TNK-BP Holding OAO : TNK-BP reports robust 2012 results: record free cash flow on the back of highest reserve additions and continued production growth

Moscow, 28 February, 2013. - TNK-BP today reported its results for the year and the fourth quarter 2012.

Results reported under International Financial Reporting Standards ("IFRS")

USD millions unless otherwise stated

*Profit for the period attributable to Group shareholders

Jonathan Muir, Chief Financial Officer, said:

"In 2012, TNK-BP delivered solid performance with net income of USD 7.6 billion and a record free cash flow of USD 7.5 billion. Our strong financial position enabled continued investment in existing operations and major new projects, strengthening the sustainability of our business.

In Upstream, we grew production by 1.8% year-on-year to 2,023 thousand barrels of oil equivalent per day and replaced more than double our production with new reserves, adding a record 1.4 billion barrels of oil equivalent to our proved reserve base. We have been successfully moving our Yamal greenfields to the execution stage, with Suzunskoye the first field ready for launch and the Rospan natural gas project moving to Phase 1 full-field development.

In Downstream, we matched increasing production with a record throughput of 652 thousand barrels per day at our Russian refineries, continuously growing the share of Euro-5 and Euro-4 fuels, now at 73% of the total gasoline and diesel output. An isomerization unit, commissioned at the Saratov refinery, will further increase high-quality gasoline production.

Finally, all our international projects showed positive momentum with incremental production in Vietnam and Venezuela and gas discoveries in Brazil. We continue to focus on business fundamentals and bottom line enhancement and will carry out our operations safely and with minimum damage to the environment."

2012 OPERATIONAL HIGHLIGHTS

 - Total proved reserves reached 9.8 bn barrels of oil equivalent representing a 210% reserve replacement ratio under SEC LOF with record reserve additions of 1.4 bn barrels.

 - Oil and gas production, including affiliates, increased by 1.8% to 2,023 mboe/d, mainly due to contributions from Uvat and Verkhnechonskoye oil fields and growing gas sales.

 - Liquids production, including affiliates, amounted to 1,753 mb/d, or 0.6% up on the previous year, with the greenfields share in total liquids production reaching 19% (including gas condensate from Rospan; excluding affiliates) vs. 14% in 2011

 - Gas sales including affiliates increased by 10.5% to 271 mboe/d due to input from assets in Vietnam as well as growing gas processing volumes in West Siberia and Orenburg

 - Rospan natural gas project moved into full field development mode

 - Phase 1 of full field development was approved by the Board in October 2012

 - Work is under way for Phase 1 ramp-up to a rate of 8.5 bcma by late 2016

 - Long-term sales contracts with energy companies were signed for incremental gas output

 - Access to Gazprom transportation system was secured through the end of 2019

 - Yamal oil fields progressed towards the execution stage

 - Suzunskoye oil field is forecast for launch in 2017; with project documentation awaiting Government approval

 - Testing at Russkoye viscous oil field of 11 development wells is ongoing to determine the best reservoir pressure maintenance system and well completion technique; transportation scheme is in place to deliver pilot production into the pipeline system

 - Tagulskoye oil field added new productive layers boosting the resource base by approx. 10%

 - Lodochnoye oil and gas field was awarded at an auction in December 2012 with over 600 mln boe of oil and gas in place; proximity to Tagulskoye should allow for infrastructure synergies

 - Engineering design of the intra-field pipeline has been completed

- International projects delivered a number of operational successes:

 - In Vietnam, production growth at Block 06.1 was complemented by first gas production from the Lan Do development, completed on schedule, incident-fee and with gross budget savings of USD 33 mln

 - In Venezuela, an effective drilling campaign at PetroMonagas resulted in record production of 145 mb/d (gross)

 - In Brazil, 4 wells showed commercial gas rates with HRT-9 gas well reported as the highest gas flow rate onshore well in Brazil; a joint gas monetization study with Petrobras is under way following a Letter of intent signed in October

 - In Downstream, refining throughput at Russian refineries achieved a record 652 mb/d, up 2.3% year-on-year due to continuing debottlenecking and optimized unit runs, with the share of Euro-4 and Euro-5 fuels reaching 73% v 40% in 2011

 - Major projects in Downstream also gained momentum - in particular, an isomerization unit was commissioned at the Saratov refinery in December 2012 allowing increased production of high-quality gasoline

 - In Marketing, significant improvement in profitability of oil trading and B2B development was accompanied by balanced retail expansion

 - EBITDA of crude oil sales increased by 58% year-on-year to USD 505 mln due to improved structure of export and domestic distributions

 - Average daily throughput per site increased by 10% to 19 thousand litres per site as compared to the Russian average growth of 5%

 - 21 new sites were launched, 20 sites rebranded and 16 sited purchased in Russia; the total number of sites is now at 1,151

 - EBITDA of B2B sales increased by 88% year-on-year to USD 443 mln mainly due to high-margin sales of jet fuel and bitumen

 - Jet fuel sales were achieved at 16 airports in Russia, with direct "in-wing" sales reaching 71% in 2012 compared to 45% in 2011

2012 FINANCIAL HIGHLIGHTS

 - Gross revenue for 2012 remained flat year-on-year: 1.1% higher Urals price was offset by changes in sales structure, primarily lower petroleum products sales volumes and increased domestic crude oil sales volumes

 - Export duties and taxes other than income tax increased by 2% for 2012 relative to 2011, primarily due to the higher excise and mineral extraction tax (MET) rates in 2012, supported by the effect of higher Urals prices on export duty and MET rates as well as the negative impact of duty lag effect. These adverse effects were partly offset by lower petroleum products volumes sold, higher MET-free VCNG production and the positive impact of the 60-66 export duty regime

 - Costs (operating expenses, transportation and SD&A) for 2012 slightly increased by 1% compared to 2011. The negative effects of higher transportation tariffs and other inflationary pressures were partly offset by the positive effect of the weaker rouble

 - EBITDA for 2012 amounted to USD 13.3 bn, 7% lower than in 2011, primarily due to the increase in export duties and taxes other than income tax in 2012 and the comparative impact of one-off events (mainly USD 0.2 bn impairment of Ukrainian assets in 2012 and disposal gains of USD 0.3 bn in 2011). These adverse effects were partly offset by the positive effect of the weaker rouble on costs

 - 2012 Net Income amounted to USD 7.6 bn, 13% lower than in 2011 due to the impact of the lower EBITDA and higher DD&A expense as a result of the increased share of greenfields production

 - Operating cash flow for 2012 amounted to USD 13.2 bn, up 22% compared to 2011, primarily driven by the positive effect of a lower level of accounts receivable at the end of 2012 due to a reduction in receivables collection terms, partly offset by lower EBITDA

 - Organic capital investments in 2012 amounted to USD 5.9 bn, 9% above 2011, largely related to increased investments in the greenfields (Yamal gas and oil projects, Uvat, VCNG) and associated gas utilisation projects (mainly Orenburg), as well as refinery quality upgrades at the Ryazan and Saratov refineries

4Q12 vs. 3Q12 RESULTS

 - Gross revenue for 4Q12 decreased by 9% compared to 3Q12 primarily due to 8% lower crude oil and petroleum products sales volumes driven by the stock accumulation in 4Q12 compared to the stock reduction in 3Q12

 - Export duties and taxes other than income tax decreased by 3% quarter-on-quarter primarily due to lower crude oil volumes sold on export markets, partly offset by the negative comparative effect of duty lag (USD 9.4 per barrel quarter-on-quarter)

 - Costs (operating expenses, transportation and SD&A) increased by 2% primarily due to the negative effect of a 2.9% rouble appreciation on costs and annual performance bonuses accrual partly offset by lower sales volumes

 - EBITDA for 4Q12 amounted to USD 3.2 bn, 26% lower than for 3Q12, primarily due to the negative comparative impact of duty lag and lower sales volumes as well as the comparative impact of disposal gains in 3Q12

 - 4Q12 Net Income amounted to USD 1.9 bn compared to USD 2.7 bn in 3Q12 due to the lower EBITDA and the negative foreign exchange effect on the deferred tax liability

 - Operating cash flow in 4Q12 amounted to USD 3.8 bn, 37% higher compared to 3Q12, mainly as a result of the comparative impact of changes in working capital, attributed primarily to a lower level of accounts receivable at the end of 4Q12

 - Organic capital investments in 4Q12 amounted to USD 1.9 bn, 21% above 3Q12, largely related to field development activity (primarily, Yamal gas and oil projects, VCNG, Uvat) and associated gas utilisation projects (mainly Orenburg) as well as to investments in refining and marketing in Downstream

 - Compared to the 4Q11 results, 4Q12 EBITDA and Net Income decreased by 9% and 11%, respectively. This primarily reflects lower sales volumes driven by a negative quarter-on-quarter impact of crude oil and petroleum products stock as well as higher MET and excise rates in 4Q12

The financial information shown in this press release relates to TNK-BP International Ltd.

This information does not constitute full year Consolidated Financial Statements. On publication of the Consolidated Financial Statements, we are not expecting any changes to the results and numbers as presented today.

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