Gazprom Neft is actively working to reduce lifting costs through the large-scale integration of new technologies. At the same time, the Company demonstrated 20% year-on-year growth in oil and gas production, which exceeded our expectations. Intensive growth will enable Gazprom Neft to take leading positions in the industry in terms of hydrocarbon production growth rates.

Based on the results of 2015, Gazprom Neft continues to show the highest oil production rates in the sector. We are upbeat about the Company’s results for 2015, which turned out to be better than our average expectations for the market. The most important qualitative change is growth in petroleum product sales at a time when market indicators are declining.

Gazprom Neft has a large portfolio of greenfield projects that will enable the Company to increase oil, condensate and natural gas production volumes for the next few years. Our estimates project average annual growth in hydrocarbon production of 4.1% in 2015–2020. The Company’s oil production, including its share in the production of joint ventures, will reach 66 million tonnes in 2020.

Overall, we assess the Company’s results for 2015 as quite strong. We also note systematic work by management to increase sales of petroleum products on the domestic market and implement the Company’s long-term priority projects. In addition, we positively note the Company is ahead of schedule in the development of the Novy Port field.

The Company continues to be our favourite and we maintain our Buy recommendation. We regard the 2015 results as moderately positive and the numbers justify our expectations. While increasing hydrocarbon production, Gazprom Neft has demonstrated a slight increase in operating expenses below the inflation level.

The Company’s results for 2015 are quite steady. An increase in production at the new Novy Port and Prirazlomnoye fields along with the launch of the Messoyakha project, in our view, will lead to significant growth in the generation of a free cash flow.