OREANDA-NEWS. November 13, 2012. TNK-BP reported its results for the first nine months of 2012.

Results reported under International Financial Reporting Standards (IFRS)

USD millions unless otherwise stated

3Q11

2Q12

3Q12

9M12

9M11

1,995

2,032

2,003

Total Oil and Gas Production (mboe/d)

2,024

1,969

15,299

14,255

15,723

Gross revenue

46,067

44,502

3,456

2,248

4,311

EBITDA

10,164

10,837

1,786

808

2,734

Net Income(a)

5,718

6,594

2,094

3,290

2,748

Operating Cash flow

9,472

8,162

5,067

5,566

4,340

Net Debt

4,340

5,067

1,303

1,263

1,614

Capex (organic)

3,982

3,504

*Profit for the period attributable to Group shareholders

Jonathan Muir, Chief Financial Officer, said:

Despite a challenging external environment in the first nine months of 2012, TNK-BP continued to deliver strong operating performance, a 14.3% increase in free cash flow, and progressed its major capital projects. This is a significant achievement and a great testament to the dedication and professionalism of our staff.

Operationally, we grew production by 2.8% y-o-y to 2,024 thousand barrels of oil equivalent per day, primarily due to growth in the Uvat and Verkhnechonskoye fields as well as a contribution from our international assets. Vietnam in particular excelled with delivery of first gas on 7 October from the new Lan Do development, on-time and under budget, with an outstanding safety record.

In Downstream, we accelerated production of Euro-4 and Euro-5 compliant fuels, which now constitute 71% of our total gasoline and diesel output.

Finally, the projects which will drive our future growth showed positive momentum. Rospan gas and condensate fields made significant progress towards full field development, and our Yamal projects have been boosted greatly in terms of final execution by the announcement of fiscal support.

For the remainder of the year, we will strive to exceed our business plan, and retain our focus on safely delivering performance, project execution and bottom line enhancement.

9M12 OPERATIONAL HIGHLIGHTS

- Liquids production continued to grow, reaching 1,757 mb/d including affiliates, up 1.4% on 9M11, driven by

- Contribution from our greenfields, mainly Verkhnechonskoye and the Uvat group of fields, reaching 18% of total liquids production, up from 14% in 9M11

Progress achieved in realization of the West Siberia intervention program with a lowering of the natural production decline by 1.2% y-o-y

- Gas sales increased by 12.8% to 267 mboe/d due to input from assets in Vietnam as well as growing gas processing volumes in West Siberia and Orenburg

- Major projects progressed well, in particular:

- Yamal fields moved towards execution with the first crude produced at Messoyaha, new productive layers added to the Tagul development scenario, and other projects on schedule

 - Fiscal support announced for new oil fields in Yamal and East Siberia essential for their comprehensive development

- The first stage of Rospan full field development was supported by the Board, moving us closer to bringing Rospan's production to 8.5 bcma in 2016

- Contracts with Yugragazpererabotka to process West Siberian associated petroleum gas were extended till 2026, securing its monetization

- Construction of a hydrocracking unit at the Ryazan refinery has commenced, in order to increase light oil product yields

- International projects delivered a number of operational successes:

- In Venezuela, an effective drilling campaign resulted in record production of 140 mb/d (gross)

 - In Vietnam, the Lan Do development project was successfully completed with first gas delivered on 7 October.

 In Brazil, the HRT-9 gas well showed the highest onshore flow rate; a Letter of Intent on gas monetization signed with Petrobras

- In refining, throughput increased by 18% q-o-q, with the share of Euro-4 and Euro-5 fuels reaching 71% compared to 42% in 9M11, primarily due to the Saratov and YANOS refineries switching to Euro-5 production from 1 July

- Marketing activities continued to improve the value of each ton of crude produced:

- ESPO crude shipments increased by 26% to 25 mln bbls, diversifying our crude export channels

- Our retail presence in the south of Russia expanded through consolidation of our TNK-South joint venture, including 121 retail sites and 11 oil depots

- Retail volumes per site grew by 13% y-o-y on promotions and premium brand performance, with the daily throughput of 38,200 litres per one BP site and of 15,600 litres per one TNK site

- Direct in-wing sales to airlines increased to 74% of domestic jet fuel sales compared to 42% in 9M11, improving the profitability of the jet fuel business

9M12 FINANCIAL HIGHLIGHTS

- Gross revenue for 9M12 increased by 4% relative to 9M11 driven by a 1.4% higher Urals price and production growth.

- Export duties and taxes other than income tax increased by 7% for 9M12 relative to 9M11. This increase is significantly higher than the Urals growth largely due to the impact of duty lag and increased excise and MET rates, although the impact would have been greater had it not been for the positive impact of the 60-66 regime.

- Costs (operating expenses, transportation and SD&A) remained relatively flat period-on-period. The negative effects of higher transportation tariffs and other inflationary pressures were offset by the positive effect of the weaker rouble.

- EBITDA for 9M12 amounted to USD 10.2 bn which is 6% lower than 9M11, primarily due to the comparative impact of one-off events (impairment charges on Ukrainian assets of USD 0.3 bn in 9M12 and disposal gains of USD 0.3 bn in 9M11) exacerbated by, the increase in excise tax rates, and, the negative duty lag. The increase in MET rates from 1 January 2012 was offset by the positive impact of the 60-66 regime.

- 9M12 Net Income amounted to USD 5.7 bn, which is 13% lower than 9M11 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 9M12 totalled USD 9.5 bn, up 16% compared to 9M11: the decrease in EBITDA was offset by the positive effect of a lower level of accounts receivable and inventories at the end of 9M12 as well as by the positive impact of non-cash items.

- Organic capital investments in 9M12 amounted to USD 4.0 bn, 14% above 9M11, largely related to increased investments in our greenfields (Yamal gas and oil projects, VCNG, Uvat) and associated gas utilisation projects (Orenburg), as well as refinery quality upgrades at the Ryazan and Saratov refineries.

3Q12 v. 2Q12 RESULTS

- Gross revenue for 3Q12 increased by 10% compared to 2Q12 primarily due to a quarter-on-quarter increase in sales volumes driven by a reduction in crude oil and petroleum products stock as well as higher Urals price.

- Export duties and taxes other than income tax decreased by 10% quarter-on-quarter primarily due to a comparative positive effect of duty lag.

- Costs (operating expenses, transportation and SD&A) increased by 5% primarily reflecting the stock reduction effect and a one-off increase in environmental provisions partly offset by the weaker rouble benefit on rouble denominated costs.

 - EBITDA for 3Q12 increased to USD 4.3 bn compared to USD 2.2 bn for 2Q12 primarily due to higher sales volumes, growth in Urals price and the comparative positive impact of duty lag.

- 3Q12 Net Income amounted to USD 2.7 bn compared to USD 0.8 bn in 2Q12 due to the higher EBITDA and the significant positive foreign exchange effect on the deferred tax calculation.

- Operating cash flow in 3Q12 decreased by 16% compared to 2Q12 attributed primarily to higher working capital resulting from a managed increase in receivables collection terms during 3Q, with overall positive bottom-line impact.

- Organic capital investments in 3Q12 amounted to USD 1.6 bn, 28% above 2Q12, largely related to field development activity (primarily, Yamal gas and oil projects, VCNG, Uvat) and associated gas utilisation projects (Orenburg).

- Compared to the 3Q11 results, 3Q12 EBITDA and Net Income increased by 25% and 53%, respectively. This primarily reflects the positive duty lag comparative impact and the positive effect of the weaker rouble on costs partly offset by a lower Urals price.