining portfolio to

produce fuel to meet European quality standards

• Over $2.0bn to be invested next 5 years to:

– ensure asset integrity

– enhance product quality

– maximize operational efficiency

Refining margins outperform other regions

Source: BP Trading Conditions Update, company data

$/bbl

2008 2009

TNK-BP

North West Europe

Europe Mediterranean

31

31

Continued retail expansion

• Inorganic activities in Russia, Belarus, Ukraine

• Launch of new fuels

• New range of products under TNK and BP brands

• B2B business expansion: jet fuels, bitumen, lubricants and marine fuel

Brand # of sites at 31 Dec 09

Company owned and operated sites

BP 64 TNK 805

Jobber sites 597

TNK-BP retail network in Russia, Ukraine and Belarus

Throughput per site

5348

11 1211 11

0

10

20

30

40

50

60

2008 2009

Ave

rag

e th

rou

gh

pu

t p

er s

ite,

klp

d

0

5

10

15

20

25

Ret

ail

fuel

mar

gin

, c/

l

Average throughputper BP site (Russia)

Average throughputper TNK site

Indicativethroughput (Europe)

Financial overview

33

33

Highlights

• Efficient cost management – costs at early 2007 levels, despite transport and electricity tariffs up by 19% and 21% respectively

• Improved tax environment – tax benefits from legislation changes

• Strong liquidity – healthy cash balances and continued access to debt markets

• Robust financial profile– gearing towards bottom range due to strong free cash flows

• Efficient debt management– $1.3bn of debt repaid prior to maturity during 2009

9.0 EBITDA

34.8 REVENUES

5.0 NET INCOME

2009 financial performance highlights, $bn

34

34

Business environmentSignificant price improvement during 2009:

• Range: $36/bbl to $77/bbl

• Average: $61/bbl

• Duty lag benefit higher by $3.5/bbl

2009 overall weaker than 2008:

• Urals lower by 36% ($34/bbl)

Positive impact of forex in 2009:

• RuR/$ weakened from 25 to 32

• Cost benefits partly offset by negative effect on domestic sales and working capital conversion

Price

30

50

70

90

110

130

1Q 2Q 3Q 4Q

$/bbl

Urals Duty Reference Price

2008

2009

duty lag +$0.9$/bbl

duty lag +$4.4$/bbl

Exchange rates (Average)

20

25

30

35

40

1Q 2Q 3Q 4Q

RUR/USD

2009

2008

35

35

35

Costs

• Forex benefit: $0.5bn

• Forex benefit partly offset by tariff increase of c.19%

• Costs flat overall

• Forex benefit: $1.3bn

• Small net inflationary increase

• $0.5bn of real reductions resulting from cost management initiatives

Transportation

3.13.22

4

2008 Forex Tariff Volume 2009

$bn

Opex & SG&A

5.47.1

4

8

2008 Forex Inflation Savings 2009

$bn

36

36

Taxes

Taxes other than Income Tax lower by 47%:

• Urals price: causes 40% reduction in Export duties and MET ($10.8bn)

• Legislation: increased MET threshold and depleted fields relief benefits - further $0.9bn of savings

Income tax lower by 35%:

• Taxable profits: lower in 2009

• Legislation: 4% rate reduction - benefit of $0.3bn

Taxes other than Income Tax

14.4

27.1

-

15

30

2008 Price Duty lag Taxlegislation

2009

$bn

Income Tax

1.5

2.3

-

2.5

2008 Taxableprofit

Taxlegislation

Other 2009

$bn

37

37

Net Income

Legislation:

• MET and Income Tax benefits

Environment:

• Price: Urals down $34/bbl (-36%)

• Duty lag: positive effect of $3.5/bbl

• Forex: cost benefits from weaker RuRPerformance:

• Operations: - Volume: +48 mboed (excl. Slavneft) - Cost reduction initiatives

• OFS: divestment gain

5.05.33

6

2008 Price -Market

Price -Duty lag

Forex Taxlegislation

Operations OFS Other 2009

$bn

38

38

Strong cash flows

• Operations: strong pre-tax inflows of $22.4bn from operations and working capital management

• Taxes: total $16bn paid

• Capex: $2.5bn of organic investments

• Debt: $2.8bn repaid with $1.8bn of new debt raised

• Dividends: $3.5bn paid in respect of 2H08 and 9M09 earnings

$bn

Organic Capex

Operations

Dividends

Taxes

12

24

Sources Uses

Acquisitions

Net Debt repayment

39

39

Prudent financial strategy

• Maintain gearing within a range of 25% to 35%Narrowed from the previous 25-50% starting from Jan 2009

• Maintain financial ratios in line with strong investment grade companies

• Maintain investment grade credit ratings

• Dividends of 40% min of Net Income

Financialframework

Debt strategy

• Maintain average life of debt portfolio at 4-5 yearsReflecting investment project cash generation profiles

• Maintain the right fixed / floating ratioBy balancing between bonds and bank financing

• Maintain a smooth repayment profile

• Keep debt portfolio largely unsecured

• Maintain proper currency of debt

• Broaden investor base

Focused on supporting the Group’s growth while minimising financial risks and maintaining a

strong balance sheet with adequate liquidity and financial flexibility

40

40

Debt and Gearing

YE 2003 YE 2008 YE 2009

Fixed / Floating46% / 54%

66% / 34%

66% / 34%

USD denominated 62% 97% 96%

LT / ST debt68% / 32%

76% / 24%

77% / 23%

Unsecured / Secured

51% / 49%

89% / 11%

93% / 7%

Average life 2.9 years 4.7 years 4.0 years

Debt portfolio characteristics

• Average life of debt portfolio maintained within 4-5 years target

• Debt portfolio largely unsecured and US dollar denominated

• Active cash management with $1.3bn of debt repaid prior to its maturity in 2009

• Continued access to debt markets with $1.8bn of new debt raised in 2009

• $1bn Eurobond issued in January 2010, with $210mln of short-term debt pre-repaid during 1Q 2010 using Eurobond proceeds

• Year end 2009 gearing at 28%, within 25%-35% band set forth by the Shareholder Agreement

Gearing

20%

25%

30%

35%

40%

31.12.08 31.03.09 30.06.09 30.09.09 31.12.09

41

41

0.0

0.5

1.0

1.5

2010 2011 2012 2013 2014 2015 2016 2017 2018

Bank debt Eurobonds Other

$bn

Liquidity Management

• Maintaining ample liquidity reserve to cover c. 3 quarters of scheduled debt repayments:

– cash balances of at least $0.5bn

– undrawn committed lines of up to $0.5bn

Debt maturity profile as of 31 December 2009

Cash and cash equivalents

• Smooth debt repayment profile

$bn Strong liquidity

0

0.5

1.0

1.5

2.0

31.12.08 31.03.09 30.06.09 30.09.09 31.12.09

42

42

YE2002 YE2003 YE2004 YE2005 YE2006 YE2007 YE2008 1H2009 Dec2009

S&P Fitch Moody's

42

Investment grade credit ratingsCredit Ratings of TNK-BP International

BB

B+

BB-

BB

BB+

Baa2Baa2

Ba2

BB

BB+

BBB-Investment grade

BBB-

Ba1

• Investment grade ratings from S&P (BBB-), Moody’s (Baa2) and Fitch (BBB-)

• Ratings upgrade: to BB+ by S&P in May 2009 and further to BBB- in December 2009

• Financial metrics consistently maintained in line with strong investment grade companies

Funds from operations / Net Debt (%)

EBITDA / interest expense (x)

Net Debt / EBITDA (x)

0.0

0.7

2004 2005 2006 2007 2008 2009

0.7x average for AA*

0

10

20

30

40

2004 2005 2006 2007 2008 2009

17.3x average for AA*

0%

50%

100%

150%

200%

250%

2004 2005 2006 2007 2008 2009

98% average for AA*

* S&P average for EMEA industrials, 2006-2008

2010 outlook

44

44

2010 outlook

Operations

• $4.4bn Capex approved by the Board

• Continued production growth (1-2%)

• Further development of Greenfields, including Yamal

• Cost focus – particularly energy efficiency

• Refinery upgrades to improve fuel quality

Portfolio

• Selective M&A opportunities

Financing

• Continuous optimization of debt portfolio

Governance

• M. Barsky to assume a deputy CEO role from mid 2010

tnk-bp investor presentation april 2010. 2 2 important notice these materials include statements...

Documents