Novatek FS ENG 12m2019 FINAL

PAO NOVATEK
IFRS CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
AND INDEPENDENT AUDITOR’S REPORT

CONTENTS Page
Independent Auditor’s Report ................................................................................................................................. 3

Consolidated Statement of Financial Position ....................................................................................................... 10
Consolidated Statement of Income ........................................................................................................................ 11
Consolidated Statement of Comprehensive Income .............................................................................................. 12
Consolidated Statement of Cash Flows ................................................................................................................. 13
Consolidated Statement of Changes in Equity ...................................................................................................... 15
Notes to the Consolidated Financial Statements:
Note 1. Organization and principal activities .................................................................................................... 16
Note 2. Basis of preparation .............................................................................................................................. 17
Note 3. Critical accounting estimates and judgments ........................................................................................ 18
Note 4. Acquisitions and disposals.................................................................................................................... 20
Note 5. Property, plant and equipment .............................................................................................................. 26
Note 6. Investments in joint ventures ................................................................................................................ 29
Note 7. Long-term loans and receivables .......................................................................................................... 34
Note 8. Other non-current assets ....................................................................................................................... 35
Note 9. Inventories ............................................................................................................................................ 35
Note 10. Trade and other receivables .................................................................................................................. 36
Note 11. Prepayments and other current assets ................................................................................................... 36
Note 12. Cash and cash equivalents .................................................................................................................... 37
Note 13. Long-term debt ..................................................................................................................................... 37
Note 14. Short-term debt and current portion of long-term debt ......................................................................... 38
Note 15. Pension obligations ............................................................................................................................... 38
Note 16. Trade payables and accrued liabilities .................................................................................................. 39
Note 17. Shareholders’ equity ............................................................................................................................. 39
Note 18. Oil and gas sales ................................................................................................................................... 40
Note 19. Purchases of natural gas and liquid hydrocarbons ................................................................................ 41
Note 20. Transportation expenses ....................................................................................................................... 41
Note 21. Taxes other than income tax ................................................................................................................. 41
Note 22. Materials, services and other ................................................................................................................ 42
Note 23. General and administrative expenses .................................................................................................... 42
Note 24. Finance income (expense) .................................................................................................................... 43
Note 25. Income tax ............................................................................................................................................ 43
Note 26. Financial instruments and financial risk factors ................................................................................... 46
Note 27. Contingencies and commitments .......................................................................................................... 56
Note 28. Principal subsidiaries and joint ventures .............................................................................................. 59
Note 29. Related party transactions ..................................................................................................................... 60
Note 30. Segment information ............................................................................................................................ 62
Note 31. Summary of significant accounting policies ......................................................................................... 63
Note 32. New accounting pronouncements ......................................................................................................... 69
Unaudited supplemental oil and gas disclosures ................................................................................................... 70
Contact Information .............................................................................................................................................. 76
Independent Auditor’s Report
To the Shareholders and Board of Directors of PAO NOVATEK:
Our opinion
In our opinion, the consolidated financial statements present fairly, in all material respects,
the consolidated financial position of PAO NOVATEK and its subsidiaries (together – the “Group”)
as at 31 December 2019, and its consolidated financial performance and its consolidated cash flows
for the year then ended in accordance with International Financial Reporting Standards (IFRS).
What we have audited
The Group’s consolidated financial statements comprise:
 the consolidated statement of financial position as at 31 December 2019;
 the consolidated statement of income for the year then ended;
 the consolidated statement of comprehensive income for the year then ended;
 the consolidated statement of cash flows for the year then ended;
 the consolidated statement of changes in equity for the year then ended; and
 the notes to the consolidated financial statements, which include significant accounting policies
and other explanatory information.
Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs).
Our responsibilities under those standards are further described in the Auditor’s responsibilities
for the audit of the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Independence
We are independent of the Group in accordance with the International Ethics Standards Board for
Accountants’ Code of Ethics for Professional Accountants (IESBA Code) and the ethical requirements
of the Auditor’s Professional Ethics Code and Auditor’s Independence Rules that are relevant to our
audit of the consolidated financial statements in the Russian Federation. We have fulfilled our other
ethical responsibilities in accordance with these requirements and the IESBA Code.
AO PricewaterhouseCoopers Audit
White Square Office Center 10 Butyrsky Val Moscow, Russian Federation, 125047
T: +7 (495) 967-6000, F:+7 (495) 967-6001, www.pwc.ru
Our audit approach
Overview
 Overall group materiality: Russian Roubles (“RUB”) 11,000 million

which represents 4% of adjusted profit before tax excluding
currency exchange differences, net gain on disposal of interests
Materiality in subsidiaries and joint ventures and the Group’s share of joint
ventures’ currency exchange differences net of income tax.
 We conducted audit work covering all significant components in

Group Russia, Switzerland, Singapore and Republic of Cyprus.
scoping
 The Group engagement team visited all significant locations
in Russia, Switzerland and Singapore.
 Our audit scope addressed more than 99% of the Group’s
Key audit revenues and more than 99% of absolute value of income and
matters expenses, forming the Group’s underlying profit before tax.
 Disposal of a 40% participation interest in OOO Arctic LNG 2.
As part of designing our audit, we determined materiality and assessed the risks of material
misstatement in the consolidated financial statements. In particular, we considered where
management made subjective judgements; for example, in respect of significant accounting estimates
that involved making assumptions and considering future events that are inherently uncertain. As in all
of our audits, we also addressed the risk of management override of internal controls, including among
other matters consideration of whether there was evidence of bias that represented a risk of material
misstatement due to fraud.
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain
reasonable assurance whether the consolidated financial statements are free from material
misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the consolidated financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall Group materiality for the consolidated financial statements as a whole as set out in the
table below. These, together with qualitative considerations, helped us to determine the scope of our audit
and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements,
if any, both individually and in aggregate on the consolidated financial statements as a whole.
ii
Overall Group materiality RUB 11,000 million
How we determined it 4% of adjusted profit before tax excluding currency differences,

net gain on disposal of interests in subsidiaries and joint
ventures and share of joint ventures’ currency differences net of
income tax.
Rationale for the materiality We chose profit before tax as the benchmark because, in our
benchmark applied view, it is the benchmark against which the performance of the
Group is most commonly measured by users, and is a generally
accepted benchmark. The use of adjusted profit before tax
mitigates the effect of volatility (that could be material) caused
by non-recurring factors such as gains on disposals of assets
and foreign exchange differences and provides a more stable
basis for determining materiality, focusing on the underlying
profitability of the Group.
We chose 4% which is consistent with quantitative materiality
thresholds used for profit-oriented companies in this sector and
prior year approach.
Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial statements of the current period. These matters were addressed
in the context of our audit of the consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter How our audit addressed the key audit
matter
Disposal of a 40% participation interest in OOO

Arctic LNG 2
In 2019, the Group disposed a 40% participation Our audit procedures included, among others,
interest in OOO Arctic LNG 2 as disclosed in note assessment of justification for voluntary change
4 to the consolidated financial statements. The of accounting policy regarding the contribution of
disposal was executed in two stages: a subsidiary to a joint venture and assessment
of the effect of its application.
 In March 2019, the Group disposed a 10%
participation interest in OOO Arctic LNG 2 to a We also performed reconciliation of cash
subsidiary of TOTAL S.A. At the same time, the receipts with corresponding contracts and
terms of the transaction stipulate that key payment documents.
strategic, operational and financial decisions
We performed audit procedures to make sure
are subject to unanimous approval by
that the assumptions used by management in
participants. As a result of this transaction, the
determining the amount of total consideration
Group ceased to exercise control and obtained
were consistent with the terms of the contracts
joint control over OOO Arctic LNG 2. The
and the project implementation plans of the
Group determined OOO Arctic LNG 2 to be a
Group.
joint venture and started to account for the
retained investment under the equity method. We reconciled the reported value of the Group’s
iii
Key audit matter How our audit addressed the key audit
matter
As at the closing date of the transaction in 10% interest in net assets of OOO Arctic LNG 2
March 2019, a 30% participation interest in as at the disposal date with the accounting data.
OOO Arctic LNG 2 was classified as an asset
We assessed the fair value of the disposed and
held for sale as IFRS 5 criteria were met.
retained interests in OOO Arctic LNG 2 at the
 In July 2019, the Group sold a 30% date of disposal of a 10% participation interest
participation interest in OOO Arctic LNG 2 to for the appropriateness of assumptions and
(by 10% each): 1) China National Petroleum methodology used by the Group management
Corporation and 2) CNOOC Limited (through for this assessment. For this purpose we
their subsidiaries) and 3) Japan Arctic LNG engaged internal valuation experts.
B.V., a joint venture of Mitsui & Co., Ltd and
We recalculated gain on disposal of a 10% and
Japan Oil, Gas and Metals National
a 30% participation interests in
Corporation. These transactions were closed
OOO Arctic LNG 2.
on terms similar to those on which TOTAL
S.A. Group entered this project. We evaluated the completeness of the
disclosures in Note 4 of the consolidated
Upon completion of the above transactions, the
financial statements to comply with IFRS
Group's interest in OOO Arctic LNG 2 decreased
requirements.
from 100% to 60%.
We focused on this area during our audit due to
the significance of judgements and assessments
used by management in accounting for the
disposal of the above participation interests and
because of a voluntary change of the accounting
policy effective 1 January 2019 regarding the
contribution of a subsidiary to a joint venture,
which was applied to the transaction on disposal
of 10% interest in OOO Arctic LNG 2. Key
judgements related to assessment of the fair
value of the Group’s interest in OOO Arctic LNG 2
at the date of disposal of 10% interest in OOO
Arctic LNG 2, of fair value of the contingent
consideration and of fair value of expected
contributions to property of the joint venture to be
received as a result of the arrangement to sell
participation interest.
How we tailored our Group audit scope

We tailored the scope of our audit in order to perform sufficient work to enable us to provide
an opinion on the consolidated financial statements as a whole, taking into account the structure
of the Group, the accounting processes and controls and the industry in which the Group operates.
In establishing the overall group audit strategy and plan, we determined the type of work that needed
to be performed at the reporting units by the group engagement team and by the component auditors
from other PwC network firms. For each reporting unit we issued specific instructions to the
component auditors within our audit scope. We determined the level of involvement for component
auditors whom we need to engage in the audit process at those reporting units so as to be able
to conclude whether sufficient appropriate audit evidence had been obtained as a basis for our opinion
iv
on the consolidated financial statements as a whole. We determined whether we required an audit
of full scope of financial information or whether a defined scope of specified procedures was sufficient.
The Group’s consolidated financial statements disclosures and a number of complex items are audited
directly by the PAO NOVATEK audit engagement team. Our procedures included the assessment
of accounting estimates performed by management in respect of fair values and classification
of financial assets and liabilities, deferred income tax asset recognition, estimation of oil and gas
reserves, impairment of financial and non-financial assets, impairment provision for trade receivables,
pension obligations, asset retirement obligations and assessment of joint arrangements.
By performing the procedures described above at the individual component level, combined with the
additional procedures performed at the group level, we have obtained sufficient and appropriate audit
evidence regarding the financial information of the Group to provide a basis for our opinion on the
consolidated financial statements.
Other information
Management is responsible for the other information. The other information comprises report
“Management’s discussion and analysis of financial condition and results of operations
of PAO NOVATEK for the years ended 31 December 2019 and 2018” (but does not include the
consolidated financial statements and our auditor’s report thereon), which we obtained prior to the
date of this auditor’s report, and “Quarterly Issuer's Report of PAO NOVATEK for the first quarter
of 2020” as well as “Annual Report Review of PAO NOVATEK for 2019”, which are expected to be
made available to us after that date.
Our opinion on the consolidated financial statements does not cover the other information and we do
not and will not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read
the other information identified above and, in doing so, consider whether the other information is
materially inconsistent with the consolidated financial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
When we read “Annual Report Review of PAO NOVATEK for 2019” and “Quarterly Issuer's Report
of PAO NOVATEK for the first quarter of 2020”, if we conclude that there is a material misstatement
therein, we are required to communicate the matter to those charged with governance.
Responsibilities of management and those charged with governance for the

consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to
liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting
process.
v
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to issue
an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:
 Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks,
and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
 Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
 Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
 Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Group’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Group to
cease to continue as a going concern.
 Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.
 Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the Group audit.
We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
vi
PAO NOVATEK
Consolidated Statement of Income
(in millions of Russian roubles, except for share and per share amounts)
Year ended 31 December:
Notes 2019 2018
Revenues
Oil and gas sales 18 852,232 825,761
Other revenues 10,571 5,997
Total revenues 862,803 831,758

Operating expenses
Purchases of natural gas and liquid hydrocarbons 19 (330,818) (319,990)
Transportation expenses 20 (151,651) (145,664)
Taxes other than income tax 21 (61,981) (58,768)
Depreciation, depletion and amortization 5 (32,230) (33,094)
Materials, services and other 22 (25,183) (22,675)
General and administrative expenses 23 (24,568) (22,282)
Exploration expenses 5 (8,386) (7,012)
Impairment (expenses) reversals, net (162) (287)
Changes in natural gas,
liquid hydrocarbons and work-in-progress (5,484) 5,860
Total operating expenses (640,463) (603,912)
Gain on disposal
of interests in subsidiaries and joint ventures, net 4 682,733 1,645
Other operating income (loss), net 26 (35,484) (2,307)
Profit from operations 869,589 227,184

Finance income (expense)
Interest expense 24 (4,491) (4,746)
Interest income 24 20,699 14,003
Change in fair value of non-commodity financial instruments 26 12,827 3,492
Foreign exchange gain (loss), net 24 (44,747) 25,859
Total finance income (expense) (15,712) 38,608
Share of profit (loss) of joint ventures, net of income tax 6 149,238 (37,258)
Profit before income tax 1,003,115 228,534

Income tax expense
Current income tax expense (97,832) (44,543)
Deferred income tax benefit (expense), net (21,822) (1,044)
Total income tax expense 25 (119,654) (45,587)
Profit 883,461 182,947

Profit attributable to:
Non-controlling interest 17,984 19,205
Shareholders of PAO NOVATEK 865,477 163,742
Basic and diluted earnings per share (in Russian roubles) 287.39 54.33
Weighted average number of shares outstanding (in millions) 3,011.5 3,013.8
The accompanying notes are an integral part of these consolidated financial statements.
11
PAO NOVATEK
Consolidated Statement of Comprehensive Income
(in millions of Russian roubles)
Notes 2019 2018
Profit 883,461 182,947

Other comprehensive income (loss)
Items that will not be reclassified subsequently to profit (loss)
Remeasurement of pension obligations 15 (976) (725)
Share of remeasurement
of pension obligations of joint ventures (205) (112)
(1,181) (837)
Items that may be reclassified subsequently to profit (loss)
Currency translation differences 4,860 1,934
Share of currency translation differences of joint ventures 656 (353)
5,516 1,581
Other comprehensive income (loss) 4,335 744
Total comprehensive income 887,796 183,691
Total comprehensive income attributable to:
Non-controlling interest 17,984 19,205
Shareholders of PAO NOVATEK 869,812 164,486
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PAO NOVATEK
Consolidated Statement of Cash Flows
Notes 2019 2018

Adjustments to profit before income tax:
Depreciation, depletion and amortization 32,230 33,094
Impairment expenses (reversals), net 162 287
Foreign exchange loss (gain), net 44,747 (25,859)
Gain on disposal of interests
in subsidiaries and joint ventures, net 4 (682,733) (1,645)
Interest expense 4,491 4,746
Interest income (20,699) (14,003)
Share of loss (profit) of joint ventures, net of income tax 6 (149,238) 37,258
Change in fair value of non-commodity financial instruments (12,827) (3,492)
Revaluation of commodity derivatives and contingent
consideration through profit or loss 26 34,304 450
Other adjustments (294) 749
Decrease (increase) in long-term advances given 5,740 4,939
Working capital changes
Decrease (increase) in trade and other receivables,
prepayments and other current assets (21,498) (13,598)
Decrease (increase) in inventories 7,560 (9,137)
Increase (decrease) in trade payables and accrued liabilities,
excluding interest and dividends payable 6,086 10,750
Increase (decrease) in taxes payable, other than income tax (2,115) 592
Total effect of working capital changes (9,967) (11,393)
Dividends received from joint ventures 46,050 8,500
Interest received 47,413 1,311
Income taxes paid excluding payments relating to disposal
of interests in subsidiaries and joint ventures 25 (35,061) (47,127)
Net cash provided by operating activities 307,433 216,349

Cash flows from investing activities
Purchases of property, plant and equipment 5 (144,186) (73,564)
Payments for mineral licenses 5 (7,827) (327)
Purchases of materials for construction (12,413) (15,442)
Purchases of intangible assets (1,146) (872)
Proceeds from disposals of property, plant and equipment
and materials for construction - 2,133
Acquisition of joint ventures 4 - (2)
Capital contributions to joint ventures 6 (298) -
Payments for acquisition of subsidiaries, net of cash acquired 4 - (30,492)
Proceeds from disposal of interests in subsidiaries
and joint ventures, net of cash disposed 4 136,541 -
Income tax payments relating to disposal
of interests in subsidiaries and joint ventures 4, 25 (64,540) -
Interest paid and capitalized 5 (5,903) (5,032)
Net decrease (increase) in bank deposits
with original maturity more than three months (58,945) (26,161)
Guarantee fees paid (1,427) (1,431)
Loans provided to joint ventures 7 (29,664) (3,429)
Repayments of loans provided to joint ventures 7 20,764 1,573
Net cash used for investing activities (169,044) (153,046)
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PAO NOVATEK
Consolidated Statement of Cash Flows
Notes 2019 2018
Cash flows from financing activities

Proceeds from long-term debt - 7,928
Repayments of long-term debt (2,176) (22,035)
Proceeds from short-term debt
with original maturity more than three months 1,000 -
Repayments of short-term debt
with original maturity more than three months (1,000) -
Proceeds from (repayments of) short-term debt
with original maturity three months or less, net - (150)
Interest on debt paid (2,237) (3,024)
Dividends paid to shareholders of PAO NOVATEK 17 (93,468) (51,980)
Dividends paid to non-controlling interest (16,758) (20,068)
Payments of lease liabilities (2,944) (2,192)
Purchases of treasury shares 17 (1,865) (2,137)
Net cash used for financing activities (119,448) (93,658)

Net effect of exchange rate changes on cash and cash equivalents (7,173) 5,884
Net increase (decrease) in cash and cash equivalents 11,768 (24,471)
Cash and cash equivalents at the beginning of the period 41,472 65,943
Cash and cash equivalents at the end of the period 53,240 41,472
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PAO NOVATEK
Consolidated Statement of Changes in Equity
(in millions of Russian roubles, except for number of shares)
Equity
Asset attributable to
Number of Ordinary Additional Currency revaluation PAO Non-
ordinary shares share Treasury paid-in translation surplus on Retained NOVATEK controlling Total
(in millions) capital shares capital differences acquisitions earnings shareholders interest equity
At 1 January 2018 3,015.6 393 (8,353) 31,297 (3,283) 5,617 732,168 757,839 17,820 775,659
Profit - - - - - - 163,742 163,742 19,205 182,947
Other comprehensive income (loss) - - - - 1,581 - (837) 744 - 744
Total comprehensive income (loss) - - - - 1,581 - 162,905 164,486 19,205 183,691
Dividends (Note 17) - - - - - - (51,979) (51,979) (18,684) (70,663)

Purchase of treasury shares (Note 17) (2.7) - (2,092) - - - - (2,092) - (2,092)
At 31 December 2018 3,012.9 393 (10,445) 31,297 (1,702) 5,617 843,094 868,254 18,341 886,595
Profit - - - - - - 865,477 865,477 17,984 883,461

Other comprehensive income (loss) - - - - 5,516 - (1,181) 4,335 - 4,335
Total comprehensive income (loss) - - - - 5,516 - 864,296 869,812 17,984 887,796

Dividends (Note 17) - - - - - - (93,468) (93,468) (16,758) (110,226)
Effect from other changes in
joint ventures’ net assets (Note 6) - - - - - - 4,774 4,774 - 4,774
Purchase of treasury shares (Note 17) (1.7) - (1,863) - - - - (1,863) - (1,863)
At 31 December 2019 3,011.2 393 (12,308) 31,297 3,814 5,617 1,618,696 1,647,509 19,567 1,667,076
15
PAO NOVATEK
Notes to the Consolidated Financial Statements
(in Russian roubles [tabular amounts in millions], unless otherwise stated)
1 ORGANIZATION AND PRINCIPAL ACTIVITIES
PAO NOVATEK (hereinafter referred to as “NOVATEK” or the “Company”) and its subsidiaries (hereinafter
jointly referred to as the “Group”) is an independent oil and gas company engaged in the acquisition, exploration,
development, production, processing, and marketing of hydrocarbons with its oil and gas operations located mainly
in the Yamal-Nenets Autonomous Region (hereinafter referred to as “YNAO”) of the Russian Federation. The
Group delivers its natural gas and its liquid hydrocarbons on both the Russian domestic and international markets.
The Group sells its natural gas on the Russian domestic market at unregulated market prices (except for deliveries
to residential customers); however, the majority of natural gas sold on the Russian domestic market by all
producers is sold at prices regulated by the governmental agency of the Russian Federation that carries out state
regulation of prices and tariffs for goods and services of natural monopolies in energy, utilities and transportation.
The Group’s natural gas sales volumes on the domestic market fluctuate on a seasonal basis mostly due to Russian
weather conditions, with sales peaking in the winter months of December and January and troughing in the summer
months of July and August.
In 2017, the Group’s joint venture OAO Yamal LNG started production at the first train of its natural gas
liquefaction plant (hereinafter referred to as the “LNG Plant”) based on the hydrocarbon resources of the South-
Tambeyskoye field, located in the YNAO. In 2018, the second and third LNG trains were launched. In 2019, the
Group’s joint venture OOO Cryogas-Vysotsk commissioned its medium-scale natural gas liquefaction plant at the
port of Vysotsk on the Baltic sea. The Group purchases a portion of the liquefied natural gas (“LNG”) produced by
Yamal LNG and Cryogas-Vysotsk and sells it on the international markets. The Group’s LNG sales volumes are
not subject to significant seasonal fluctuations.
The Group also purchases and sells natural gas on the European market under long- and short-term supply contracts
to carry out its foreign commercial trading activities, as well as conducts LNG regasification in Poland.
The Group processes unstable gas condensate at its Purovsky Gas Condensate Processing Plant located in close
proximity to its fields into stable gas condensate and liquefied petroleum gas. The majority of stable gas condensate
is further processed at the Group’s Gas Condensate Fractionation and Transshipment Complex located at the port
of Ust-Luga on the Baltic Sea into higher-value refined products (naphtha, jet fuel, gasoil and fuel oil). The
remaining stable gas condensate volumes are sold on domestic and international markets. The Group sells its liquid
hydrocarbons at prices that are subject to fluctuations in underlying benchmark crude oil, naphtha and other gas
condensate refined products prices. The Group’s liquids sales volumes are not subject to significant seasonal
fluctuations.
In March 2019, the Group disposed a 10 percent participation interest in ООО Arctic LNG 2 to a subsidiary of
TOTAL S.A. (see Note 4). The Arctic LNG 2 project envisages the construction of three LNG trains of 6.6 million
tons per annum each based on the feedstock resources of the Salmanovskoye (Utrenneye) field located on the
Gydan peninsula.
In July 2019, the Group sold a 30 percent participation interest in OOO Arctic LNG 2 to three new participants
(10 percent to each participant): to China National Petroleum Corporation (“CNPC”) and CNOOC Limited
(through their respective subsidiaries), and to Japan Arctic LNG B.V., a joint venture of Mitsui & Co., Ltd and
Japan Oil, Gas and Metals National Corporation (“JOGMEC”). The transactions were closed in July 2019 upon
completion of the conditions precedent (see Note 4). As a result, the Group’s participation interest in OOO Arctic
LNG 2 further decreased to 60 percent.
In 2019, the Group and PAO Gazprom Neft conducted transactions on reorganizing its joint venture AO Arcticgas
aimed at obtaining by the Arcticgas’ shareholders the full ownership over certain assets (see Note 4).
16
PAO NOVATEK
2 BASIS OF PREPARATION
The accompanying consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) under the historical cost convention, as modified by the initial recognition of
financial instruments based on fair value, and by the revaluation of financial instruments categorised at fair value
through profit or loss or other comprehensive income. In the absence of specific IFRS guidance for oil and gas
producing companies, the Group has developed accounting policies in accordance with other generally accepted
accounting principles for oil and gas producing companies, mainly US GAAP, insofar as they do not conflict with
IFRS principles.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise judgment in the process of applying the Group’s accounting
policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates
are significant to the consolidated financial statements are disclosed in Note 3.
Functional and presentation currency. The consolidated financial statements are presented in Russian roubles, the
Group’s reporting (presentation) currency and the functional currency for the Company and the majority of the
Group’s subsidiaries.
Transactions denominated in foreign currencies are converted into the functional currency of each entity at the
exchange rates prevailing on the date of transactions. Monetary assets and liabilities denominated in foreign
currencies are converted into the functional currency of each entity by applying the year end exchange rate. Non-
monetary assets and liabilities denominated in foreign currencies valued at cost are converted into the functional
currency of each entity at the historical exchange rate. Non-monetary assets that are remeasured to fair value,
recoverable amount or realizable value, are converted at the exchange rate applicable to the date of remeasurement.
Exchange gains and losses resulting from foreign currency remeasurement into the functional currency are included
in profit (loss) for the reporting period.
On consolidation the assets and liabilities (both monetary and non-monetary) of the Group entities whose
functional currency is not the Russian rouble are translated into Russian roubles at the closing exchange rate at each
balance sheet date. All items included in the shareholders’ equity, other than profit or loss, are translated at
historical exchange rates. The financial results of these entities are translated into Russian roubles using exchange
rates at the dates of the transactions or the average exchange rate for the period when this is a reasonable
approximation. Exchange adjustments arising on the opening net assets and the profits for the reporting period are
taken to other comprehensive income and reported as currency translation differences in the consolidated statement
of changes in equity and the consolidated statement of comprehensive income.
Exchange rates for foreign currencies in which the Group conducted significant transactions or had significant
assets and/or liabilities in the reporting period were as follows:
Average rate for the year

ended 31 December:
Russian roubles to one currency unit At 31 December 2019 At 31 December 2018 2019 2018
US dollar (USD) 61.91 69.47 64.74 62.71

Euro (EUR) 69.34 79.46 72.50 73.95
Polish zloty (PLN) 16.24 18.48 16.87 17.36
Exchange rates and restrictions. The Russian rouble is not a fully convertible currency outside the Russian
Federation and, accordingly, any remeasurement of Russian rouble amounts to US dollars or any other currency
should not be construed as a representation that such Russian rouble amounts have been, could be, or will in the
future be converted into other currencies at these exchange rates.
Significant accounting policies. The principal accounting policies are disclosed in Note 31. In 2019, the Group
adopted all IFRS, amendments and interpretations which are effective 1 January 2019 and relevant to its operations.
None of them had material impact on the Group’s consolidated financial statements. The Group early adopted IFRS
16, Leases, starting from the annual period beginning on 1 January 2017.
Effective 1 January 2019, the Group adopted a voluntary change to its accounting policy regarding the contribution
of a subsidiary to a joint venture, a joint operation or an associate.
17
PAO NOVATEK
2 BASIS OF PREPARATION (CONTINUED)
At present, IFRS 10, Consolidated Financial Statements, and IAS 28, Investments in Associates and Joint Ventures,
set inconsistent requirements when accounting for such transactions. In accordance with IAS 28, the amount of the
unrealized gain or loss recognized resulting from the contribution of a non-monetary asset to an entity accounted
for by the equity method, is restricted to the extent of the interests attributable to the unrelated investors in the
entity. IFRS 10, however, requires full profit or loss recognition on the loss of control of a subsidiary.
Starting from 2019, the Group elected to follow IAS 28 whereas previously applied accounting policy was based on
IFRS 10. The new accounting policy was applied to the transaction on the sale of a 10 percent participating interest
in OOO Arctic LNG 2 (see Note 3).
The Group considers that the new accounting policy is more appropriate and provides more relevant information to
the users of consolidated financial statements as compared to the previously applied accounting policy to recognize
full unrealized gain immediately as this gain will eventually affect the Group’s future share in profit or loss of the
investee through the application of the equity method. Management has assessed, based on both qualitative and
quantitative factors, that retrospective application of the new accounting policy would not have a material effect on
these consolidated financial statements; therefore, comparative information was not restated.
Reclassifications. Certain reclassifications have been made to the comparative figures to conform to the current
period presentation with no effect on profit for the period or shareholder’s equity.
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
Consolidated financial statements prepared in accordance with IFRS require management to make estimates which
the Group’s management reviews on a continuous basis, by reference to past experience and other factors
considered as reasonable. Adjustments to accounting estimates and assumptions are recognized in the period in
which the estimate is revised if the change affects only that period or in the period of the revision and subsequent
periods, if both are affected. Management also makes certain judgments, apart from those involving estimations, in
the process of applying the Group’s accounting policies.
Judgments and estimates that have the most significant effect on the amounts reported in these consolidated
financial statements are described below.
Fair value of financial instruments. The fair value of financial assets and liabilities, other than financial
instruments that are traded in active markets, is determined by applying various valuation methodologies. The
Group’s management uses its judgment to make assumptions primarily based on market conditions existing at each
reporting date.
For commodity derivative contracts where observable information is not available, fair value estimations are
determined using mark-to-market analysis and other acceptable valuation methods, for which the key inputs include
future prices, volatility, price correlation, counterparty credit risk and market liquidity. Fair values of the Group’s
commodity derivative contracts and sensitivities are presented in Note 26.
In some cases, judgment is required to determine whether contracts to buy or sell commodities meet the definition
of a derivative. Contracts to buy or sell LNG are not considered to meet the definition of a derivative, as they are
not considered capable of being net settled. Therefore, such contracts are not within the scope of IFRS 9, Financial
Instruments, and are accounted for on an accruals basis.
Fair value estimation of shareholders’ loans to joint ventures is determined using benchmark interest rates adjusted
for the borrower credit risk and free cash flows from the borrower’s strategic plans approved by the shareholders of
the joint ventures. Fair values of the shareholders’ loans to joint ventures and sensitivities are presented in Note 26.
Discounted cash flow analysis is used for loans and receivables as well as debt instruments that are not traded in
active markets. The effective interest rate is determined by reference to the interest rates of financial instruments
available to the Group in active markets. In the absence of such instruments, the effective interest rate is determined
by reference to the interest rates of active market financial instruments available adjusted for the Group’s specific
risk premium estimated by management.
18
PAO NOVATEK
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (CONTINUED)
Deferred income tax asset recognition. Management assesses deferred income tax assets at each reporting date and
determines the amount recorded to the extent that realization of the related tax benefit is probable. In determining
future taxable profits and the amount of tax benefits that are probable in the future management makes judgments
and applies estimations based on prior years taxable profits and expectations of future income that are believed to
be reasonable under the circumstances.
Estimation of oil and gas reserves. Oil and gas reserves have a direct impact on certain amounts reported in the
consolidated financial statements, most notably depreciation, depletion and amortization, as well as impairment
expenses and asset retirement obligations. The Group’s principal oil and gas reserves have been independently
estimated by internationally recognized petroleum engineers whereas other oil and gas reserves of the Group have
been determined based on estimates of hydrocarbon reserves prepared by the Group’s management in accordance
with internationally recognized definitions.
Depreciation rates on oil and gas assets using the unit-of-production method are based on proved developed
reserves and total proved reserves estimated by the Group in accordance with rules promulgated by the Securities
and Exchange Commission (SEC) for proved reserves. The Group also uses estimated probable and possible
reserves to calculate future cash flows from oil and gas properties, which serve as an indicator in determining their
economic lives and whether or not property impairment is present.
A portion of the reserves estimated by the Group includes reserves expected to be produced beyond license expiry
dates. The Group’s management believes that there is requisite legislation and past experience to extend mineral
licenses at the initiative of the Group and, as such, intends to extend its licenses for properties expected to produce
beyond the current license expiry dates.
Due to the inherent uncertainties and the limited nature of reservoir data, estimates of underground reserves are
subject to change over time as additional information becomes available, such as from development drilling and
production activities or from changes in economic factors, including product prices, contract terms or development
plans. In general, estimates of reserves for undeveloped or partially developed fields are subject to greater
uncertainty over their future life than estimates of reserves for fields that are substantially developed and depleted.
As those fields are further developed, new information may lead to further revisions in reserve estimates.
Impairment of investments in joint ventures and property, plant and equipment. Management assesses whether
there are any indicators of possible impairment of investments in joint ventures and property, plant and equipment
at each reporting date based on events or circumstances that indicate that the carrying value of assets may not be
recoverable. Such indicators include changes in the Group’s business plans, changes in commodity prices leading
to unprofitable performances, changes in product mixes, and for oil and gas properties, significant downward
revisions of estimated proved reserves. When value in use calculations are undertaken, management estimates the
expected future cash flows from the asset or cash generating unit and chooses a suitable discount rate in order to
calculate the present value of those cash flows.
Pension obligations. The costs of defined benefit pension plans and related current service costs are determined
using actuarial valuations. The actuarial valuations involve making demographic assumptions (mortality rates, age
of retirement, employee turnover and disability) as well as financial assumptions (discount rates, expected rates of
return on assets, future salary and pension increases). Due to the long-term nature of these plans, such estimates are
subject to significant uncertainty.
Asset retirement obligations. The Group’s exploration, development and production activities involve the use of
wells, related equipment and operating sites, oil and gas gathering and treatment facilities and in-field pipelines.
Generally, licenses and other regulatory acts require that such assets be decommissioned upon the completion of
production, i.e. the Group is obliged to decommission wells, dismantle equipment, restore the sites and perform
other related activities. The Group’s estimates of these obligations are based on current regulatory or license
requirements, as well as actual dismantling and related costs.
19
PAO NOVATEK
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (CONTINUED)
The Group’s management believes that due to the limited history of gas and gas condensate processing plants
activities, the useful lives of these assets are indeterminable (while certain of the operating components and
equipment have definite useful lives). Because of these reasons, and the lack of clear legal requirements as to the
recognition of obligations, the present value of an asset retirement obligation for such processing facilities cannot
be reasonably estimated and, therefore, legal or contractual asset retirement obligations related to these assets are
not recognized.
In accordance with the guidelines of IFRIC 1, Changes in Existing Decommissioning, Restoration and Similar
Liabilities, the amount recognized as a provision is the best estimate of the expenditures required to settle the
present obligation at the reporting date based on current legislation where the Group’s respective operating assets
are located, and is subject to change because of modifications, revisions and changes in laws and regulations and
their interpretation thereof. Estimating future asset retirement obligations is complex and requires management to
make estimates and judgments with respect to removal obligations that will occur many years in the future.
Fair value assessment of investment in OOO Arctic LNG 2. As further discussed in Note 4, as a result of the sale
of a 10 percent participation interest in Arctic LNG 2 to TOTAL S.A. in March 2019, the Group’s control over
Arctic LNG 2 was replaced by joint control.
In accordance with IAS 28, Investments in Associates and Joint Ventures, the Group recognized a gain resulting
from the remeasurement at fair value of the participation interest retained to the extent of the unrelated investor’s
interest in the new joint venture. The fair value of the investment in Arctic LNG 2 was calculated based on a
discounted cash flow model for the Arctic LNG 2 project including a number of key assumptions, the sensitivities
of which are disclosed in Note 4.
4 ACQUISITIONS AND DISPOSALS
Disposal of a 10 percent participation interest in OOO Arctic LNG 2 in March 2019
In May 2018, NOVATEK and TOTAL S.A. agreed in principle on the acquisition by TOTAL S.A. group of a
10 percent participation interest in OOO Arctic LNG 2 and joint control over the entity upon closing the
transaction. Arctic LNG 2 undertakes a project to construct a new LNG plant on the Gydan peninsula based on the
hydrocarbon resources of the Salmanovskoye (Utrenneye) field (the “Project”). In July 2018, the NOVATEK’s
Board of Directors approved the sale of a 10 percent participation interest in OOO Arctic LNG 2 to TOTAL S.A.
group.
At 31 December 2018, in accordance with IFRS 5, Non-current Assets Held for Sale and Discontinued Operations,
assets and liabilities related to the Arctic LNG 2 project, excluding intercompany balances, have been classified as
assets and liabilities held for sale:
At 31 December 2018
Property, plant and equipment 53,955

Other non-current assets 3,829
Prepayments and other current assets 3,636
Total assets classified as held for sale 61,420
Non-current liabilities 3,539

Current liabilities 1,342
Total liabilities associated with assets held for sale 4,881
No impairment of assets was identified as a result of the decision to sell an interest in this entity.
In March 2019, the Group entered into an agreement to sell a 10 percent participation interest in OOO Arctic
LNG 2 (the “Sales Contract”) to TOTAL E&P Salmanov, a wholly owned subsidiary of TOTAL S.A.
20
PAO NOVATEK
4 ACQUISITIONS AND DISPOSALS (CONTINUED)
As a part of the transaction on the sale of a 10 percent participation interest in Arctic LNG 2, total consideration to
be paid by TOTAL E&P Salmanov comprises the following:
 cash payments to the Group of USD 1,300 million equivalent, of which USD 600 million equivalent was paid
upon the transaction closing date and the remaining amount to be paid within twelve months from that date;
 contingent cash consideration to the Group consisting of tranches in total of up to USD 800 million equivalent
depending on average crude oil benchmark prices level for the year preceding each payment. The contingent
payments dates are linked to the dates of launching the Project’s LNG trains;
 capital contributions to OOO Arctic LNG 2 (in the form of contributions to the assets) ranging from USD 363
million to USD 863 million equivalent (these amounts are presented, in particular, taking into account
revisions made upon the entry of the three additional participants to the Project in July 2019, see below) with
the terms and payment amounts depending on the Project’s capital expenditure program determined upon the
results of the Final Investment Decision (“FID”) and the date of production launch at the Project’s first LNG
train.
The Group retained a 90 percent participation interest in Arctic LNG 2 after closing the transaction; at the same
time, the terms of the transaction stipulate that key strategic, operational and financial decisions are subject to
unanimous approval by participants. As a result of these changes, upon closing the transaction, the Group’s control
over Arctic LNG 2 was replaced by joint control. The Group determined Arctic LNG 2 to be a joint venture and
accounts for the investment retained under the equity method.
The Group treated the transaction on the sale of a 10 percent participation interest in OOO Arctic LNG 2 as a
contribution of a non-monetary asset to a newly formed joint venture. In accordance with IAS 28, Investments in
associates and joint ventures, the Group recognized within the gain on the transaction the part of a gain resulting
from the remeasurement at fair value of the participation interest retained only to the extent of the unrelated
investor’s interest in the new joint venture.
The following table summarizes the consideration details and shows the components of the gain on disposal of a
10 percent participation interest in Arctic LNG 2:
RR million
Cash payment 85,540

Contingent consideration (1) 35,810
Capital contributions (2) (at 90 percent) 40,446
Total consideration 161,796

Less: carrying amount of the Group’s 10 percent interest in the net assets (3,382)
Add: fair value adjustment relating to the retained investment in joint venture 1,501,643
Less: elimination of a 90 percent of the fair value adjustment (1,351,479)
Gain on the sale of a 10 percent participation interest 308,578

(1)
– Estimated based on assumptions regarding a discount rate, long-term crude oil prices forecasts and the Project’s realization
schedule.
(2)
– Estimated based on assumptions regarding a discount rate, future capital expenditure and the Project’s realization schedule.
Gain on the disposal of a 10 percent participation interest amounted to RR 308,578 million, before associated
income tax (current and deferred) of RR 37,372 million.
21
PAO NOVATEK
The fair value of the investment in Arctic LNG 2 was based on a discounted cash flow model for the Arctic LNG 2
project. The significant assumptions in the discounted cash flow model included: forecasted prices for liquefied
natural gas (“LNG”); anticipated production volumes; future capital expenditures required to build necessary
infrastructure and drill production wells; and the discount factor used in the fair value calculation. The key
sensitivities in relation to the discounted cash flows are:
• future LNG prices were based on benchmark natural gas prices at the major natural gas hubs and benchmark
crude oil prices using forecasted growth rates. If these estimated future crude oil prices were to decrease by
one percent for each year in the cash flow projection then, assuming that other parameters remain unchanged,
the fair value of the retained interest in Arctic LNG 2 and the gain on the transaction would be reduced by
RR 36,731 million and RR 3,673 million, respectively;
• future production was based on expected Project capacity. If production volumes were to be one percent lower
in the cash flow projection then, assuming that other parameters remain unchanged, the fair value of the
retained interest in Arctic LNG 2 and the gain on the transaction would be reduced by RR 17,719 million and
RR 1,772 million, respectively;
• future capital expenditure over the Project’s life has been estimated based on preliminary engineering and cost
estimates. If the level of capital expenditure were to be one percent higher in the cash flow projection then,
assuming that other parameters remain unchanged, the fair value of the retained interest in Arctic LNG 2 and
the gain on the transaction would be reduced by RR 8,871 million and RR 887 million, respectively; and
• the discount rate was assumed to be 9.4 percent (in US dollar terms). If the discount rate was increased by half
of one percent (to 9.9 percent) then, assuming that other parameters remain unchanged, the fair value of the
retained interest in Arctic LNG 2 and the gain on the transaction would be reduced by RR 152,748 million and
RR 15,275 million, respectively.
Below is a breakdown of major classes of assets and liabilities of OOO Arctic LNG 2 at the date of disposal:
RR million

Other non-current assets 4,486
Cash and cash equivalents 15,990
Other current assets 5,714
Long-term debt (58,329)
Other non-current liabilities (3,546)
Other current liabilities (3,596)
Total identifiable net assets at disposal 33,821
The following table reconciles the carrying value of net assets of OOO Arctic LNG 2 at the date of disposal and the
carrying value of the retained investment in the entity recorded under the equity method of accounting:
RR million
Carrying value of the net assets at disposal 33,821

Add: Group’s proportion of proceeds from future capital contributions 40,446
Less: carrying amount of the Group’s 10 percent interest in the net assets (3,382)
Add: fair value adjustment relating to the retained investment in joint venture 1,501,643
Less: elimination of 90 percent of the fair value adjustment (1,351,479)
The carrying value of the retained 90 percent participation interest 221,049

Less: reclassification of a 30 percent participating interest to assets held for sale (73,683)
The carrying value of equity investment at the transaction closing date 147,366
22
PAO NOVATEK
At the transaction closing date, the conditions for recognition of a 30 percent participation interest in Arctic LNG 2
as an asset held for sale in accordance with IFRS 5, Non-current Assets Held for Sale and Discontinued
Operations, have been met.
The carrying value of the asset held for sale of RR 73,683 million was determined based on the carrying value of
the retained participation interest recognized upon closing the transaction as presented above. In accordance with
IAS 12, Income taxes, the Group recorded associated deferred tax liability in the amount of RR 13,510 million,
calculated as the difference between that carrying value and its tax base, included in the total income tax expense
related to the transaction disclosed above. No impairment of assets was identified as a result of the decision to sell
an interest in this entity.
Disposal of a 30 percent participation interest in OOO Arctic LNG 2 in July 2019
In June 2019, the Group signed agreements with CNPC, CNOOC Limited, Mitsui & Co., Ltd. and JOGMEC on
entering the Arctic LNG 2 project. In accordance with these agreements, CNODC Dawn Light Limited and CEPR
Limited, respective subsidiaries of CNPC and CNOOC Limited, and Japan Arctic LNG B.V., a joint venture of
Mitsui & Co. Ltd. and JOGMEC, each acquired a 10 percent participation interest in ООО Arctic LNG 2 on the
terms similar to the aforementioned terms for TOTAL S.A.’s entrance to the Project. The transactions were closed
in July 2019 upon the completion of the conditions precedent.
As a result of these transactions, the Group’s interest in Arctic LNG 2 is 60 percent. As key strategic, operational
and financial decisions are subject to unanimous approval by the participants, the Group continues recognising the
company to be a joint venture and accounts for this investment under the equity method.
The following table summarizes the consideration details and shows the components of the gain on disposal of an
additional 30 percent participation interest in Arctic LNG 2 in July 2019:
RR million
Cash payment 245,331

Contingent consideration (1) 101,689
Capital contributions (2) (at 60 percent) 93,053
Total consideration 440,073

Less: carrying amount of the Group’s disposed 30 percent
participation interest classified as held for sale (73,683)
Gain on the sale of 30 percent participation interest 366,390

(1)
– Estimated based on assumptions regarding a discount rate, long-term crude oil prices forecasts and the Project’s realization
schedule.
(2)
– Estimated based on assumptions regarding a discount rate, future capital expenditure and the Project’s realization schedule.
Gain on the disposal of a 30 percent participation interest amounted to RR 366,390 million, before associated
income tax (current and deferred) of RR 54,668 million.
The total gain on disposal of a 40 percent participation interest in Arctic LNG 2 in 2019 amounted to
RR 674,968 million, before associated income tax (current and deferred) of RR 92,040 million.
Reorganization of AO Arcticgas
At the end of 2018, the Group and PAO Gazprom Neft agreed on series of transactions on reorganizing its joint
venture AO Arcticgas aimed at obtaining by the Arcticgas’ shareholders the full ownership over certain assets.
Under this agreement, in February 2019, the Group made a contribution of 100 percent participation interest in
OOO NOVATEK-Yarsaleneftegas, the holder of the license for exploration and production of hydrocarbons within
the Malo-Yamalsky license area, to the capital of Arcticgas. The carrying value of the net assets of NOVATEK-
Yarsaleneftegas at the disposal date was RR 2.2 billion.
23
PAO NOVATEK
Three subsidiaries were then carved out from Arcticgas: two subsidiaries, to which licenses for North-Chaselskiy
and Yevo-Yakhinskiy license areas were transferred, in favor of the Group, and one subsidiary, the holder of the
license for Malo-Yamalskiy license area, in favor of Gazprom Neft.
Reorganization transactions were completed in October 2019. The Group recognized a gain of RR 7.8 billion from
the reorganization recorded in the line item “Gain on disposal of interests in subsidiaries and joint ventures” in the
consolidated statement of income:
RR million
Fair value of investments in new subsidiaries 19,650

Less: carrying value of the net assets of NOVATEK-Yarsaleneftegas (2,163)
Less: Group’s share in a decrease in the net assets of Arcticgas (9,722)
Gain on reorganization 7,765
The fair value of investments in new subsidiaries has been allocated to property, plant and equipment, primarily to
the licences cost, and respective deferred tax liabilities (See Note 5).
Acquisition of AO Geotransgas and OOO Urengoyskaya gasovaya companiya
In February 2018, upon the results of an auction held by AK ALROSA (PAO), the Group acquired 100 percent
participation interests in Maretiom Investments Limited and Velarion Investments Limited for total cash
consideration of RR 30.3 billion. These companies owned 100 percent participation interests in AO Geotransgas
(renamed to AO NOVATEK-Pur in November 2018) and OOO Urengoyskaya gasovaya companiya (merged
into OOO NOVATEK-Yurkharovneftegas in January 2019), which held the licenses for exploration and production
of hydrocarbons within the Beregovoy and Ust-Yamsoveyskiy license areas located in YNAO, respectively.
In accordance with IFRS 3, Business Combinations, the Group assessed fair values of the identified assets and
liabilities of the acquired companies at the acquisition date:
Fair values at the acquisition date

Other non-current assets 220
Other current assets 195
Cash and cash equivalents 424
Deferred income tax liabilities (4,531)
Long-term debt (1,007)
Other non-current liabilities (417)
Trade payables and accrued liabilities (858)
Total identifiable net assets 30,300

Purchase consideration (30,300)
Goodwill -
For the period from the date of acquisition to 31 December 2018, the acquired companies contributed
RR 4.2 billion to the Group’s revenues. The financial and operational activities of the acquired companies would
have increased the Group’s revenues for 2018 by an additional RR 0.8 billion, if the acquisition had occurred in
January 2018.
24
PAO NOVATEK
Acquisition of OOO Chernichnoye
In January 2018, the Group acquired a 100 percent participation interest in OOO Chernichnoye for RR 616 million.
OOO Chernichnoye is a holder of the license for exploration and production of hydrocarbons within the
Chernichniy license area located in YNAO. OOO Chernichnoye had no notable operating activities at and before
the acquisition date and, accordingly, this acquisition is outside the definition of business as defined in IFRS 3,
Business Combinations. The cost of the acquisition has been allocated to property, plant and equipment, primarily
to the license cost.
Disposal of an ownership interest in AO Arcticgas
At 31 December 2017, the Group held an effective 53.3 percent participation interest in AO Arcticgas through two
of the Group’s other joint ventures, OOO SeverEnergia and OOO Yamal Development. SeverEnergia was owned
by the Group (a 6.7 percent participation interest) and Yamal Development (a 93.3 percent participation interest).
Yamal Development was a joint venture of the Group and PAO Gazprom Neft with a 50 percent participation
interest held by each investor. Arcticgas was a wholly owned subsidiary of SeverEnergia.
In the first quarter of 2018, the Group and Gazprom Neft completed the final stage of the previously commenced
restructuring procedures to achieve parity shareholdings in Arcticgas. In January 2018, Yamal Development and
SeverEnergia were merged with Arcticgas. As a result, the Group and Gazprom Neft obtained direct participation
interests in Arcticgas of 53.3 percent and 46.7 percent, respectively. Subsequently, in March 2018, Gazprom Neft
subscribed to Arcticgas’s additional share emission for a total cash consideration of RR 32,098 million. As a result
of the aforementioned transactions, the Group’s participation interest in Arcticgas decreased from 53.3 to
50 percent and the Group recognized a gain on the disposal of the 3.3 percent ownership interest in Arcticgas in the
amount of RR 1,645 million.
The Group continues to exercise joint control over Arcticgas and recognizes it as a joint venture, and, accordingly,
accounts for this investment under the equity method.
25
PAO NOVATEK
5 PROPERTY, PLANT AND EQUIPMENT
Movements in property, plant and equipment, for the reporting periods are as follows:
Assets under
Oil and gas construction
properties and and advances
equipment for construction Other Total
Cost 479,569 38,926 16,709 535,204

Accumulated depreciation,
depletion and amortization (171,325) - (3,828) (175,153)
Net book value at 1 January 2018 308,244 38,926 12,881 360,051
Additions 3,671 94,813 - 98,484

Transfers 21,451 (23,104) 1,653 -
Acquisition of subsidiaries (see Note 4) 31,878 4,827 215 36,920
Change in asset retirement costs 1,375 - - 1,375
Depreciation, depletion and amortization (32,307) - (886) (33,193)
Reclassification to assets held for sale (see Note 4) (18,469) (35,431) (55) (53,955)
Disposals, net (697) (2,109) (504) (3,310)
Currency translation differences 1,764 31 34 1,829
Cost 525,089 77,953 17,949 620,991

Net book value at 31 December 2018 316,910 77,953 13,338 408,201
Additions 6,676 170,309 - 176,985

Transfers 58,000 (62,993) 4,993 -
Reorganization (see Note 4) 18,605 3,165 - 21,770
Change in asset retirement costs 3,552 - - 3,552
Depreciation, depletion and amortization (30,805) - (1,066) (31,871)
Reclassification to assets held for sale (see Note 4) - (18,761) (386) (19,147)
Disposals, net (489) (893) (119) (1,501)
Currency translation differences (1,124) (37) (30) (1,191)
Cost 609,958 168,743 22,294 800,995

Net book value at 31 December 2019 371,325 168,743 16,730 556,798
At 31 December 2018, property, plant and equipment in the amount of RR 53,955 million related to the Arctic
LNG 2 project, were reclassified to assets held for sale. Included in additions to property, plant and equipment for
the year ended 31 December 2019 are RR 19,147 million related to the Arctic LNG 2 project and incurred until the
date of the disposal of a 10 percent participation interest in OOO Arctic LNG 2 to TOTAL S.A. group (see Note 4).
Included in additions to property, plant and equipment for the years ended 31 December 2019 and 2018 are
capitalized interest and foreign exchange differences of RR 5,903 million and RR 7,395 million, respectively.
Included within assets under construction and advances for construction are advances to suppliers for construction
and equipment of RR 44,070 million and RR 15,526 million at 31 December 2019 and 2018, respectively.
In 2019, as a result of the reorganization of AO Arcticgas, the Group consolidated assets relating to the North
Chaselsky and Yevo Yakhinsky license areas and recorded a disposal of assets relating to the Malo Yamalsky
license area. The respective net increase in the carrying value of property, plant and equipment amounted to
RR 21,770 million (see Note 4).
26
PAO NOVATEK
5 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
In December 2019, the Group purchased through auctions oil and gas exploration and production licenses for the
South-Yamburgskiy, East-Ladertoyskiy and Bukharinskiy license areas located in the YNAO for the total amount
of RR 3,493 million, of which RR 3,176 million were paid at the reporting date as the auction’s participation fees
and included within assets under construction and advances for construction.
In August 2019, the Group won an auction for oil and gas exploration and production license for the license area
including the Soletskoye-Khanaveyskoye field located on the Gydan peninsula in the YNAO for a payment of
RR 2,586 million, which was included within oil and gas properties and equipment.
In November 2018, the Group won an auction for an oil and gas exploration and production license for the South-
Leskinskiy license area located on the Gydan peninsula in the YNAO for the total amount of RR 2,041 million, of
which RR 35 million was paid in 2018 and included within assets under construction and advances for construction
at 31 December 2018. The remaining amount of RR 2,006 million was paid after the state registration of the license
in January 2019.
In March 2018, the Group won an auction for an oil and gas exploration and production license for the Payutskiy
license area located in Krasnoyarsk Territory for a payment of RR 66 million, which was included within oil and
gas properties and equipment.
The table below summarizes the Group’s carrying values of total acquisition costs of proved and unproved
properties included in oil and gas properties and equipment:
At 31 December 2019 At 31 December 2018
Proved properties acquisition costs 100,495 71,087

Less: accumulated depreciation, depletion
and amortization of proved properties acquisition costs (20,463) (19,197)
Unproved properties acquisition costs 10,997 11,947
Total acquisition costs 91,029 63,837
The Group’s management believes these costs are recoverable as the Group plans to explore and develop the
respective fields.
Reconciliation of depreciation, depletion and amortization (DDA):

2019 2018
Depreciation, depletion and amortization of property, plant and equipment 31,871 33,193
Add: DDA of intangible assets 714 622
Less: DDA capitalized in the course of intra-group construction services (355) (721)
DDA as presented in the consolidated statement of income 32,230 33,094
At 31 December 2019 and 2018, no property, plant and equipment were pledged as security for the Group’s
borrowings. No impairment was recognized in respect of oil and gas properties and equipment for the years ended
31 December 2019 and 2018.
Capital commitments are disclosed in Note 27.
27
PAO NOVATEK
5 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Leases. Included in property, plant and equipment at 31 December 2019 and 2018 are the right-of-use assets
primarily related to long-term agreements on time chartering of marine tankers. Movements in the carrying
amounts of the right-of-use assets are as follows:
Oil and gas properties

and equipment Other Total
Net book value at 1 January 2018 6,634 611 7,245
Additions 2,308 172 2,480

Depreciation, depletion and amortization (1,677) (219) (1,896)
Reclassification to assets held for sale - (15) (15)
Other movements 1,731 25 1,756
Net book value at 31 December 2018 8,996 574 9,570
Additions 4,196 95 4,291

Depreciation, depletion and amortization (2,278) (180) (2,458)
Other movements (1,169) (23) (1,192)
Net book value at 31 December 2019 9,745 466 10,211
The maturity analysis of lease liabilities is disclosed in Note 26.
Exploration for and evaluation of mineral resources. The amounts of assets, liabilities, expense and cash flows
arising from the exploration and evaluation of mineral resources comprise the following:

2019 2018
Net book value of assets at 1 January 19,311 17,805

Additions 18,526 5,417
Acquisition of subsidiaries - 14
Reorganisation (see Note 4) (1,176) -
Reclassification to proved properties and development expenditures (16,279) (3,685)
Reclassification to assets held for sale - (240)
Net book value of assets at 31 December 20,382 19,311
Liabilities 1,375 1,938

Cash flows used for operating activities 8,807 7,012
Cash flows used for investing activities 17,944 4,463
For the years ended 31 December 2019 and 2018, the Group has recognized exploration expenses within operating
expenses in the amount of RR 8,386 million and RR 7,012 million, respectively. These expenses included
employee compensations in the amount of RR 431 million and RR 207 million, respectively.
28
PAO NOVATEK
6 INVESTMENTS IN JOINT VENTURES
Joint ventures:
OOO Arctic LNG 2 247,450 -
OAO Yamal LNG 150,943 48,378
AO Arcticgas 132,399 146,631
ZAO Nortgas 44,372 44,064
ZAO Terneftegas 6,394 2,434
OOO Cryogas-Vysotsk 3,511 2,991
Rostock LNG GmbH 225 2
OOO SMART LNG 46 -
Total investments in joint ventures 585,340 244,500
The Group considers that Arctic LNG 2, Yamal LNG, Arcticgas, Nortgas, Terneftegas, Cryogas-Vysotsk, Rostock
LNG GmbH and SMART LNG constitute jointly controlled entities based on existing contractual arrangements.
The charters and/or participants’ agreements of these entities stipulate that strategic and/or key decisions of a
financial, operating and capital nature require effectively the unanimous approval by all participants or by a group
of participants. The Group accounts for its interests in joint ventures under the equity method.
OOO Arctic LNG 2. In March 2019, the Group sold a 10 percent participation interest in OOO Arctic LNG 2, a
Group’s subsidiary at that time, to TOTAL S.A. (see Note 4).
In July 2019, the Group sold a 30 percent participation interest in OOO Arctic LNG 2 to CNPC, CNOOC Limited
and Japan Arctic LNG B.V. (see Note 4).
The Group retained a 60 percent participation interest in Arctic LNG 2 upon the completion of the transactions and
exercises joint control over the entity. The Group has determined Arctic LNG 2 to be a joint venture and accounts
for this investment under the equity method.
OAO Yamal LNG. The Group holds a 50.1 percent ownership in Yamal LNG, along with TOTAL S.A.
(20 percent), CNPC (20 percent) and Silk Road Fund Co. Ltd. (9.9 percent). Yamal LNG undertakes the project to
construct and operate LNG Plant based on the hydrocarbon resources of the South-Tambeyskoye field, located in
the YNAO. Annual capacity of the LNG plant after launching the four LNG trains will aggregate 17.4 million tons
of LNG (5.5 million tons for each of the first three LNG trains and 0.9 million tons for the fourth LNG train) and
up to 1.2 million tons of stable gas condensate. The first LNG train began production in the fourth quarter of 2017,
the second and the third trains – in July and November 2018, respectively.
At 31 December 2019 and 2018, the Group’s 50.1 percent ownership in Yamal LNG was pledged in connection
with credit line facility agreements signed by Yamal LNG with a number of Russian and foreign banks to obtain
external project financing.
AO Arcticgas. Arcticgas operates the Samburgskoye, Urengoyskoye and Yaro-Yakhinskoye fields, located in the
YNAO.
In the first quarter of 2018, the Group and Gazprom Neft completed the final stage of the previously commenced
restructuring procedures to achieve parity shareholdings in Arcticgas. As a result, Yamal Development and
SeverEnergia were merged with Arcticgas, and the Group’s participation ownership in Arcticgas was reduced to
50 percent (see Note 4).
ZAO Nortgas. The Group holds a 50 percent ownership in Nortgas, its joint venture with PAO Gazprom Neft.
Nortgas operates the North-Urengoyskoye field, located in the YNAO.
ZAO Terneftegas. The Group holds a 51 percent ownership in Terneftegas, its joint venture with TOTAL S.A.
Terneftegas operates the Termokarstovoye field, located in the YNAO.
29
PAO NOVATEK
6 INVESTMENTS IN JOINT VENTURES (CONTINUED)
OOO Cryogas-Vysotsk. The Group holds a 51 percent participation interest in Cryogas-Vysotsk, its joint venture
with AO Gazprombank group. Cryogas-Vysotsk operates the first train of a medium-scale LNG plant with annual
capacity of 660 thousand tons, located at the port of Vysotsk on the Baltic Sea.
In March 2019, Cryogas-Vysotsk commenced initial LNG production at the first train of its medium-scale LNG
plant and in April 2019 reached nameplate capacity.
At 31 December 2019 and 2018, the Group’s 51 percent participation interest in Cryogas-Vysotsk was pledged in
connection with credit line facility agreements signed by the joint venture with a Russian bank to obtain external
project financing.
Rostock LNG GmbH. The Group holds a 49 percent ownership interest in Rostock LNG GmbH, its joint venture
with Fluxys Germany Holding GmbH. The joint venture plans to construct a mid-scale LNG transshipment
terminal with capacity of approximately 300 thousand tons per annum located in the port of Rostock in Germany.
OOO SMART LNG. From October 2019, the Group holds a 50 percent participation interest in OOO SMART
LNG, its joint venture with PAO Sovcomflot. SMART LNG will lease Arctic ice-class LNG tankers, ensuring
transportation from the Arctic LNG 2 project.
The table below summarizes the movements in the carrying amounts of the Group’s investments in joint ventures:

2019 2018
At 1 January 244,500 285,326

Share of profit from operations 139,065 124,211
Share of finance income (expense) 40,432 (160,836)
Share of total income tax benefit (expense) (30,259) (633)
Share of profit (loss) of joint ventures, net of income tax 149,238 (37,258)
Share of other comprehensive income (loss) of joint ventures 451 (465)
Sale of interests in subsidiaries resulting in the recognition
of investments in joint ventures (see Note 4) 147,366 -
Sale of interests in joint ventures (see Note 4) 93,053 1,645
Acquisitions of joint ventures - 2
Reorganization (see Note 4) (9,722) -
Group’s costs capitalized in investments 1,457 1,378
Effect from initial measurement of loans provided by the Group to joint
ventures (see Note 26) net of deferred income tax 1,992 -
Effect from other changes in joint ventures’ net assets 4,774 -
Capital contributions 298 -
Dividends from joint ventures (46,550) (8,500)
Elimination of the Group’s share in profits of joint ventures
from hydrocarbons balances purchased by the Group
from joint ventures and not sold at the reporting date (1,517) 2,372
At 31 December 585,340 244,500
For the years ended 31 December 2019 and 2018, the Group recorded commission fees in the amount of
RR 1,457 million and RR 1,378 million, respectively, for the guarantee received from the State Development
Corporation VEB.RF (see Note 27) as an increase to the investment in Yamal LNG.
30
PAO NOVATEK
For the year ended 31 December 2019, the capital of OOO Arctic LNG 2 was increased by RR 107,938 million
through the cash contributions made by other participants in the form of contributions to the assets representing a
part of the consideration for the disposal of a 40 percent participation interest in OOO Arctic LNG 2 (see Note 4).
The difference between the Group’s share in the contributions made and the amount previously recognized within
the investment in OOO Arctic LNG 2 comprised RR 1,789 million and was recorded as an increase in the
investment in OOO Arctic LNG 2, with the corresponding effect recognized in the consolidated statement of
changes in equity in accordance with the Group’s accounting policy. The Group’s participation interest in
OOO Arctic LNG 2 did not change as a result of these transactions.
For the year ended 31 December 2019, the Group recorded an increase in equity in the amount of RR 2,985 million
from remeasurement of the loans (net of deferred income tax) provided to OOO Arctic LNG 2 by other
participants.
In 2019, the capital of Rostock LNG GmbH was increased through proportional contributions by its participants
totaling RR 506 million, of which RR 248 were contributed by the Group.
In October 2019, the Group established OOO SMART LNG, a joint venture with PAO Sovcomflot, through
proportional contributions by its participants totaling RR 100 million, of which RR 50 million were paid by the
Group.
In 2019, Arcticgas declared dividends in the total amount of RR 92 billion, of which RR 46 billion were
attributable to NOVATEK. Dividends in the amount of RR 91 billion, of which RR 45.5 billion were attributable to
NOVATEK, were paid in 2019, and the remaining amount was paid in January 2020.
In 2019 and 2018, Nortgas declared and paid dividends in the amount of RR 1,100 million and RR 17,001 million,
of which RR 550 million and RR 8,500 million, respectively, were attributable to NOVATEK.
The Group eliminates its share in profits of joint ventures from natural gas and liquid hydrocarbons balances
purchased by the Group from its joint ventures and not sold at the reporting date.
For the year ended 31 December 2019, the summarized statements of financial position and statements of
comprehensive income (loss) for the Group’s principal joint ventures are as follows:
At 31 December 2019 Arctic LNG 2 Arcticgas Yamal LNG Nortgas
Property, plant and equipment

and materials for construction 415,122 400,614 2,392,117 125,638
Other non-current non-financial assets 122 13 1,341 34
Non-current financial assets - 69 - 13
Total non-current assets 415,244 400,696 2,393,458 125,685
Cash and cash equivalents 58,601 5,265 23,281 1,266
Other current financial assets 125 21,737 25,821 2,146
Current non-financial assets 19,561 9,625 33,470 374
Total current assets 78,287 36,627 82,572 3,786
Non-current financial liabilities (126,606) (66,197) (1,958,446) (9,654)
Non-current non-financial liabilities (39,823) (51,296) (44,542) (23,186)
Total non-current liabilities (166,429) (117,493) (2,002,988) (32,840)
Trade payables and accrued liabilities (9,579) (15,760) (15,386) (551)
Other current financial liabilities (75) (28,804) (152,757) (5,821)
Current non-financial liabilities (101) (10,468) (3,453) (1,515)
Total current liabilities (9,755) (55,032) (171,596) (7,887)
Net assets 317,347 264,798 301,446 88,744
31
PAO NOVATEK
For the year ended 31 December 2019 Arctic LNG 2 Arcticgas Yamal LNG Nortgas
Revenues 36 196,191 324,018 21,137

Depreciation, depletion and amortization - (22,523) (102,403) (7,893)
Profit (loss) from operations (485) 103,573 164,106 3,765
Interest expense (77) (5,389) (126,627) (1,709)
Change in fair value of
non-commodity financial instruments (581) - (9,231) -
Foreign exchange gain (loss), net 1,702 1 213,509 -
Profit (loss) before income tax 574 99,400 242,139 2,216
Income tax benefit (expense) (120) (16,337) (41,309) (447)
Profit (loss), net of income tax 454 83,063 200,830 1,769
Other comprehensive income (loss) (11) (84) 1,092 (53)
Total comprehensive income (loss) 443 82,979 201,922 1,716
The information above reflects the amounts presented in the financial statements of the joint ventures adjusted for
differences in accounting policies between the Group and the joint ventures.
Reconciliation of the summarized financial information presented to the Group’s share in net assets of the joint
ventures:
As at and for the year ended 31 December 2019 Arctic LNG 2 Arcticgas Yamal LNG Nortgas
Net assets at 1 January 2019 - 293,263 96,614 88,128

Profit (loss), net of income tax 454 83,063 200,830 1,769
Other comprehensive loss (11) (84) 1,092 (53)
Sale of interests in subsidiaries (see Note 4) 200,673 - - -
Capital contributions 107,938 - - -
Reorganization (see Note 4) - (19,444) - -
Other equity movements 8,293 - 2,910 -
Dividends - (92,000) - (1,100)
Net assets at 31 December 2019 317,347 264,798 301,446 88,744

Ownership 60% 50% 50.1% 50%
Group’s share in net assets 190,408 132,399 150,943 44,372
At 31 December 2019, the Group’s investment in OOO Arctic LNG 2 totaled RR 247,450 million, which differed
from its share in the net assets of Arctic LNG 2. This difference of RR 57,042 million related to the Group’s share
in the future cash payments in the form of capital contributions by other participants representing a part of the
consideration for the disposal of a 40 percent interest in OOO Arctic LNG 2 (see Note 4).
32
PAO NOVATEK
For the year ended 31 December 2018, the summarized statements of financial position and statements of
comprehensive income (loss) for the Group’s principal joint ventures are as follows:
At 31 December 2018 Arcticgas Yamal LNG Nortgas
Property, plant and equipment and materials for construction 400,606 2,155,305 130,956
Other non-current non-financial assets 13 828 36
Non-current financial assets 70 - 9
Total non-current assets 400,689 2,156,133 131,001
Cash and cash equivalents 27,139 8,407 1,151
Other current financial assets 27,595 37,685 2,053
Current non-financial assets 2,117 32,213 444
Total current assets 56,851 78,305 3,648
Non-current financial liabilities (65,160) (1,832,224) (15,435)
Non-current non-financial liabilities (46,800) (24,312) (23,504)
Total non-current liabilities (111,960) (1,856,536) (38,939)
Trade payables and accrued liabilities (12,868) (36,558) (468)
Other current financial liabilities (28,615) (244,567) (5,587)
Current non-financial liabilities (10,834) (163) (1,527)
Total current liabilities (52,317) (281,288) (7,582)
Net assets 293,263 96,614 88,128
For the year ended 31 December 2018 Arcticgas Yamal LNG Nortgas
Revenues 195,066 181,835 23,339

Depreciation, depletion and amortization (21,219) (31,253) (7,288)
Profit from operations 108,904 129,722 6,623
Interest expense (7,163) (63,350) (2,142)
Change in fair value of non-commodity financial instruments - (24,624) -
Foreign exchange gain (loss), net (7) (216,255) -
Profit (loss) before income tax 102,971 (174,202) 5,162
Income tax benefit (expense) (17,056) 16,477 (1,059)
Profit (loss), net of income tax 85,915 (157,725) 4,103
Other comprehensive income (loss) (95) (798) (11)
Total comprehensive income (loss) 85,820 (158,523) 4,092
The information above reflects the amounts presented in the financial statements of the joint ventures adjusted for
differences in accounting policies between the Group and the joint ventures.
33
PAO NOVATEK
Reconciliation of the summarized financial information presented to the Group’s share in net assets of the joint
ventures:
As at and for the year ended 31 December 2018 Arcticgas Yamal LNG Nortgas
Net assets at 1 January 2018 180,630 252,385 101,037

Profit (loss), net of income tax 85,915 (157,725) 4,103
Other comprehensive loss (95) (798) (11)
Restructuring (see Note 4) 26,813 - -
Other equity movements - 2,752 -
Dividends - - (17,001)
Net assets at 31 December 2018 293,263 96,614 88,128

Ownership 50% 50.1% 50%
Group’s share in net assets 146,631 48,378 44,064
7 LONG-TERM LOANS AND RECEIVABLES
The following table presents long-term loans (including interest accrued) and receivables:
Long-term loans receivable 282,310 272,901

Other long-term receivables 403 407
Total 282,713 273,308

Less: current portion of long-term loans receivable (50,815) (40,386)
Total long-term loans and receivables 231,898 232,922
The Group’s long-term loans receivable by borrowers are as follows:
OAO Yamal LNG 199,623 265,606

OOO Arctic LNG 2 76,085 -
OOO Cryogas-Vysotsk 6,521 6,012
ZAO Terneftegas 81 1,283
Total long-term loans receivable 282,310 272,901
OAO Yamal LNG. In prior years the Group provided US dollar and Euro credit line facilities to Yamal LNG, the
Group’s joint venture. In 2018, the shareholders opened additional credit line facilities denominated in Euros to
finance construction of the LNG plant’s fourth train. The loans interest rates are set based on market interest rates,
interest rates on borrowings of shareholders and/or combination thereof. The repayment schedules are linked to free
cash flows of the joint venture.
For the year ended 31 December 2019, Yamal LNG repaid to the Group a part of the loans and accrued interest in
the amount of RR 65,210 million.
OOO Arctic LNG 2. The Group provided Euro credit line facilities to Arctic LNG 2, the Group’s joint venture. The
loans interest rates are set based on market interest rates and interest rates on borrowings of participants. The
repayment schedules are linked to free cash flows of the joint venture.
34
PAO NOVATEK
7 LONG-TERM LOANS AND RECEIVABLES (CONTINUED)
OOO Cryogas-Vysotsk. The Group provided Russian rouble denominated loans under agreed credit line facilities
to Cryogas-Vysotsk, the Group’s joint venture. The loans are repayable not later than 2033 and bear variable
interest rates.
ZAO Terneftegas. The Group provided US dollar denominated loans to Terneftegas, the Group’s joint venture. The
loans interest rate is set based on market interest rates and interest rates on borrowings of shareholders. The
repayment schedule is linked to free cash flows of the joint venture.
For the years ended 31 December 2019 and 2018, Terneftegas repaid to the Group a part of the loans and accrued
interest in the total amount of RR 1,142 million and RR 1,673 million, respectively.
No provisions for impairment of long-term loans and receivables were recognized at 31 December 2019 and 2018.
The carrying values of long-term loans and receivables approximate their respective fair values.
8 OTHER NON-CURRENT ASSETS
Financial assets
Contingent consideration (see Note 26) 101,391 -
Commodity derivatives 749 2,397
Other financial assets 8 7
Non-financial assets
Long-term advances 9,549 15,289
Materials for construction 12,552 10,852
Deferred income tax assets 14,800 6,486
Intangible assets, net 2,644 2,119
Other non-financial assets 642 277
Total other non-current assets 142,335 37,427
At 31 December 2019 and 2018, the long-term advances represented advances to OAO Russian Railways. The
advances were paid in accordance with the Strategic Partnership Agreement signed with Russian Railways in 2012.
9 INVENTORIES
Natural gas and liquid hydrocarbons 8,685 14,465

Materials and supplies (net of provision of
RR 5 million and RR 4 million at 31 December 2019 and 2018) 3,550 2,760
Other inventories 28 26
Total inventories 12,263 17,251
No inventories were pledged as security for the Group’s borrowings or payables at both dates.
35
PAO NOVATEK
10 TRADE AND OTHER RECEIVABLES
Trade receivables (net of provision of RR 362 million and

RR 349 million at 31 December 2019 and 2018, respectively) 48,539 48,347
Other receivables (net of provision of RR 317 million and
RR 323 million at 31 December 2019 and 2018, respectively) 181,042 6,086
Total trade and other receivables 229,581 54,433
Trade receivables in the amount RR 16,996 million and RR 12,413 million at 31 December 2019 and 2018,
respectively, are secured by letters of credit, issued by banks with investment grade rating. The Group does not
hold any other collateral as security for trade and other receivables (see Note 26 for credit risk disclosures).
At 31 December 2019, other receivables included RR 173,336 million related to receivables in respect of the
transactions on the sale of a 40 percent participation interest in OOO Arctic LNG 2 (see Note 4).
The carrying values of trade and other receivables approximate their respective fair values. Trade and other
receivables were categorized as Level 3 in the fair value measurement hierarchy described in Note 26.
Movements in the Group’s provision for impairment of trade receivables are as follows:

2019 2018
At 1 January 349 284

Additional provision recorded 113 42
Acquisition of subsidiaries - 107
Receivables written off as uncollectible (72) (26)
Provision reversed (28) (58)
At 31 December 362 349
The provision for impaired trade and other receivables has been included in the consolidated statement of income in
net impairment expenses.
11 PREPAYMENTS AND OTHER CURRENT ASSETS
Financial assets
Current portion of long-term loans receivable (see Note 7) 50,815 40,386
Commodity derivatives 16,966 9,313
Other financial assets 622 -
Non-financial assets
Value-added tax receivable 22,401 12,646
Prepayments and advances to suppliers 9,879 7,066
Recoverable value-added tax 6,026 8,467
Deferred transportation expenses for natural gas 2,064 3,963
Deferred transportation expenses for liquid hydrocarbons 1,784 3,100
Deferred export duties for liquid hydrocarbons 1,218 3,210
Prepaid customs duties 530 604
Other non-financial assets 1,536 890
Total prepayments and other current assets 113,841 89,645
36
PAO NOVATEK
12 CASH AND CASH EQUIVALENTS
Cash at current bank accounts 22,736 30,196

Bank deposits with original maturity of three months or less 30,504 11,276
Total cash and cash equivalents 53,240 41,472
All deposits are readily convertible to known amounts of cash and are not subject to significant risk of change in
value (see Note 26 for credit risk disclosures).
13 LONG-TERM DEBT
Eurobonds – Ten-Year Tenor

(par value USD 1 billion, repayable in 2022) 61,833 69,359
Eurobonds – Ten-Year Tenor
(par value USD 650 million, repayable in 2021) 40,209 45,094
Loan from Silk Road Fund 42,115 48,757
Bank loans 7,941 8,953
Total 152,098 172,163

Less: current portion of long-term debt (12,246) (2,120)
Total long-term debt 139,852 170,043
Eurobonds. In December 2012, the Group issued US dollar denominated Eurobonds in the amount of
USD 1 billion. The US dollar denominated Eurobonds were issued with an annual coupon rate of 4.422 percent,
payable semi-annually. The Eurobonds have a ten-year tenor and are repayable in December 2022.
In February 2011, the Group issued US dollar denominated Eurobonds in the amount of USD 650 million.
The US dollar denominated Eurobonds were issued with an annual coupon rate of 6.604 percent, payable
semi-annually. The Eurobonds have a ten-year tenor and are repayable in February 2021.
Loan from Silk Road Fund. In December 2015, the Group obtained a loan from China’s investment fund Silk
Road Fund which is repayable until December 2030 by semi-annual equal installments starting from December
2019 and includes the maintenance of certain restrictive financial covenants.
Bank loans. In December 2016, the Group obtained EUR 100 million under a revolving credit line facility from the
Russian subsidiary of a foreign bank. The loan is repayable in April 2020 and includes the maintenance of certain
restrictive financial covenants.
At 31 December 2019 and 2018, bank loans also included a credit line facility obtained by a Group’s subsidiary
from a Russian bank in the amount of RR 1,007 million repayable until December 2020 by monthly equal
installments starting from January 2020.
The fair value of long-term debt including its current portion was RR 164,310 million and RR 176,984 million at
31 December 2019 and 2018, respectively. The fair value of the corporate bonds was determined based on market
quote prices (Level 1 in the fair value measurement hierarchy described in Note 26). The fair value of other long-
term loans was determined based on future cash flows discounted at the estimated risk-adjusted discount rate
(Level 3 in the fair value measurement hierarchy described in Note 26).
Scheduled maturities of long-term debt are disclosed in Note 26.
Available credit line facilities. In addition to disclosed above, at 31 December 2019, the Group had available long-
term bank credit line facilities with credit limits for the total amount of RR 150 billion. The facilities include the
maintenance of certain restrictive financial covenants.
37
PAO NOVATEK
14 SHORT-TERM DEBT AND CURRENT PORTION OF LONG-TERM DEBT
At 31 December 2019 and 2018, short-term debt and current portion of long-term debt consisted only of current
portion of long-term debt in the amount of RR 12,246 million and RR 2,120 million, respectively.
Loans with original maturity three months or less. During 2019 and 2018, the Group had available revolving credit
line facilities under which the obtained loans with original maturities of three months or less to finance trade
activities were secured by cash revenues from specifically determined liquid hydrocarbons export sales contracts.
At 31 December 2019 and 2018, these loans were repaid.
Available credit line facilities. At 31 December 2019, the Group had available short-term revolving bank credit line
facilities, with credit limits in the total amount of RR 20 billion.
15 PENSION OBLIGATIONS
Defined contribution plan. For the years ended 31 December 2019 and 2018, total amounts recognized as an
expense in respect of payments made by employer on behalf of employees to the Pension Fund of the Russian
Federation were RR 3,190 million and RR 2,608 million, respectively.
Defined benefit plan. The Group operates a post-employment benefit program for its retired employees. Under the
current terms of the pension program, employees who are employed and retire from the Group on or after the
statutory retirement age will receive from the Group pension benefits in the form of a lump sum retirement benefit
and/or monthly life payments unless they are reemployed. The type and amounts of payments to be disbursed
depend on the employee’s average salary, duration and location of employment.
The program represents an unfunded defined benefit plan and is accounted for as such under provisions of IAS 19,
Employee Benefits. The present value of the defined benefit obligation is included in other non-current liabilities in
the consolidated statement of financial position. The impact of the program on the consolidated financial statements
is disclosed below.
The movements in the present value of the defined benefit obligation are as follows:

2019 2018
At 1 January 4,174 3,198

Interest cost 269 217
Current service cost 340 254
Past service cost (496) (80)
Benefits paid (152) (138)
Actuarial gains (losses) arising from:
- changes in financial assumptions 1,064 180
- changes in demographic assumptions 68 (15)
- experience adjustments (156) 560
Reclassification to liabilities associated with assets held for sale - (2)
At 31 December 5,111 4,174
Defined benefit plan (benefits) costs were recognized in:

2019 2018
Materials, services and other (as employee compensation) 76 206
General and administrative expenses (as employee compensation) 37 185
Other comprehensive loss 976 725
38
PAO NOVATEK
15 PENSION OBLIGATIONS (CONTINUED)
The principal actuarial assumptions used are as follows:
Weighted average discount rate 5.6% 7.7%

Projected annual increase in employee compensation 4.0% 5.0%
Expected increases to pension benefits 4.0% 5.0%
The discount rate was determined by reference to Russian rouble denominated bonds issued by the Government of
the Russian Federation chosen to match the duration of the post-employment benefit obligations.
The assumed average salary and pension payment increases for Group employees have been calculated on the basis
of inflation forecasts, analysis of increases of past salaries and the general salary policy of the Group.
Mortality assumptions are based on the Russian mortality tables published by the Federal State Statistics Service
from the year 2014 adjusted for estimates of mortality improvements in the future periods.
The Group’s management has assessed that reasonable changes in the principal significant actuarial assumptions
will not have a significant impact on the consolidated statement of income or the consolidated statement of
comprehensive income or the liability recognized in the consolidated statement of financial position.
16 TRADE PAYABLES AND ACCRUED LIABILITIES
Financial liabilities
Trade payables 50,048 46,692
Commodity derivatives 16,450 8,492
Interest payable 1,291 1,451
Other payables 3,188 7,639
Non-financial liabilities
Advances from customers 4,253 5,447
Salary payables 915 837
Other liabilities and accruals 10,583 8,683
Total trade payables and accrued liabilities 86,728 79,241
The carrying values of trade payables and accrued liabilities approximate their respective fair values. Trade and
other payables were categorized as Level 3 in the fair value measurement hierarchy described in Note 26.
During the years ended 31 December 2019 and 2018, advances from customers in the amount of RR 4,570 million
and RR 4,394 million, respectively, remained at the beginning of the respective period were recognized as revenue.
17 SHAREHOLDERS’ EQUITY
Ordinary share capital. Share capital issued and paid in consisted of 3,036,306,000 ordinary shares with a par
value of RR 0.1 each at 31 December 2019 and 2018. The total authorized number of ordinary shares was
10,593,682,000 shares at both dates.
Treasury shares. In accordance with the Share Buyback Programs authorized by the Board of Directors,
the Group’s wholly owned subsidiary, Novatek Equity (Cyprus) Limited, purchases ordinary shares of
PAO NOVATEK in the form of Global Depository Receipts (GDRs) on the London Stock Exchange (LSE) and
ordinary shares on the Moscow Exchange through the use of independent brokers. NOVATEK also purchases its
ordinary shares from shareholders where required by Russian legislation.
39
PAO NOVATEK
17 SHAREHOLDERS’ EQUITY (CONTINUED)
During the years ended 31 December 2019 and 2018, the Group purchased 1.7 million and 2.7 million ordinary
shares at a total cost of RR 1,863 million and RR 2,092 million, respectively. At 31 December 2019 and 2018, the
Group held in total 25.1 million and 23.4 million ordinary shares at a total cost of RR 12,308 million and
RR 10,445 million, respectively. The Group has decided that these shares do not vote.
Dividends. Dividends (including tax on dividends) declared and paid were as follows:

2019 2018
Dividends payable at 1 January - 1

Dividends declared (*) 93,468 51,979
Dividends paid (*) (93,468) (51,980)
Dividends payable at 31 December - -
Dividends per share declared during the year (in Russian roubles) 31.04 17.25
Dividends per GDR declared during the year (in Russian roubles) 310.40 172.50
(*)
– excluding treasury shares.
The Group declares and pays dividends in Russian roubles. Dividends declared in 2019 and 2018 were as follows:
Final for 2018: RR 16.81 per share or RR 168.10 per GDR declared in April 2019 51,040
Interim for 2019: RR 14.23 per share or RR 142.30 per GDR declared in September 2019 43,207
Total dividends declared in 2019 94,247
Final for 2017: RR 8.00 per share or RR 80.00 per GDR declared in April 2018 24,291
Interim for 2018: RR 9.25 per share or RR 92.50 per GDR declared in September 2018 28,086
Total dividends declared in 2018 52,377
Distributable retained earnings. The basis for distribution of profits of a company to shareholders is defined by
Russian legislation as net profit presented in its statutory financial statements prepared in accordance with the
Regulations on Accounting and Reporting of the Russian Federation, which may differ significantly from amounts
calculated on the basis of IFRS. At 31 December 2019 and 2018, NOVATEK’s closing balances of the
accumulated profit including the respective year’s net statutory profit totaled RR 694,890 million and
RR 551,913 million, respectively.
18 OIL AND GAS SALES

2019 2018
Natural gas 414,844 375,198

Naphtha 144,541 149,770
Crude oil 114,641 106,257
Other gas and gas condensate refined products 88,010 89,686
Liquefied petroleum gas 47,668 56,243
Stable gas condensate 42,528 48,607
Total oil and gas sales 852,232 825,761
40
PAO NOVATEK
19 PURCHASES OF NATURAL GAS AND LIQUID HYDROCARBONS

2019 2018
Natural gas 175,023 150,811

Unstable gas condensate 138,092 155,360
Other liquid hydrocarbons 21,775 13,819
Reverse excise (4,072) -
Total purchases of natural gas and liquid hydrocarbons 330,818 319,990
The Group purchases not less than 50 percent of the natural gas volumes produced by its joint venture
ZAO Nortgas, some volumes of natural gas produced by its joint venture AO Arcticgas, all volumes of natural gas
produced by its joint venture ZAO Terneftegas and some volumes of liquefied natural gas produced by its joint
ventures OAO Yamal LNG and OOO Cryogas-Vysotsk (see Note 29).
The Group purchases all volumes of unstable gas condensate produced by its joint ventures Nortgas, Arcticgas and
Terneftegas at ex-field prices primarily based on benchmark reference crude oil prices, as well as some volumes of
stable gas condensate produced by its joint venture Yamal LNG (see Note 29).
Starting from January 2019, the Group accrues excise tax on raw oil (blend of hydrocarbons comprised of one or
more components of crude oil, stable gas condensate, vacuum gasoil, tar, fuel oil sent by the owner for processing)
and at the same time claims for deduction at a double rate. The net result from these operations is reported as a
deduction to expense for purchases of natural gas and liquid hydrocarbons in the “Reverse excise” line item, as the
Group obtains most of its raw oil from unstable gas condensate purchased from its joint ventures.
20 TRANSPORTATION EXPENSES

2019 2018
Natural gas transportation by trunk and low-pressure pipelines 97,371 96,146

Stable gas condensate and liquefied petroleum gas transportation by rail 32,674 30,643
Crude oil transportation by trunk pipelines 9,639 8,557
Stable gas condensate and refined products,
crude oil and liquefied natural gas transportation by tankers 8,589 8,307
Other 3,378 2,011
Total transportation expenses 151,651 145,664
21 TAXES OTHER THAN INCOME TAX
The Group is subject to a number of taxes other than income tax, which are detailed as follows:

2019 2018
Unified natural resources production tax 57,935 54,644

Property tax 3,658 3,595
Other taxes 388 529
Total taxes other than income tax 61,981 58,768
41
PAO NOVATEK
22 MATERIALS, SERVICES AND OTHER

2019 2018
Employee compensation 11,273 9,815

Repair and maintenance 2,778 2,948
Preparation and processing of hydrocarbons 2,431 2,009
Materials and supplies 1,945 1,963
Electricity and fuel 1,551 1,311
Liquefied petroleum gas volumes reservation expenses 1,157 1,155
Fire safety and security expenses 1,051 976
Transportation services 924 822
Rent expenses 591 416
Insurance expenses 366 340
Other 1,116 920
Total materials, services and other 25,183 22,675
23 GENERAL AND ADMINISTRATIVE EXPENSES

2019 2018
Employee compensation 17,905 15,807

Social expenses and compensatory payments 2,503 2,484
Legal, audit, and consulting services 975 1,122
Business travel expense 720 621
Advertising expenses 531 465
Fire safety and security expenses 509 471
Repair and maintenance expenses 228 229
Rent expenses 189 176
Other 1,008 907
Total general and administrative expenses 24,568 22,282
Auditor’s fees. AO PricewaterhouseCoopers Audit has served as the independent external auditor of
PAO NOVATEK for each of the reported financial years. The independent external auditor is subject to
appointment at the Annual General Meeting of shareholders based on the recommendations from the Board of
Directors. The aggregate fees for audit and other services rendered by PricewaterhouseCoopers Audit to the parent
company of the Group included within legal, audit, and consulting services are as follows:

2019 2018
Audits of PAO NOVATEK

(audit of the Group’s consolidated financial statements and
audit of statutory financial statements of PAO NOVATEK) 37 34
Other services 12 8
Total auditor’s fees and services 49 42
42
PAO NOVATEK
24 FINANCE INCOME (EXPENSE)

Interest expense (including transaction costs) 2019 2018
Interest expense on fixed rate debt 9,079 8,615

Interest expense on variable rate debt 33 87
Total 9,112 8,702
Less: capitalized interest (5,903) (5,032)
Interest expense on debt 3,209 3,670

Provisions for asset retirement obligations:
effect of the present value discount unwinding 738 602
Interest expense on lease liabilities 544 474
Total interest expense 4,491 4,746

Interest income 2019 2018
Interest income on loans receivable classified

as at amortised cost 963 653
Interest income on loans receivable classified
as at fair value through profit or loss 15,319 11,940
Interest income on cash, cash equivalents, deposits and other assets 4,417 1,410
Total interest income 20,699 14,003

Foreign exchange gains (losses) 2019 2018
Gains 37,683 70,704

Losses (82,430) (44,845)
Total foreign exchange gain (loss), net (44,747) 25,859
25 INCOME TAX
Reconciliation of income tax. The table below reconciles actual income tax expense and theoretical income tax,
determined based on the applicable rates for each of the Group’s entities and their accounting profit before income
tax.

2019 2018

Theoretical income tax expense at applicable rates of the Group’s entities 192,157 38,878
Increase (decrease) due to:
Permanent differences in respect
of the Group’s share of loss (profit) of joint ventures (29,544) 6,977
Permanent differences in respect
of disposal of interests in subsidiaries and joint ventures (44,507) (329)
Other differences 1,548 61
Total income tax expense 119,654 45,587
43
PAO NOVATEK
25 INCOME TAX (CONTINUED)
Domestic and foreign components of current income tax expense were:

2019 2018
Russian Federation income tax 95,590 42,968

Foreign income tax 2,242 1,575
Total current income tax expense 97,832 44,543
Effective income tax rate. The Russian statutory income tax rate for 2019 and 2018 was 20 percent. A number of
the Group’s investment projects were included by the government authorities in the list of priority projects, in
respect of them the Group was able to apply a reduced income tax rate. Profits of the Group’s foreign subsidiaries
are taxed at rates applicable in accordance with legislation of the respective jurisdiction.
The Group recognizes in profit before income tax its share of net profit (loss) from joint ventures, which influences
the consolidated profit of the Group but does not result in additional income tax expense (benefit) at the Group’s
level. Net profit (loss) of joint ventures was recorded in their financial statements on an after-tax basis. The
dividend income received from the joint ventures in which the Group holds at least a 50 percent interest is subject
to a zero withholding tax rate according to the Russian tax legislation.
Without the effect of net profit (loss) from joint ventures and effects from disposal of interests in subsidiaries and
joint ventures (initial recognition of gain on disposal and subsequent non-monetary revaluation of contingent
consideration), the effective income tax rate for the years ended 31 December 2019 and 2018 was 16.7 percent and
17.3 percent, respectively.
For the year ended 31 December 2019, the Group paid income tax in the amount of RR 99.6 billion, inclusive of a
payment of RR 40 billion to a government controlled entity under an agreement to finance infrastructure facilities
in federal ownership in YNAO, to which an investment tax credit was applied.
In respect of PAO NOVATEK and the majority of its Russian subsidiaries, the Group submits a single consolidated
income tax return in accordance with Russian tax legislation (see Note 31).
Deferred income tax. Differences between IFRS and Russian statutory tax regulations give rise to certain
temporary differences between the carrying value of certain assets and liabilities for financial reporting purposes
and for income tax purposes.
Deferred income tax balances are presented in the consolidated statement of financial position as follows:
Long-term deferred income tax asset (other non-current assets) 14,800 6,486
Long-term deferred income tax liability (62,146) (29,927)
Net deferred income tax liability (47,346) (23,441)
Deferred income tax assets expected to be realized within twelve months as of 31 December 2019 and 2018 were
RR 4,031 million and RR 3,768 million, respectively. Deferred tax liabilities expected to be reversed within twelve
months of 31 December 2019 and 2018 were RR 1,521 million and RR 1,113 million, respectively.
44
PAO NOVATEK
Movements in deferred income tax assets and liabilities during the years ended 31 December 2019 and 2018 are as
follows:
Statement of Statement of
At 31 December Statement of Comprehensive Financial At 31 December
2018 Income effect Income effect Position effect 2019
Property, plant and equipment (36,895) (3,732) - (4,304) (44,931)

Contingent consideration - (20,278) - - (20,278)
Other (1,483) (405) 34 9 (1,845)
Deferred income tax liabilities (38,378) (24,415) 34 (4,295) (67,054)

Less: deferred tax assets offset 8,451 (3,543) - - 4,908
Total deferred income tax liabilities (29,927) (27,958) 34 (4,295) (62,146)
Tax losses carried forward 4,943 3,634 - (336) 8,241

Property, plant and equipment 3,509 (33) - 69 3,545
Asset retirement obligations 1,708 843 - (9) 2,542
Inventories 2,304 (24) 2 (332) 1,950
Trade payables and accrued liabilities 1,234 190 (13) 1 1,412
Loans receivable 1,009 (2,460) 989 1,811 1,349
Other 230 443 (3) (1) 669
Deferred income tax assets 14,937 2,593 975 1,203 19,708

Less: deferred tax liabilities offset (8,451) 3,543 - - (4,908)
Total deferred income tax assets 6,486 6,136 975 1,203 14,800
Net deferred income tax liabilities (23,441) (21,822) 1,009 (3,092) (47,346)
Statement of Statement of
At 31 December Statement of Comprehensive Financial At 31 December
2017 Income effect Income effect Position effect 2018
Property, plant and equipment (31,983) (2,550) (2) (2,360) (36,895)

Other (1,282) (205) 22 (18) (1,483)
Deferred income tax liabilities (33,265) (2,755) 20 (2,378) (38,378)

Less: deferred tax assets offset 7,098 669 - 684 8,451
Total deferred income tax liabilities (26,167) (2,086) 20 (1,694) (29,927)
Tax losses carried forward 3,607 2,253 - (917) 4,943

Property, plant and equipment 3,102 754 - (347) 3,509
Inventories 2,438 (648) (2) 516 2,304
Asset retirement obligations 1,389 351 - (32) 1,708
Trade payables and accrued liabilities 1,237 (2) 9 (10) 1,234
Loans receivable 1,996 (987) - - 1,009
Other 227 (10) 7 6 230
Deferred income tax assets 13,996 1,711 14 (784) 14,937

Less: deferred tax liabilities offset (7,098) (669) - (684) (8,451)
Total deferred income tax assets 6,898 1,042 14 (1,468) 6,486
Net deferred income tax liabilities (19,269) (1,044) 34 (3,162) (23,441)
45
PAO NOVATEK
At 31 December 2019, the Group had recognized deferred income tax assets of RR 8,241 million (31 December
2018: RR 4,943 million) in respect of unused tax loss carry forwards of RR 41,456 million (31 December 2018:
RR 25,029 million). In accordance with tax legislation of Russian Federation effective 1 January 2017, taxable
profits can be reduced in the amount of tax losses carried forward for relief during unlimited period of time, at the
same time in 2017 to 2021 tax losses carried forward cannot exceed 50 percent of taxable profits. In determining
future taxable profits and the amount of tax benefits that are probable in the future, the Group’s management makes
judgments including expectations regarding the Group’s ability to generate sufficient future taxable income and the
projected time period over which deferred tax benefits will be realized.
26 FINANCIAL INSTRUMENTS AND FINANCIAL RISK FACTORS
The accounting policies and disclosure requirements for financial instruments have been applied to the line items
below:

Financial assets Non-current Current Non-current Current
At amortised cost
Long-term loans receivable 11,408 2,878 9,556 -
Trade and other receivables 403 229,581 407 54,433
Short-term bank deposits
with original maturity more than three months - 83,752 - 27,788
Cash and cash equivalents - 53,240 - 41,472
Other 8 622 7 -
At fair value through profit or loss
Long-term loans receivable 220,087 47,937 222,959 40,386
Contingent consideration 101,391 - - -
Commodity derivatives 749 16,966 2,397 9,313
Total financial assets 334,046 434,976 235,326 173,392
At amortised cost
Long-term debt 139,852 12,246 170,043 2,120
Long-term lease liabilities 7,516 2,947 7,473 2,325
Interest payable - 1,291 - 1,451
Trade and other payables - 53,236 - 54,331
At fair value through profit or loss
Commodity derivatives 1,680 16,450 2,403 8,492
Total financial liabilities 149,048 86,170 179,919 68,719
Fair value measurement. The Group evaluates the quality and reliability of the assumptions and data used to
measure fair value in accordance with IFRS 13, Fair Value Measurement, in the three hierarchy levels as follows:
i. quoted prices in active markets (Level 1);

ii. inputs other than quoted prices included in Level 1 that are directly or indirectly observable in the market
(externally verifiable inputs) (Level 2); or
iii. inputs that are not based on observable market data (unobservable inputs) (Level 3).
Commodity derivative instruments. The Group conducts natural gas foreign trading in active markets under long-
term and short-term purchase and sales contracts, as well as purchases and sells various derivative instruments
(with reference to the European natural gas hubs) for delivery optimization and to decrease exposure to the risk of
negative changes in natural gas prices.
46
PAO NOVATEK
26 FINANCIAL INSTRUMENTS AND FINANCIAL RISK FACTORS (CONTINUED)
These contracts include pricing terms that are based on a variety of commodities and indices, and/or volume
flexibility options that collectively qualify them under the scope of IFRS 9, Financial Instruments, although the
activity surrounding certain contracts involves the physical delivery of natural gas. All contracts mentioned above
are recognized in the consolidated statement of financial position at fair value with movements in fair value
recognized in the consolidated statement of income.
The fair value of long-term natural gas derivative contracts involving the physical delivery of natural gas is
determined using internal models and other valuation techniques (the mark-to-market and mark-to-model analysis)
due to the absence of quoted prices or other observable, market-corroborated data, for the duration of the contracts.
Due to the assumptions underlying their fair value, the natural gas derivatives contracts are categorized as Level 3
in the fair value hierarchy, described above.
The fair value of short-term natural gas derivative contracts involving the physical delivery of natural gas and
likewise contracts used for the price risk management and delivery optimization is determined based on available
futures quotes in the active market (mark-to-market analysis) (Level 1).
The amounts recognized by the Group in respect of the natural gas derivative contracts measured in accordance
with IFRS 9, Financial Instruments, are as follows:
Commodity derivatives At 31 December 2019 At 31 December 2018
Within other non-current and current assets 17,715 11,710

Within other non-current and current liabilities (18,130) (10,895)

Included in other operating income (loss) 2019 2018
Operating income (loss) from natural gas foreign trading (1,072) (2,278)
Change in fair value 238 (450)
The table below represents the effect on the fair value estimation of natural gas derivative contracts that would
occur from price changes by ten percent by one megawatt-hour in 12 months after the reporting date:

Effect on the fair value 2019 2018
Increase by ten percent (1,478) (2,021)

Decrease by ten percent 1,478 2,021
Recognition and remeasurement of the shareholders’ loans to joint ventures. Terms and conditions of certain
shareholders’ loans provided by the Group to its joint ventures OAO Yamal LNG, OOO Arctic LNG 2 and
ZAO Terneftegas contain certain financial (benchmark interest rates adjusted for the borrower credit risk) and non-
financial (actual interest rates on the borrowings of shareholders, expected free cash flows of the borrower and
expected maturities) variables and in accordance with the Group’s accounting policy were classified as financial
assets at fair value through profit or loss.
47
PAO NOVATEK
The following table summarizes the movements in the carrying amounts of shareholders’ loans provided to joint
ventures, which are accounted for at fair value through profit or loss:

2019 2018
At 1 January 263,345 207,051

Loans provided 24,441 -
Repayment of loans and accrued interest (66,352) (1,673)
Recognition of loans, classified previously
as intercompany, due to disposal of a subsidiary (see Note 4) 58,329 -
Initial measurement at fair value allocated
to increase the Group’s investments in joint ventures (see Note 6) (3,803) -
Subsequent remeasurement
at fair value recognized in profit or loss as follows:
 Interest income (using the effective interest rate method) 15,319 11,940
 Foreign exchange gain (loss), net (36,082) 42,535
 Remaining effect from changes in fair value
(attributable to free cash flows of the borrowers and interest rates) 12,827 3,492
At 31 December 268,024 263,345
Fair value measurement of shareholders’ loans to joint ventures is determined using benchmark interest rates
adjusted for the borrower credit risk and internal free cash flows models based on the borrower’s strategic plans
approved by the shareholders of the joint ventures. Due to the assumptions underlying fair value estimation,
shareholders’ loans are categorized as Level 3 in the fair value hierarchy, described above.
The fair value of the shareholders’ loans is sensitive to benchmark interest rates changes. The table below
represents the effect on fair value of the shareholders’ loans that would occur from one percent changes in the
benchmark interest rates.

Effect on the fair value 2019 2018
Increase by one percent (7,752) (10,036)

Decrease by one percent 8,142 10,650
Contingent consideration. According to the terms of the transactions on the sale of a 40 percent participation
interest in OOO Arctic LNG 2, total consideration comprises, inter alia, contingent cash payments in total of up to
USD 3,200 million equivalent depending on average crude oil benchmark prices level for the year preceding each
payment (see Note 4). The contingent payments dates are linked to the dates of launching the Arctic LNG 2
project’s LNG trains.
Under IFRS 9, Financial Instruments, this contingent consideration contains a commodity based embedded
derivative and was classified as a financial asset measured at fair value through profit or loss. Interest income and
foreign exchanges differences (calculated using the effective interest method), and the remaining effect from fair
value remeasurement of the contingent consideration (included in “Other operating income (loss)” line item) are
disclosed separately in the consolidated statement of income.
48
PAO NOVATEK
The following table summarises the movements in the carrying amounts of the contingent consideration:

2019
At 1 January -
Initial recognition of the contingent consideration (see Note 4) 137,499
Subsequent remeasurement
at fair value recognized in profit or loss as follows:
 Interest income (using the effective interest rate method) 2,269
 Foreign exchange gain (loss), net (3,835)
 Remaining effect from changes in fair value
(attributable to crude oil benchmark prices forecast) (34,542)
At 31 December 101,391
Fair value measurement of the contingent consideration is determined based on cash flow model using a discount
rate, internal projections of the crude oil benchmark price dynamics and the Arctic LNG 2 project’s realization
schedule. Due to the assumptions underlying fair value estimation, the contingent consideration is categorized as
Level 3 in the fair value hierarchy, described above.
The table below represents the effect on the fair value estimation of the contingent consideration that would occur
from crude oil price changes throughout the valuation period:
Effect on the fair value At 31 December 2019
Increase by one percent 4,492

Decrease by one percent (4,551)
Financial risk management objectives and policies. In the ordinary course of business, the Group is exposed to
market risks from fluctuating prices on commodities purchased and sold, prices of other raw materials, currency
exchange rates and interest rates. Depending on the degree of price volatility, such fluctuations in market prices
may create volatility in the Group’s financial results. To effectively manage the variety of exposures that may
impact financial results, the Group’s overriding strategy is to maintain a strong financial position.
The Group’s principal risk management policies are established to identify and analyze the risks faced by the
Group, to set appropriate risk limits and controls, and to monitor risks and adherence to these limits. Risk
management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s
activities.
Market risk. Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates,
commodity prices and equity prices, will affect the Group’s financial results or the value of its holdings of financial
instruments. The primary objective of mitigating these market risks is to manage and control market risk exposures,
while optimizing the return on risk.
The Group is exposed to market price movements relating to changes in commodity prices such as crude oil, oil
and gas condensate refined products and natural gas (commodity price risk), foreign currency exchange rates,
interest rates, equity prices and other indices that could adversely affect the value of the Group’s financial assets,
liabilities or expected future cash flows.
(a) Foreign exchange risk
The Group is exposed to foreign exchange risk arising from various exposures in the normal course of business,
primarily with respect to the US dollar and Euro. Foreign exchange risk arises primarily from future commercial
transactions, recognized assets and liabilities when assets and liabilities are denominated in a currency other than
the functional currency.
49
PAO NOVATEK
The Group’s overall strategy is to have no significant net exposure in currencies other than the Russian rouble, the
US dollar and Euro. The Group may utilize foreign currency derivative instruments to manage the risk exposures
associated with fluctuations on certain firm commitments for sales and purchases, debt instruments and other
transactions that are denominated in currencies other than the Russian rouble, and certain non-Russian rouble assets
and liabilities.
The carrying amounts of the Group’s financial instruments are denominated in the following currencies:
Russian
At 31 December 2019 rouble US dollar Euro Other Total
Financial assets
Non-current
Long-term loans receivable 6,521 28,037 196,937 - 231,495
Trade and other receivables 339 1 - 63 403
Contingent consideration - 101,391 - - 101,391
Commodity derivatives - - 749 - 749
Other - - - 8 8
Current
Trade and other receivables 25,561 192,947 10,057 1,016 229,581
Current portion
of long-term loans receivable - 47,843 2,972 - 50,815
Commodity derivatives - - 16,966 - 16,966
Short-term bank deposits with original
maturity more than three months - 83,752 - - 83,752
Cash and cash equivalents 13,375 27,498 11,598 769 53,240
Other 622 - - - 622
Non-current
Long-term debt - (139,852) - - (139,852)
Long-term lease liabilities (264) (4,661) (2,529) (62) (7,516)
Commodity derivatives - - (1,680) - (1,680)
Current
Short-term debt
and current portion of long-term debt (1,007) (4,305) (6,934) - (12,246)
Current portion
of long-term lease liabilities (21) (1,981) (866) (79) (2,947)
Interest payable (3) (1,287) (1) - (1,291)
Trade and other payables (43,232) (3,253) (6,496) (255) (53,236)
Net exposure 1,891 326,130 204,323 1,460 533,804
50
PAO NOVATEK
Russian
At 31 December 2018 rouble US dollar Euro Other Total
Financial assets
Non-current
Long-term loans receivable 6,012 107,713 118,790 - 232,515
Trade and other receivables 342 2 - 63 407
Other - - - 7 7
Current
Trade and other receivables 21,379 13,577 18,393 1,084 54,433
Current portion
of long-term loans receivable - 20,694 19,692 - 40,386
Short-term bank deposits with original
maturity more than three months - 27,788 - - 27,788
Cash and cash equivalents 6,804 11,194 22,588 886 41,472
Non-current
Long-term debt (1,007) (161,090) (7,946) - (170,043)
Long-term lease liabilities (337) (7,043) (1) (92) (7,473)
Current
Short-term debt
and current portion of long-term debt - (2,120) - - (2,120)
Current portion
of long-term lease liabilities (20) (2,222) (2) (81) (2,325)
Interest payable (3) (1,447) (1) - (1,451)
Trade and other payables (35,709) (2,671) (15,707) (244) (54,331)
Net exposure (2,539) 4,375 156,621 1,623 160,080
The Group chooses to provide information about market risk and potential exposure to hypothetical loss from its
use of financial instruments through sensitivity analysis disclosures in accordance with IFRS requirements.
The sensitivity analysis depicted in the table below reflects the hypothetical profit (loss) that would occur assuming
a ten percent increase in exchange rates and no changes in the portfolio of instruments and other variables at
31 December 2019 and 2018, respectively:

Effect on profit before income tax Increase in exchange rate 2019 2018
RUB / USD 10% 32,613 438

RUB / EUR 10% 20,432 15,662
The effect of a corresponding ten percent decrease in exchange rate is approximately equal and opposite.
(b) Commodity price risk
The Group’s overall commercial trading strategy in natural gas and liquid hydrocarbons is centrally managed.
Changes in commodity prices could negatively or positively affect the Group’s results of operations. The Group
manages the exposure to commodity price risk by optimizing its core activities to achieve stable price margins.
51
PAO NOVATEK
Natural gas supplies on the Russian domestic market. As an independent natural gas producer, the Group is not
subject to the government’s regulation of natural gas prices, except for those volumes sold to residential customers.
Nevertheless, the Group’s prices for natural gas sold are strongly influenced by the prices regulated by the
governmental agency of the Russian Federation that carries out state regulation of prices and tariffs for goods and
services of natural monopolies in energy, utilities and transportation.
In 2018, wholesale natural gas prices for sales to all customer categories (excluding residential customers) on the
domestic market were increased by the Regulator by 3.4 percent effective 21 August 2018, and remained
unchanged until the end of the second quarter of 2019. From 1 July 2019, regulated wholesale natural gas prices
were increased by 1.4 percent.
Management believes it has limited downside commodity price risk for natural gas in the Russian Federation and
does not use commodity derivative instruments for trading purposes. The Group’s natural gas purchase and sales
contracts in the domestic market are not considered to meet the definition of a derivative and are not within the
scope of IFRS 9, Financial Instruments. However, to effectively manage the margins achieved through its natural
gas trading activities, management has established targets for volumes sold to wholesale traders and end-customers.
LNG supplies on international markets. The Group sells liquefied natural gas purchased primarily from its joint
ventures Yamal LNG and Cryogas-Vysotsk on international markets under short- and long-term contracts at prices
based on benchmark natural gas prices at the major natural gas hubs and benchmark crude oil prices. The Group’s
LNG purchase and sales contracts are not considered to meet the definition of a derivative and are not within the
scope of IFRS 9, Financial Instruments.
LNG regasification activity in Europe. The Group purchases and sells regasified LNG in Europe primarily at
prices linked to natural gas prices at major European natural gas hubs. Regasified LNG purchase and sales
contracts are not considered to meet the definition of a derivative and are not within the scope of IFRS 9, Financial
Instruments.
Natural gas trading activities on the European and other foreign markets. The Group purchases and sells natural
gas on the European and other foreign markets under short- and long-term supply contracts, as well as purchases
and sells different derivative instruments based on formulas with reference to benchmark natural gas prices quoted
for the North-Western European natural gas hubs, crude oil and oil products prices and/or a combination thereof.
Therefore, the Group’s results from natural gas foreign trading and derivative instruments foreign trading are
subject to commodity price volatility based on fluctuations or changes in the respective benchmark prices.
Natural gas foreign trading activities and respective foreign derivative instruments are executed by
Novatek Gas & Power GmbH, the Group’s wholly owned subsidiary, and are managed within the Group’s
integrated trading function.
Liquid hydrocarbons supplies. The Group sells its crude oil, stable gas condensate and gas condensate refined
products under spot contracts. Naphtha and stable gas condensate volumes sold to the Asian-Pacific Region,
European and North American markets are primarily based on benchmark crude oil prices of Brent and Dubai
and/or naphtha prices, mainly of Naphtha Japan and Naphtha CIF NWE or a combination thereof, plus a margin or
discount, depending on current market situation. Other gas condensate refined products volumes sold mainly to the
European market are based on benchmark jet fuel prices of Jet CIF NWE and gasoil prices of Gasoil 0.1 percent
CIF NWE plus a margin or discount, depending on current market situation. Crude oil sold internationally is based
on benchmark crude oil prices of Brent, or Dubai, plus a premium or a discount, and on a transaction-by-transaction
basis or based on benchmark crude oil prices of Brent and Urals or a combination thereof for volumes sold
domestically.
As a result, the Group’s revenues from the sales of liquid hydrocarbons are subject to fluctuations in the crude oil
and gas condensate refined products benchmark prices. The Group’s liquid hydrocarbons purchase and sales
contracts are concluded to meet supply requirements to fulfil contract obligations or for own consumption and are
not within the scope of IFRS 9, Financial Instruments.
52
PAO NOVATEK
(c) Cash flow and fair value interest rate risk
The Group is subject to interest rate risk on financial liabilities with variable interest rates. Changes in interest rates
impact primarily debt by changing either their fair value (fixed rate debt) or their future cash flows (variable rate
debt). To mitigate this risk, the Group’s treasury function performs periodic analysis of the current interest rate
environment and depending on that analysis management makes decisions whether it would be more beneficial to
obtain financing on a fixed-rate or variable-rate basis. In cases where the change in the current market fixed or
variable interest rates is considered significant management may consider refinancing a particular debt on more
favorable interest rate terms. At 31 December 2019 and 2018, the Group’s debt bore fixed interest rates.
The Group centralizes the cash requirements and surpluses of controlled subsidiaries and the majority of their
external financing requirements, and applies, on its consolidated net debt position, a funding policy to optimize its
financing costs and manage the impact of interest rate changes on its financial results in line with market
conditions. In this way, the Group is able to ensure that the balance between the floating rate portion of its debt and
its cash surpluses has a low level of exposure to any changes in interest rates over the short-term. This policy makes
it possible to significantly limit the Group’s sensitivity to interest rate volatility.
Credit risk. Credit risk refers to the risk exposure that a potential financial loss to the Group may occur if a
counterparty defaults on its contractual obligations.
Credit risk is managed on a Group level and arises from cash and cash equivalents, other bank deposits, as well as
credit exposures to customers, including outstanding trade receivables and committed transactions. Cash, cash
equivalents and deposits are placed only with banks that are considered by the Group during the whole deposit
period to have minimal risk of default.
The Group’s trade and other receivables consist of a large number of customers, spread across diverse industries
and geographical areas. The Group has developed standard credit payment terms and constantly monitors the status
of trade and other receivables and the creditworthiness of the customers.
Most of the Group’s international natural gas and liquid hydrocarbons sales are made to customers with
independent external ratings; however, if the customer has a credit rating below BBB-, the Group requires the
collateral for the trade receivable to be in the form of letters of credit from banks with an investment grade rating.
Most of domestic sales of liquid hydrocarbons are made on a 100 percent prepayment basis.
As a result of the domestic regional natural gas trading activities, the Group is exposed to the risk of payment
defaults of small and medium-sized industrial users and individuals. To minimize credit risk the Group monitors
the recoverability of these debtors by analyzing ageing of receivables by type of customers and their respective
prior payment history.
The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the
consolidated statement of financial position.
The table below highlights the Group’s trade and other receivables to published credit ratings of its counterparties
and/or their parent companies:
Moody’s, Fitch and/or Standard & Poor’s At 31 December 2019 At 31 December 2018
Investment grade rating 199,446 30,285

Non-investment grade rating 328 2,438
No external rating 29,807 21,710
Total trade and other receivables 229,581 54,433
53
PAO NOVATEK
The table below highlights the Group’s cash, cash equivalents and short-term bank deposits with original maturity
more than three months to published credit ratings of its banks and/or their parent companies:
Moody’s, Fitch and/or Standard & Poor’s At 31 December 2019 At 31 December 2018
Investment grade rating 131,049 40,759

Non-investment grade rating 5,915 28,462
No external rating 28 39
Total cash, cash equivalents and short-term bank
deposits with original maturity more than three months 136,992 69,260
Investment grade ratings classification referred to as Aaa to Baa3 for Moody’s Investors Service, and as AAA to
BBB- for Fitch Ratings and Standard & Poor’s.
In addition, the Group provides long-term loans receivable to its joint ventures for development, construction and
acquisitions of oil and gas assets. Required amount of loans and their maturity schedules are based on the budgets
and strategic plans approved by the shareholders of the joint ventures.
Liquidity risk. Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall
due. The Group’s approach to managing liquidity is to ensure that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking
damage to the Group’s reputation. In managing its liquidity risk, the Group maintains adequate cash reserves and
debt facilities, continuously monitors forecast and actual cash flows and matches the maturity profiles of financial
assets and liabilities.
The Group prepares various financial plans (monthly, quarterly and annually) which ensures that the Group has
sufficient cash on demand to meet expected operational expenses, financial obligations and investing activities for a
period of 30 days or more. The Group has entered into a number of short-term credit facilities. Such credit lines and
overdraft facilities can be drawn down to meet short-term financing needs. To fund cash requirements of a more
permanent nature, the Group will normally raise long-term debt in available international and domestic markets.
The following tables summarize the maturity profile of the Group’s financial liabilities, except for natural gas
derivative contracts, based on contractual undiscounted payments, including interest payments:
Less than Between Between More than

At 31 December 2019 1 year 1 and 2 years 2 and 5 years 5 years Total
Debt
Principal 12,246 44,545 74,827 25,839 157,457
Interest 7,572 5,965 7,269 3,796 24,602
Lease liabilities 3,153 2,959 5,610 - 11,722
Trade and other payables 53,236 - - - 53,236
Total financial liabilities 76,207 53,469 87,706 29,635 247,017
At 31 December 2018
Debt
Principal 2,416 13,786 129,124 33,831 179,157
Interest 8,775 8,494 13,371 5,739 36,379
Lease liabilities 2,408 2,396 6,294 - 11,098
Trade and other payables 54,330 - - - 54,330
Total financial liabilities 67,929 24,676 148,789 39,570 280,964
54
PAO NOVATEK
The following tables represent the maturity profile of the Group’s derivative commodity contracts based on
undiscounted cash flows:
Between Between
At 31 December 2019 Less than 1 year 1 and 2 years 2 and 5 years Total
Cash inflow 113,918 43,034 15,146 172,098

Cash outflow (113,402) (43,649) (15,462) (172,513)
Net cash flows 516 (615) (316) (415)
At 31 December 2018
Cash inflow 133,167 47,403 42,251 222,821

Cash outflow (132,409) (47,367) (42,292) (222,068)
Net cash flows 758 36 (41) 753
Reconciliation of liabilities arising from financing activities. The movements in the Group’s liabilities arising
from financing activities were as follows:
Long-term debt and Long-term lease

interest payable liabilities Total
At 1 January 2018 156,971 7,296 164,267

Cash flows (22,313) (2,192) (24,505)
Non-cash movements
Non-cash additions 249 2,480 2,729
Interest accrued 8,702 474 9,176
Foreign exchange movements 28,995 1,758 30,753
Acquisition of subsidiaries 1,010 - 1,010
Reclassification to assets held for sale (see Note 4) - (18) (18)
At 31 December 2018 173,614 9,798 183,412
Cash flows (10,316) (2,944) (13,260)

Non-cash movements
Non-cash additions - 4,291 4,291
Interest accrued 9,112 544 9,656
Foreign exchange movements (19,021) (1,226) (20,247)
At 31 December 2019 153,389 10,463 163,852
Capital management. The primary objectives of the Group’s capital management policy are to ensure a strong
capital base to fund and sustain its business operations through prudent investment decisions and to maintain
investor, market and creditor confidence to support its business activities.
At 31 December 2019, the Group had investment grade ratings of BBB by Standard & Poor’s, BBB by Fitch
Ratings and Baa2 by Moody’s Investors Service. The Group has established certain financial targets and coverage
ratios that it monitors on a quarterly and annual basis to maintain its credit ratings.
The Group manages its capital on a corporate-wide basis to ensure adequate funding to sufficiently meet the
Group’s operational requirements. The majority of external debts raised to finance NOVATEK’s wholly owned
subsidiaries are centralized at the parent level, and financing to Group entities is facilitated through inter-company
loan arrangements or additional contributions to share capital.
55
PAO NOVATEK
The Group has a stated dividend policy that distributes not less than 30 percent of the Group’s consolidated net
profit determined according to IFRS, adjusted for one-off profits (losses). The dividend payment for a specific year
is determined after taking into consideration future earnings, capital expenditure requirements, future business
opportunities and the Group’s current financial position. Dividends are recommended by the Board of Directors of
NOVATEK and approved by the NOVATEK’s shareholders.
The Group defines the term “capital” as equity attributable to PAO NOVATEK shareholders plus net debt (total
debt less cash and cash equivalents and bank deposits with maturity more than three months). There were no
changes to the Group’s approach to capital management during 2019. At 31 December 2019 and 2018, the Group’s
capital totaled RR 1,663 billion and RR 971 billion, respectively.
27 CONTINGENCIES AND COMMITMENTS
Operating environment. The Russian Federation continues to display some characteristics of an emerging market.
These characteristics include, but are not limited to, the existence of a currency that is in practice not convertible in
most countries outside of the Russian Federation, and relatively high inflation. In addition, the Russian economy is
particularly sensitive to world oil and gas prices; therefore, significant prolonged declines in world oil prices have a
negative impact on the Russian economy. The tax, currency and customs legislation is subject to varying
interpretations, frequent changes and other legal and fiscal impediments contribute to the challenges faced by
entities currently operating in the Russian Federation. The future economic direction of the Russian Federation is
largely dependent upon the effectiveness of economic, financial and monetary measures undertaken by the
Government, together with tax, legal, regulatory, and political developments.
The Group’s business operations are primarily located in the Russian Federation and are thus exposed to the
economic and financial markets of the Russian Federation.
Developments in Ukraine during 2014 and the subsequent negative reaction of the world community have had and
may continue to have a negative impact on the Russian economy, including difficulties in obtaining international
funding, devaluation of national currency and high inflation. These and other events, in case of escalation, may
have a significant negative impact on the operating environment in the Russian Federation.
Sectoral sanctions imposed by the U.S. government. On 16 July 2014, the Office of Foreign Assets Control
(OFAC) of the U.S. Treasury included PAO NOVATEK on the Sectoral Sanctions Identification List (the “List”),
which prohibits U.S. persons or persons within the United States from providing new financing to the Group for
longer than 60 days (prior to 28 November 2017, this restriction applied to new financing with a maturity of more
than 90 days). Whereas all other transactions, including financial, carried out by U.S. persons or within the United
States with the Group are permitted. The inclusion on the List has not impacted the Group’s business activities, in
any jurisdiction, nor does it affect the Group’s assets and debt.
Management has reviewed the Group’s capital expenditure programs and existing debt portfolio and has concluded
that the Group has sufficient liquidity, through internally generated (operating) cash flows, to adequately fund its
core oil and gas business operations including finance of planned capital expenditure programs of its subsidiaries,
as well as to repay and service all Group’s short-term and long-term debt existing at the current reporting date and,
therefore, inclusion on the List does not adversely impact the Group’s operational activities.
The Group together with its foreign partners currently raises necessary financing for our joint ventures from
non-US debt markets and lenders.
Contractual commitments. At 31 December 2019, the Group had contractual capital expenditures commitments
aggregating approximately RR 223 billion (at 31 December 2018: RR 376 billion) mainly for development of LNG
projects (through 2024), construction of a hydrocracker unit at the Gas Condensate Fractionation and
Transshipment Complex located at the port of Ust-Luga on the Baltic Sea (through 2021), and for development at
the North-Russkoye (through 2021), the East-Tarkosalinskoye (through 2021), the Yarudeyskoye (through 2020),
the Kharbeyskoye (through 2023), and the Yurkharovskoye (through 2022) fields all in accordance with duly
signed agreements. At 31 December 2018, contractual commitments included RR 266 billion related to
OOO Arctic LNG 2, which became a Group’s joint venture in March 2019 (see Note 4).
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PAO NOVATEK
27 CONTINGENCIES AND COMMITMENTS (CONTINUED)
At 31 December 2019 and 2018, the Group was a participant of joint operations on exploration and production in
Montenegro (50 percent participation interest) and in Republic of Lebanon (20 percent participation interest) under
the agreements concluded with the State of Montenegro and the Ministry of Energy and Water of Republic of
Lebanon, respectively. Jointly with other participants of these agreements, the Group committed to conduct
mandatory work program exploration activities during the established periods, as stipulated by these agreements
(until 2021). The maximum amount to be paid by the Group in case of non-performance of work program
exploration activities is EUR 42.5 million to the State of Montenegro and EUR 12.7 million to the Republic of
Lebanon. The outflow of resources embodying economic benefits required to settle these contingent liabilities is
not probable; therefore, no provision for these liabilities was recognized in the consolidated interim condensed
financial statements.
The Group has entered into a number of agreements, relating to time chartering of marine tankers with service
terms from 20 to 29 years under which provision of the services has not yet commenced. At 31 December 2019, the
Group’s future minimum payments under these time charter agreements amounted to RR 110 billion.
Non-financial guarantees. The aggregated amount of non-financial guarantees in respect of the Yamal LNG
project issued by the Group to a number of third parties (the Ministry of Finance of the Russian Federation, Russian
and foreign banks, LNG-terminal owners) in favor of the Group’s joint venture OAO Yamal LNG and its
subsidiary totaled USD 1.4 billion and EUR 8.5 billion at 31 December 2019 (at 31 December 2018:
USD 1.4 billion and EUR 7.2 billion). These non-financial guarantees have various terms depending mostly on
passing tests proving successful project completion that is expected in the near term. After the expiry of the
aforementioned guarantees, in accordance with the project financing agreements, the Group will issue non-financial
guarantees enforceable only in limited circumstances specified in these agreements.
With regard to the Group’s obligations under the non-financial guarantee issued to the banks providing project
financing to Yamal LNG, the State Development Corporation VEB.RF issued in favor of the banks a counter
guarantee for the amount not exceeding the equivalent of USD 3 billion.
The aggregated amount of non-financial guarantees issued by the Group to a Russian bank in favor of the Group’s
joint venture Cryogas-Vysotsk totaled EUR 277 million at 31 December 2019 (at 31 December 2018:
EUR 232 million).
Subsequent to the balance sheet date, in January 2020, the Group issued non-financial guarantees in favor of its
joint venture Arctic LNG 2 relating to LNG-tankers time charter agreements in the amount of USD 384 million.
The outflow of resources embodying economic benefits required to settle the obligations under these non-financial
guarantees issued by the Group is not probable; therefore, no provision for these liabilities was recognized in the
consolidated financial statements.
Taxation. Russian tax, currency and customs legislation is subject to varying interpretations, and changes, which
can occur frequently. Correspondingly, the relevant regional and federal tax authorities may periodically challenge
management’s interpretation of such taxation legislation as applied to the Group’s transactions and activities.
Furthermore, events within the Russian Federation suggest that the tax authorities may be taking a more assertive
position in its interpretation of the legislation and assessments, and it is possible that transactions and activities that
have not been challenged in the past may be challenged. As a result, significant additional taxes, penalties and
interest may be assessed. Fiscal periods remain open to review by the authorities in respect of taxes for three
calendar years preceding the year of review. Under certain circumstances reviews may cover longer periods.
Management believes that its interpretation of the relevant legislation is appropriate and that it is probable that the
Group’s tax, currency and customs positions will be sustained. Where management believes it is probable that a
position cannot be sustained, an appropriate amount has been accrued in the consolidated financial statements.
Mineral licenses. The Group is subject to periodic reviews of its activities by governmental authorities with respect
to the requirements of its mineral licenses. Management cooperates with governmental authorities to agree on
remedial actions necessary to resolve any findings resulting from these reviews. Failure to comply with the terms of
a license could result in fines, penalties or license limitation, suspension or revocation. The Group’s management
believes any issues of non-compliance will be resolved through negotiations or corrective actions without any
material adverse effect on the Group’s financial position, results of operations or cash flows.
57
PAO NOVATEK
The major of the Group’s oil and gas fields and license areas are located in the YNAO. Licenses are issued by the
Federal Agency for the Use of Natural Resources of the Russian Federation and the Group pays unified natural
resources production tax to produce crude oil, natural gas and unstable gas condensate from these fields and
contributions for exploration of license areas. The principal licenses of the Group and its joint ventures and their
expiry dates are:
Field License holder License expiry date
Subsidiaries:
Geofizicheskoye OOO Arctic LNG 1 2034
Soletskoye+Khanaveyskoye OOO Arctic LNG 1 2046
Gydanskoye OOO Arctic LNG 1 2044
Yurkharovskoye OOO NOVATEK-Yurkharovneftegas 2034
Urengoyskoe (within the
Ust-Yamsoveyskiy license area) OOO NOVATEK-Yurkharovneftegas 2198
East-Urengoiskoye+North-
Esetinskoye (within the West Yaro
Yakhinsky license area) OOO NOVATEK-Yurkharovneftegas 2025
Nyakhartinskoye OOO NOVATEK-Yurkharovneftegas 2043
West-Yurkharovskoye OOO NOVATEK-Yurkharovneftegas 2029
Upper-Tiuteyskoye
and West-Seyakhinskoye OOO Obskiy LNG 2044
East-Tarkosalinskoye OOO NOVATEK-Tarkosaleneftegas 2043
North-Russkoye OOO NOVATEK-Tarkosaleneftegas 2031
Kharbeyskoye OOO NOVATEK-Tarkosaleneftegas 2036
East-Tazovskoye OOO NOVATEK-Tarkosaleneftegas 2033
Urengoyskoye (within the
Olimpiyskiy license area) OOO NOVATEK-Tarkosaleneftegas 2059
Dorogovskoye OOO NOVATEK-Tarkosaleneftegas 2033
Khancheyskoye OOO NOVATEK-Tarkosaleneftegas 2044
Dobrovolskoye (within the
South-Khadyryakhinskoye OOO NOVATEK-Tarkosaleneftegas 2031
North-Khancheyskoye+
Khadyryakhinskoye OOO NOVATEK-Tarkosaleneftegas 2029
Sterkhovoye (within the
North-Chaselskoye OOO North-Chaselskoye Life of field
Beregovoye AO NOVATEK-Pur 2070
Syskonsyninskoye AO NOVATEK-Pur 2027
Yevo-Yakhinskoye OOO Yevo-Yakhinskoye 2034
Yarudeyskoye OOO Yargeo 2029
Joint ventures:
South-Tambeyskoye OAO Yamal LNG 2045
Salmanovskoye (Utrenneye) OOO Arctic LNG 2 2120
Urengoyskoye (within the Samburgskiy and
Yevo-Yakhinskiy license areas) AO Arcticgas 2034
Yaro-Yakhinskoye AO Arcticgas 2034
Samburgskoye AO Arcticgas 2034
East-Urengoiskoye+North-Esetinskoye
(within the Samburgskiy license area) AO Arcticgas 2034
North-Urengoyskoye ZAO Nortgas 2038
Termokarstovoye ZAO Terneftegas 2097
Management believes the Group has the right to extend its licenses beyond the initial expiration date under the
existing legislation and intends to exercise this right on all of its fields.
58
PAO NOVATEK
Environmental liabilities. The Group operates in the oil and gas industry in the Russian Federation and abroad.
The enforcement of environmental regulation in the Russian Federation and other countries of operation is evolving
and the enforcement posture of government authorities is continually being reconsidered. The Group periodically
evaluates its obligations under environmental regulations and, as obligations are determined, they are recognized as
an expense immediately if no future benefit is discernible. Potential liabilities arising as a result of a change in
interpretation of existing regulations, civil litigation or changes in legislation cannot be estimated. Under existing
legislation, management believes that there are no probable liabilities, which will have a material adverse effect on
the Group’s financial position, results of operations or cash flows.
Legal contingencies. The Group is subject of, or party to a number of court proceedings (both as a plaintiff and a
defendant) arising in the ordinary course of business. In the opinion of management, there are no current legal
proceedings or other claims outstanding, which could have a material effect on the result of operations or financial
position of the Group and which have not been accrued or disclosed in the consolidated financial statements.
28 PRINCIPAL SUBSIDIARIES AND JOINT VENTURES
The principal subsidiaries and joint ventures of the Group and respective effective ownership in the ordinary share
capital at 31 December 2019 and 2018 are set out below:
Ownership percent
at 31 December: Country of
2019 2018 incorporation Principal activities
Subsidiaries:
OOO NOVATEK-Yurkharovneftegas 100 100 Russia Exploration and production
OOO NOVATEK-Tarkosaleneftegas 100 100 Russia Exploration and production
Exploration, development
OOO Yargeo 51 51 Russia and production
AO NOVATEK-Pur 100 100 Russia Exploration and production
OOO Arctic LNG 1 100 100 Russia Exploration and development
OOO Arctic LNG 3 100 100 Russia Exploration and development
Scientific and
technical support of
OOO NOVATEK-NTC 100 100 Russia exploration and development
Construction of
OOO NOVATEK-Murmansk 100 100 Russia large-scale offshore structures
Gas Condensate
OOO NOVATEK-Purovsky ZPK 100 100 Russia Processing Plant
OOO NOVATEK-Transervice 100 100 Russia Transportation services
Fractionation
OOO NOVATEK-Ust-Luga 100 100 Russia and Transshipment Complex
OOO NOVATEK-AZK 100 100 Russia Wholesale and retail trading
OOO NOVATEK-Chelyabinsk 100 100 Russia Trading and marketing
OOO NOVATEK-Kostroma 100 100 Russia Trading and marketing
OOO NOVATEK-Perm 100 100 Russia Trading and marketing
OOO NOVATEK Moscow Region 100 100 Russia Trading and marketing
Novatek Gas & Power GmbH 100 100 Switzerland Trading and marketing
Novatek Gas & Power Asia Pte. Ltd. 100 100 Singapore Trading and marketing
Novatek Polska Sp. z o.o. (renamed to
Novatek Green Energy Sp. z o.o. in
February 2020) 100 100 Poland Trading and marketing
59
PAO NOVATEK
28 PRINCIPAL SUBSIDIARIES AND JOINT VENTURES (CONTINUED)
Ownership percent
at 31 December: Country of
2019 2018 incorporation Principal activities
Joint ventures:
Exploration and development,
OAO Yamal LNG 50.1 50.1 Russia production of LNG
OOO Arctic LNG 2 Exploration and development,
(subsidiary until March 2019) 60 100 Russia construction of LNG plant
AO Arcticgas 50 50 Russia Exploration and production
ZAO Nortgas 50 50 Russia Exploration and production
ZAO Terneftegas 51 51 Russia Exploration and production
Operation of
ООО Cryogas-Vysotsk 51 51 Russia medium-scale LNG plant
OOO SMART LNG 50 - Russia Leasing of LNG tankers
Construction of LNG
Rostock LNG GmbH 49 49 Germany transshipment terminal
29 RELATED PARTY TRANSACTIONS
Transactions between NOVATEK and its subsidiaries, which are related parties of NOVATEK, have been
eliminated on consolidation and are not disclosed in this Note.
For the purposes of these consolidated financial statements, parties are generally considered to be related if one
party has the ability to control the other party, is under common control, or can exercise significant influence or
joint control over the other party in making financial and operational decisions. Management has used reasonable
judgments in considering each possible related party relationship with attention directed to the substance of the
relationship, not merely the legal form. Related parties may enter into transactions, which unrelated parties might
not, and transactions between related parties may not be affected on the same terms, conditions and amounts as
transactions between unrelated parties.

Related parties – joint ventures 2019 2018
Transactions
Revenue from oil and gas sales 3,210 -
Other revenues 5,304 3,258
Purchases of natural gas and liquid hydrocarbons (296,442) (280,570)
Materials, services and other (164) (133)
Interest income 16,158 12,511
Dividends declared 46,550 8,500
Related parties – joint ventures At 31 December 2019 At 31 December 2018
Balances
Long-term loans receivable 231,495 232,515
Current portion of long-term loans receivable 50,815 40,386
Trade and other receivables 1,426 330
Trade payables and accrued liabilities 27,034 26,194
The terms and conditions of the loans receivable from the joint ventures are disclosed in Note 7.
60
PAO NOVATEK
29 RELATED PARTY TRANSACTIONS (CONTINUED)
The Group issued non-financial guarantees in favor of its joint ventures as described in Note 27.
In September 2018, TOTAL S.A. acquired an additional shareholding in NOVATEK increasing their ownership
interest in the Company to 19.4 percent. From there on, the Group considers TOTAL as a shareholder of significant
influence, and starting from 1 October 2018, discloses balances and operations with TOTAL and its subsidiaries as
related party transactions.

Related parties – entities with significant influence and their subsidiaries 2019 2018
Transactions
Revenue from oil and gas sales 38,325 16,511
Other revenues 106 -
Gain on disposal of interests in subsidiaries and joint ventures, net 308,578 -
Other operating income (loss), net (7,842) (459)
Interest income 899 -
Related parties – entities with significant influence and their subsidiaries At 31 December 2019 At 31 December 2018
Balances
Trade and other receivables 43,910 2,271
Contingent consideration 26,513 -
Trade payables and accrued liabilities 359 350

Related parties – parties under control of key management personnel 2019 2018
Transactions
Purchases of construction services
(capitalized within property, plant and equipment) (14,555) (7,107)
Transportation expenses (10,114) (9,449)
Related parties – parties under control of key management personnel At 31 December 2019 At 31 December 2018
Balances
Advances for construction 4,773 3,704
Prepayments and other current assets 487 715
Trade payables and accrued liabilities 1,898 2,104
Key management personnel compensation. The Group paid to key management personnel (members of the Board
of Directors and the Management Committee) short-term compensation, including salary, bonuses and excluding
dividends, in the following amounts:

Related parties – members of the key management personnel 2019 2018
Board of Directors 166 128

Management Committee 4,134 3,151
Total compensation 4,300 3,279
Such amounts include personal income tax and are net of payments to non-budget funds made by the employer.
Some members of key management personnel have direct and/or indirect interests in the Group and receive
dividends under general conditions based on their respective shareholdings.
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PAO NOVATEK
30 SEGMENT INFORMATION
The Group’s activities are considered by the chief operating decision maker (hereinafter referred to as “CODM”,
represented by the Management Committee of NOVATEK) to comprise one operating segment: “exploration,
production and marketing”.
The Group’s management reviews financial information on the results of operations of the reporting segment
prepared based on IFRS. The CODM assesses reporting segment performance based on profit comprising among
others revenues, depreciation, depletion and amortization, interest income and expense, income tax and other items
as presented in the Group’s consolidated statement of income. The CODM also reviews capital expenditures of the
reporting segment for the period defined as additions to property, plant and equipment (see Note 5).
Geographical information. The Group operates in the following geographical areas:
• Russian Federation – exploration, development, production and processing of hydrocarbons, and sales of
natural gas, stable gas condensate, other gas and gas condensate refined products, liquefied petroleum gas and
crude oil;
• Countries of Europe (primarily, the Netherlands, Belgium, Sweden, Denmark, France, Finland, Italy, the
United Kingdom, Poland, Spain, Latvia, Lithuania, Norway and Montenegro) – sales of naphtha, stable gas
condensate, gas condensate refined products, crude oil, liquefied petroleum gas and natural gas and
exploration activities within joint operations;
• Countries of the Asia-Pacific region (primarily, China, including Taiwan, Republic of Korea, Japan, India
and Singapore) – sales of naphtha, stable gas condensate, natural gas and crude oil;
• Countries of North America (primarily, the USA) – sales of naphtha, other gas condensate refined products
and crude oil;
• Countries of the Middle East (primarily, Turkey, Oman, UAE and Lebanon) – sales of naphtha, stable gas
condensate, crude oil and exploration activities within joint operations;
• Countries of Latin America (primarily, Brazil) – sales of natural gas.
Geographical information of the Group’s oil and gas sales for the years ended 31 December 2019 and 2018 is as
follows:

2019 2018
Russia 403,639 406,621

Europe 303,564 278,367
Asia-Pacific region 120,802 138,992
North America 41,205 26,867
The Middle East 16,217 11,742
Latin America - 4,786
Less: export duties (33,195) (41,614)
Total outside Russia 448,593 419,140

Total oil and gas sales 852,232 825,761
Revenues pertaining to geographical information are prepared based on the products geographical destination. For
products transported by tankers, the geography is determined based on the location of the port of
discharge/transshipment designated by the Group’s customer. Substantially all of the Group’s operating assets are
located in the Russian Federation.
Major customers. For the years ended 31 December 2019 and 2018, the Group had one major customer to whom
individual revenue exceeded 10 percent of total external revenues, which represented 13.4 percent
(RR 115.9 billion) and 13.9 percent (RR 115.4 billion) of total external revenues, respectively. The Group’s major
customer resides within the Russian Federation.
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31 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation. These consolidated financial statements present the assets, liabilities, equity, income,
expenses and cash flows of PAO “NOVATEK” and its subsidiaries as those of a single economic entity.
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an
entity when the Group is exposed to, or has rights to, variable returns from its involvements with the entity and has
the ability to affect those returns through its power over the entity. Subsidiaries are consolidated from the date on
which control is transferred to the Group (acquisition date) and are deconsolidated from the date that control
ceases.
Intercompany transactions, balances and unrealized gains on transactions between group companies are eliminated.
Accounting policies of the Group’s subsidiaries have been changed where necessary to ensure consistency with the
Group’s policies.
Joint arrangements. The Group undertakes a number of business activities through joint arrangements, which exist
when two or more parties have joint control. Joint arrangements are classified as either joint operations or joint
ventures, based on the contractual rights and obligations between the parties to the arrangement.
Interests in joint ventures are accounted for using the equity method. With regard to joint operations, the Group
records its share of assets, liabilities, revenues and expenses of its joint operations in the consolidated financial
statements on a line-by-line basis.
Under the equity method, an investment in a joint venture is initially recognized at cost. The difference between the
cost of an acquisition and the share of the fair value of the joint venture’s identifiable net assets represents goodwill
upon acquiring the joint venture.
Post-acquisition changes in the Group’s share of net assets of a joint venture are recognized as follows: (a) the
Group’s share of profits or losses is recorded in the consolidated profit or loss for the year as share of financial
result of joint ventures; (b) the Group’s share of other comprehensive income or loss is recognized in other
comprehensive income or loss and presented separately; (c) dividends received or receivable from a joint venture
are recognized as a reduction in the carrying amount of the investment; (d) all other changes in the Group’s share of
the carrying value of net assets of a joint venture are recognized within retained earnings in the consolidated
statement of changes in equity.
After application of the equity method, including recognizing the joint venture’s losses, the entire carrying amount
of the investment is tested for impairment as a single asset whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable.
When the Group’s share of losses in a joint venture equals or exceeds its interest in the joint venture, the Group
does not recognize further losses, unless it has incurred obligations or made payments on behalf of the joint
ventures. The interest in a joint venture is the carrying amount of the investment in the joint venture together with
any long-term interests that, in substance, form part of the Group’s net investment in the joint venture, including
receivables and loans for which settlement is neither planned nor likely to occur in the foreseeable future.
Unrealized gains on transactions between the Group and its joint ventures are eliminated to the extent of the
Group’s interest in joint ventures; unrealized losses are also eliminated unless the transaction provides evidence of
an impairment of the asset transferred.
Accounting policies of joint ventures have been changed where necessary to ensure consistency with the policies
adopted by the Group.
Business combinations. The acquisition method of accounting is used to account for acquisitions of subsidiaries.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are
measured at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest.
Goodwill is measured by deducting the net assets of the acquiree from the aggregate of the consideration
transferred for the acquiree, the amount of non-controlling interest in the acquiree and fair value of an interest in
the acquiree held immediately before the acquisition date. Any negative amount (“negative goodwill”) is
recognized in profit or loss, after management reassesses whether it identified all the assets acquired and all
liabilities and contingent liabilities assumed and reviews appropriateness of their measurement.
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PAO NOVATEK
31 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The consideration transferred for the acquiree is measured at the fair value of the assets transferred, equity
instruments issued and liabilities incurred or assumed, including fair value of assets or liabilities from contingent
consideration arrangements but excludes acquisition related costs such as advisory, legal, valuation and similar
professional services.
Disposals of subsidiaries, associates or joint ventures. When the Group ceases to control a subsidiary as a result of
its contribution to a joint venture, a joint operation or an associate, the subsidiary is deconsolidated and the retained
interest in the entity is remeasured to its fair value only to the extent of the unrelated investors’ interest in the joint
venture, the joint operation or the associate, with the change in carrying amount recognized in profit or loss.
If the ownership interest in a joint venture is reduced but joint control is retained or replaced with significant
influence, the Group continues to apply the equity method and does not remeasure the retained interest.
Extractive activities. The Group follows the successful efforts method of accounting for its oil and gas properties
and equipment whereby property acquisitions and development costs are capitalized, and exploration costs
(geological and geophysical expenditures, expenditures associated with the maintenance of non-proven reserves
and other expenditures relating to exploration activity), excluding exploratory drilling expenditures and exploration
license acquisition costs, are recognized within operating expenses in the consolidated statement of income as
incurred.
Exploration license acquisition costs and exploratory drilling costs are recognized as exploration assets within
property, plant and equipment until it is determined whether proved reserves justifying their commercial
development have been found. If no proved reserves are found, the relevant costs are charged to the consolidated
statement of income. When proved reserves are determined, exploration license acquisition costs are reclassified to
proved properties acquisition costs and exploratory drilling costs are reclassified to development expenditure
categories within property, plant and equipment. Exploration license acquisition costs and exploratory drilling costs
recognized as exploration assets are reviewed for impairment on an annual basis.
The costs of 3-D seismic surveys used to assist production, increase total recoverability and determine the
desirability of drilling additional development wells within proved reservoirs are capitalized as development costs.
All other seismic costs are expensed as incurred.
Production costs and overheads are charged to expense as incurred.
Property, plant and equipment. Property, plant and equipment are carried at historical cost of acquisition or
construction and adjusted for accumulated depreciation, depletion, amortization and impairment.
The cost of self-constructed assets includes the cost of direct materials, direct employee related costs, a pro-rata
portion of depreciation of assets used for construction and an allocation of the Group’s overhead costs.
Depreciation, depletion and amortization of oil and gas properties and equipment is calculated using the unit-of-
production method for each field based upon total proved reserves for costs associated with acquisitions of proved
properties and common infrastructure facilities, and proved developed reserves for other development costs,
including wells. Where unit-of-production method does not reflect useful life and pattern of consumption of
particular oil and gas assets, such as processing facilities serving several properties, those assets are depreciated on
a straight-line basis.
Property, plant and equipment, other than oil and gas properties and equipment, are depreciated on a straight-line
basis over their estimated useful lives. Land and assets under construction are not depreciated.
The estimated useful lives of the Group’s property, plant and equipment depreciated on a straight-line basis are as
follows:
Years
Machinery and equipment 5-15

Processing facilities 20-30
Buildings 25-50
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PAO NOVATEK
At each reporting date management assesses whether there is any indication of impairment in respect of property,
plant and equipment. If any such indication exists, management estimates the recoverable amount, which is
determined as the higher of an asset’s fair value less selling costs and its value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which
are largely independent of the cash inflows from other assets or groups of assets (cash generating units). The
carrying amount is reduced to the recoverable amount and the impairment loss is recognized in profit or loss for the
respective period. An impairment loss recognized for an asset in prior years is reversed if there has been a change
in the estimates used to determine the asset’s recoverable amount.
Borrowing costs. Interest costs on borrowings and exchange differences arising from foreign currency borrowings
(to the extent that they are regarded as an adjustment to interest costs) used to finance the construction of property,
plant and equipment are capitalized during the period of time that is required to complete and prepare the asset for
its intended use. All other borrowing costs are recognized in the consolidated statement of income.
Asset retirement obligations. An asset retirement obligation is recognized when the Group has a present legal or
constructive obligation to dismantle, remove and restore items of property, plant and equipment whose construction
is substantially completed. The obligation is recognized when incurred at the present value of the estimated costs of
dismantling the assets, including abandonment and site restoration costs, and are included within the carrying value
of property, plant and equipment.
Changes in the asset retirement obligation relating to a change in the expected pattern of settlement of the
obligation, or in the estimated amount of the obligation or in the discount rates, are treated as a change in an
accounting estimate in the current period. Such changes are reflected as adjustments to the carrying value of
property, plant and equipment and the corresponding liability. Changes in the obligation resulting from the passage
of time are recognized in the consolidated statement of income as interest expense.
Leases. A contract is (or contains) a lease if it conveys the right to control the use of an identified asset for a period
of time in exchange for consideration.
Right-of-use assets are initially measured at cost and depreciated by the earlier of the end of the useful life of the
right-of-use asset or the end of the lease term. The cost of right-of-use assets comprises of initial measurement of
the lease liability, any lease payments made before or at the commencement date and initial direct costs. After the
commencement date, the right-of-use assets are carried at cost less accumulated depreciation and impairment losses
in accordance with IAS 16, Property, Plant and Equipment.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date and subsequently measured at amortised cost with the interest expense recognized within
finance income (expense) in the consolidated statement of income.
In accordance with IFRS 16, Leases, the Group elected not to apply accounting requirements under this standard to
short-term leases.
Non-current assets held for sale. Non-current assets are classified as held for sale if their carrying amount will be
recovered principally through a sale transaction rather than through continuing use, and the sale within a year from
the date of classification is highly probable. They are measured at the lower of their carrying amount and fair value
less costs to sell.
Property, plant and equipment are not depreciated once classified as held for sale.
The Group ceases to use the equity method of accounting in relation to an interest in a joint venture or an associate
classified as an asset held for sale.
Inventories. Natural gas, gas condensate, crude oil and gas condensate refined products are valued at the lower of
cost or net realizable value. The cost of natural gas and liquid hydrocarbons includes direct cost of materials, direct
operating costs, and related production overhead expenses and is recorded on weighted average cost basis. Net
realizable value is the estimate of the selling price in the ordinary course of business, less selling expenses.
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PAO NOVATEK
Materials and supplies are carried at amounts which do not exceed their respective recoverable amounts in the
normal course of business.
Financial instruments. Financial assets are classified in the following measurement categories: those to be
measured subsequently at amortised cost, those to be measured at fair value through profit or loss, and those to be
measured at fair value through other comprehensive income. The classification depends on the Group’s business
model for managing the financial assets and the contractual terms of the cash flows. If a hybrid contract contains a
host that is a financial asset, the classification requirements apply to the entire hybrid contract.
Financial assets are classified as at amortised cost only if both of the following criteria are met: the asset is held
within a business model with the objective of collecting the contractual cash flows, and the contractual terms give
rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding.
Certain shareholders’ loans provided by the Group to its joint ventures include embedded derivatives that modify
cash flows of the loans based on financial (market interest rates) and non-financial (interest rate on borrowings of
the lender and free cash flows of the borrower) variables. The risks relating to these variables are interrelated;
therefore, terms and conditions of each of these loans related to those variables were defined as a single compound
embedded derivative. The Group classified these loans as financial assets at fair value through profit or loss (see
Note 26).
The difference between the loan proceeds and the fair value at initial recognition is recorded as the Group’s
investment in the joint ventures. Subsequently, the loans are measured at fair value at each reporting date with
recognition of the revaluation through profit or loss. Interest income and foreign exchanges differences (calculated
using the effective interest method), and the remaining effect from fair value remeasurement of such loans are
disclosed separately in the consolidated statement of income.
Other shareholders’ loans provided by the Group, trade and other financial receivables, and cash and cash
equivalents, are classified as at amortised cost. The Group does not have financial assets classified as at fair value
through other comprehensive income.
The Group’s non-derivative financial liabilities are measured at amortised cost. Derivatives are classified as at fair
value through profit or loss. The Group does not apply hedge accounting.
Where there is an active market for a commodity, commodity contracts are accounted for as derivatives except for
contracts that were entered into and continue to be held for the purpose of the receipt or delivery of a commodity in
accordance with the Group’s expected purchase, sale or usage requirements. Gains or losses arising from changes
in the fair value of commodity derivatives are recognized within other operating income (loss) in the consolidated
statement of income (see Note 26).
An allowance for expected credit losses (“ECL”) shall be recorded for financial assets classified as at amortised
cost. Loss allowances are measured on either of the following bases: 12-month ECLs that result from possible
default events within the 12 months after the reporting date; and lifetime ECLs that result from all possible default
events over the expected life of a financial instrument.
For trade receivables, the Group measures loss allowances applying a simplified approach at an amount equal to
lifetime ECLs. To measure the expected credit losses, expected loss rates are applied to trade receivables grouped
based on the days past due. For other financial assets classified as at amortised cost, including some shareholders’
loans provided, loss allowances are measured as 12-month ECLs unless there has been a significant increase in
credit risk since origination, in which case the allowance is based on the lifetime ECLs.
The effective interest rate is the rate that exactly discounts future cash payments and receipts through the expected
life of the financial instrument or, when appropriate, a shorter period to the net carrying value of the financial asset
or financial liability.
Financial assets and liabilities are offset and the net amount reported in the consolidated statement of financial
position only when there is a legally enforceable right to offset the recognized amounts, and there is an intention to
either settle on a net basis, or to realize the asset and settle the liability simultaneously.
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PAO NOVATEK
Provisions for liabilities and charges. Provisions are recognized when the Group has a present legal or
constructive obligation as a result of past events; when it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation; and a reliable estimate of the amount of the obligation
can be made.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation
using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the
obligation. Provisions are reassessed at each reporting date, and those changes in the provisions resulting from the
passage of time are recognized in the consolidated statement of income as interest expense. Where the Group
expects a provision to be reimbursed, the reimbursement is recognized as a separate asset but only when the
reimbursement is virtually certain.
Pension obligations. The Group performs mandatory contributions to the Pension Fund of the Russian Federation
on behalf of its employees based on gross salary payments. These contributions represent a defined contribution
plan, are expensed when incurred and are included in the employee compensation in the consolidated statement of
income.
The Group also operates a non-contributory post-employment defined benefit plan based on employees’ years of
service and average salary (see Note 15).
The liability recognized in the consolidated statement of financial position in respect of the defined benefit pension
plan is the present value of the defined benefit obligations at the balance sheet date. The defined benefit obligations
are calculated annually by independent actuaries using the projected unit credit method.
Actuarial gains and losses on assets and liabilities arising from experience adjustments and changes in actuarial
assumptions are charged or credited to other comprehensive income in the period in which they arise. They are not
reclassified to profit or loss in subsequent periods. Past-service costs are recognized in profit or loss in the period
when a plan is amended or curtailed.
Non-financial guarantees. The Group issued a number of shareholder guarantees that provide compensation to
third parties if a joint venture fails to perform a contractual obligation. Such guarantees meet the definition of
insurance contracts and are accounted for under IFRS 4, Insurance Contracts. Liabilities for a non-financial
guarantee are recognized when an outflow of resources embodying economic benefits required to settle the
obligation is probable. The liabilities are recognized in the amount of best estimates of such an outflow.
Income taxes. The income tax charge or benefit comprises current tax and deferred tax and is recognized in the
consolidated statement of income unless it relates to transactions that are recognized, in the same or a different
period, in other comprehensive income or directly in equity.
Current tax is the amount expected to be paid to or recovered from the tax authorities in respect of taxable profits or
losses for the current and prior periods. Russian tax legislation allows to prepare and file a single, consolidated
income tax declaration by the taxpayers’ group comprised of a holding company and any number of entities with at
least 90 percent ownership in each (direct or indirect). Eligible taxpayers’ group must be registered with tax
authorities and meet certain conditions and criteria. The tax declaration can be submitted then by any member of
the group. The Group prepares a consolidated tax return for the taxpayers’ group including the Company and
majority of its subsidiaries in Russia.
Deferred tax assets and liabilities are recognized on temporary differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax base. Deferred tax balances are measured at tax
rates enacted or substantively enacted at the balance sheet date which are expected to apply to the period when the
temporary differences will reverse or when the tax loss carry forwards will be utilized. The Group applies a net-
basis accounting in respect of temporary differences arising from right-of-use assets and long-term lease liabilities.
Deferred tax assets for deductible temporary differences and tax loss carry forwards are recorded only to the extent
that it is probable that future taxable profit will be available against which the deductions can be utilized.
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PAO NOVATEK
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets against current tax liabilities and when the deferred income taxes balances relate to the same taxation
authority and the same taxable entity, consolidated tax group of entities or different taxable entities where there is
an intention to settle the balances on a net basis. Deferred tax assets and liabilities are netted only with respect to
individual companies of the Group (for companies outside the consolidated tax group of companies) and within the
consolidated tax payers’ group of companies.
The Group controls the reversal of temporary differences relating to taxes chargeable on dividends from
subsidiaries or on gains upon their disposal. The Group does not recognize deferred tax liabilities on such
temporary differences except to the extent that management expects the temporary differences to reverse in the
foreseeable future.
Treasury shares. Where any Group company purchases PAO NOVATEK’s equity share capital (treasury shares),
the consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted from
equity attributable to PAO NOVATEK shareholders until the shares are cancelled or reissued or disposed. Where
such shares are subsequently reissued or disposed, any consideration received, net of any directly attributable
incremental transaction costs and the related income tax effects, is included in equity attributable to
PAO NOVATEK shareholders. Treasury shares are recorded at weighted average cost. Gains or losses resulting
from subsequent sales of shares are recorded in the consolidated statement of changes in equity, net of associated
costs including taxation.
Dividends. Dividends are recognized as a liability and deducted from equity at the balance sheet date only if they
are declared before or on the balance sheet date. Dividends are disclosed when they are proposed or declared after
the balance sheet date but before the consolidated financial statements are authorized for issue.
Revenue recognition. Revenues represent the fair value of consideration received or receivable for the sale of
goods and services in the normal course of business, net of discounts, export duties, value-added tax, excise and
fuel taxes.
Revenues from oil and gas sales are recognized when control over such products has transferred to a customer,
which refers to ability to direct the use of, and obtain substantially all of the remaining benefits from the products.
The Group considers indicators of the transfer of control, which include, but are not limited to the following: the
Group has a present right to payment for the products; the Group has transferred physical possession of the
products; the customer has legal title to the products; the customer has the significant risks and rewards of
ownership of the products; the customer has accepted the products. Not all of the indicators have to be met for
management to conclude that control has transferred and revenue could be recognized. Management uses judgment
to determine whether factors collectively indicate that the customer has obtained control over the products.
Revenues from services are recognized in the period in which the services are rendered.
When the consideration includes a variable amount, minimum amounts must be recognized that are not at
significant risk of reversal. If sales contract includes the variability associated with market price it represents a
separated embedded derivative that is treated as part of revenue. Accordingly, at the date of sale the sales price is
determined on a provisional basis, and the fair value of the final sales price adjustment is re-estimated continuously
with changes in fair value recognized as an adjustment to revenue.
Trade receivables are recognized when the goods are transferred as this is the point in time that the consideration is
unconditional and only the passage of time is required before the payment is due. No significant element of
financing is deemed present as the sales are made with short-term credit terms consistent with market practice.
General and administrative expenses. General and administrative expenses represent overall corporate
management and other expenses related to the general management and administration of the business unit as a
whole. They include management and administrative compensation, legal and other advisory expenses, insurance
of administrative buildings, social expenses and compensatory payments of general nature not directly linked to the
Group’s oil and gas activities, charity and other expenses necessary for the administration of the Group.
Earnings per share. Earnings per share are determined by dividing the profit or loss attributable to
PAO NOVATEK shareholders by the weighted average number of shares outstanding during the reporting period.
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PAO NOVATEK
Consolidated statement of cash flows. Cash and cash equivalents comprises cash on hand, cash deposits held with
banks and short-term highly liquid investments which are readily convertible to known amounts of cash and which
are not subject to significant risk of change in value and have an original maturity of three months or less.
The Group reports cash receipts and the repayments of short-term borrowings which have a maturity of three
months or less on a net basis in the consolidated statement of cash flows.
32 NEW ACCOUNTING PRONOUNCEMENTS
The following new standards and interpretations have been issued that are mandatory for the annual periods
beginning on or after 1 January 2020, and which the Group has not early adopted:
Amendments to IFRS 10, Consolidated Financial Statements, and IAS 28, Investments in Associates and Joint
Ventures (issued in September 2014, in November 2015 the effective date was postponed indefinitely). These
amendments address an inconsistency between the requirements in IFRS 10 and those in IAS 28 in dealing with the
sale or contribution of assets between an investor and its associate or joint venture. The amendments stipulate that a
full gain or loss is recognized when a transaction involves a business. A partial gain or loss is recognized when a
transaction involves assets that do not constitute a business, even if these assets are held by a subsidiary. The Group
is considering the implications of these amendments for the Group’s consolidated financial statements, and the
timing of their adoption by the Group.
Amendments to IFRS 3, Business Combinations (issued in October 2018 and effective for annual periods beginning
on or after 1 January 2020, early adoption is permitted). These amendments revise the definition of a business with
the aim to make its application less complicated. In addition, they introduce an optional “concentration test” that, if
met, eliminates the need for further assessment. Under this concentration test, where substantially all of the fair
value of gross assets acquired is concentrated in a single asset (or a group of similar assets), the assets acquired
would not represent a business. The Group will apply the new definition of a business in accounting for future
transactions starting from 1 January 2020.
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Unaudited Supplemental Oil and Gas Disclosures
UNAUDITED SUPPLEMENTAL OIL AND GAS DISCLOSURES
The accompanying consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”). In the absence of specific IFRS guidance for the oil and gas industry, the Group has
reverted to other relevant disclosure standards, mainly US GAAP, that are consistent with norms established for
companies in the oil and gas industry. While not required under IFRS, this section provides unaudited supplemental
information on oil and gas exploration and production activities but excludes disclosures regarding the standardized
measures of discounted cash flows related to oil and gas activities.
The Group’s exploration and production activities are mainly within the Russian Federation; therefore, majority of
the information provided in this section pertains to this country. The Group operates through various oil and gas
production subsidiaries, and also has an interest in oil and gas companies that are accounted for under the equity
method.
Oil and Gas Exploration and Development Costs
The following tables set forth information regarding oil and gas acquisition, exploration and development activities.
The amounts reported as costs incurred include both capitalized costs and costs charged to expense, and are
presented comprising amounts classified as assets held for sale and amounts allocated to fair values of the identified
assets in acquisitions of subsidiaries (see Note 4), except for the effects from non-monetary transactions. These
costs do not include LNG liquefaction and transportation operations (amounts in millions of Russian roubles).

2019 2018
Costs incurred in exploration and development activities

Acquisition of unproved properties 5,217 66
Acquisition of proved properties 3,420 17,633
Exploration costs 25,604 12,379
Development costs 68,681 59,946
Total costs incurred in exploration and development activities 102,922 90,024

The Group’s share in joint ventures’
cost incurred in exploration and development activities 50,453 29,401
Capitalized costs relating to oil and gas producing activities

Proved and unproved properties 111,492 91,496
Wells, related equipment and facilities 287,447 279,361
Support equipment and facilities 158,732 126,970
Uncompleted wells, related equipment and facilities 86,758 78,843
Total capitalized costs relating to oil and gas producing activities 644,429 576,670
Less: accumulated depreciation, depletion and amortization (218,316) (193,834)
Net capitalized costs relating to oil and gas producing activities 426,113 382,836
The Group’s share in joint ventures’
capitalized costs relating to oil and gas producing activities 604,488 456,277
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PAO NOVATEK
UNAUDITED SUPPLEMENTAL OIL AND GAS DISCLOSURES (CONTINUED)
Results of Operations for Oil and Gas Producing Activities
Results of operations for oil and gas producing activities of the Group’s subsidiaries and the Group’s share in the
results of operations of joint ventures are shown below (amounts in millions of Russian roubles).

2019 2018
Subsidiaries
Revenues from oil and gas sales (less transportation) 235,156 242,078
Lifting costs (16,045) (14,938)
Taxes other than income tax (61,225) (57,821)
Depreciation, depletion and amortization (25,280) (27,051)
Exploration expenses (8,386) (7,012)
Social expenses and charity (1) (268) (1,171)
Other operating expenses (2) (433) (388)
Results of operations for oil and gas
producing activities before income tax 123,519 133,697
Less: related income tax expenses (23,088) (25,123)
producing activities of the Group’s subsidiaries 100,431 108,574
Group’s share in joint ventures

Revenues from oil and gas sales (less transportation) 192,421 193,396
Lifting costs (5,897) (5,527)
Taxes other than income tax (39,237) (37,306)
Depreciation, depletion and amortization (23,620) (19,786)
Exploration expenses (731) (332)
Social expenses and charity (1) (42) (106)
Other operating expenses (2) (113) -
producing activities before income tax 122,781 130,339
Less: related income tax expenses (20,415) (21,738)
Group’s share in results of operations for oil and gas
producing activities of joint ventures 102,366 108,601
Total results of operations for oil and gas producing activities
of the Group’s subsidiaries and joint ventures 202,797 217,175
(1)
Represent social expenses and compensatory payments related mainly to continued support of charities and social programs
in the regions where production and development activities are performed.
(2)
Represent mainly materials, services and other expenses, as well as administrative expenses being by nature operating
expenses relating to fields in exploration and development stage.
The results of operations for hydrocarbons producing activities are presented only for volumes produced by the
Group’s subsidiaries and joint ventures and do not include general corporate overheads, processing costs incurred
after saleable hydrocarbons are received, such as stable gas condensate processing costs and natural gas
liquefaction costs. Revenues from oil and gas sales are calculated based on hydrocarbons production volumes and
netback prices determined at the point of marketable products production and do not include export duties,
transportation expenses to customers, storage, sales and other similar expenses.
71
PAO NOVATEK
Operating expenses include only the amounts directly related to the extraction of natural gas, gas condensate and
crude oil, such as lifting costs (materials, services and other expenses, as well as administrative expenses being by
nature operating expenses of oil and gas producing activities), taxes other than income tax, depreciation, depletion
and amortization and other expenses. Income tax expense is calculated based on income tax rates applicable to each
Group’s subsidiary and joint venture.
Proved Oil and Gas Reserves
The following information presents the quantities of proved oil and gas reserves and changes thereto as at and for
the years ended 31 December 2019 and 2018.
The Group estimates its oil and gas reserves in accordance with rules promulgated by the Securities and Exchange
Commission (SEC) for proved reserves.
The Group’s oil and gas reserves estimation and reporting process involves an annual independent third party
reserve appraisal as well as internal technical appraisals of reserves. The Group maintains its own internal reserve
estimates that are calculated by qualified engineers and technical staff working directly with the oil and gas
properties. The Group’s technical staff periodically updates reserve estimates during the year based on evaluations
of new wells, performance reviews, new technical information and other studies.
The oil and gas reserve estimates reported below are determined by the Group’s independent petroleum reservoir
engineers, DeGolyer and MacNaughton (“D&M”). The Group provides D&M annually with engineering,
geological and geophysical data, actual production histories and other information necessary for the reserve
determination. The Group’s and D&M’s technical staffs meet to review and discuss the information provided, and
upon completion of this process, senior management reviews and approves the final reserve estimates issued by
D&M.
The following reserve estimates were prepared using standard geological and engineering methods generally
accepted by the petroleum industry. The method or combination of methods used in the analysis of each reservoir is
tempered by experience with similar reservoirs, stages of development, quality and completeness of basic data, and
production history.
Extensions of production licenses are assumed to be at the discretion of the Group. Management believes that
proved reserves should include quantities which are expected to be produced after the expiry dates of the Group’s
production licenses. The principal licenses of the Group for exploration and production expire between 2029 and
2120. Legislation of the Russian Federation states that, upon expiration, a license is subject to renewal at the
initiative of the license holder provided that further exploration, appraisal, production or remediation activities are
necessary and provided that the license holder has not violated the terms of the license. Management intends to
extend its licenses for properties expected to produce beyond the license expiry dates.
Proved reserves are defined as the estimated quantities of oil and gas which geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing
economic conditions. In some cases, substantial new investment in additional wells and related support facilities
and equipment will be required to recover such proved reserves. Due to the inherent uncertainties and the limited
nature of reservoir data, estimates of underground reserves are subject to change over time as additional
information becomes available.
Proved developed reserves are those reserves which are expected to be recovered through existing wells with
existing equipment and operating methods. Undeveloped reserves are those reserves which are expected to be
recovered as a result of future investments to drill new wells, to re-complete existing wells and/or install facilities
to collect and deliver the production. Net reserves exclude quantities due to others when produced.
The reserve quantities below include 100 percent of the net proved reserve quantities attributable to the Group’s
consolidated subsidiaries and the Group’s ownership percentage of the net proved reserves quantities of the joint
ventures including volumes of natural gas consumed in hydrocarbons production and development activities.
Production and reserves of the South-Tambeyskoye field of Yamal LNG are reported at 60 percent including an
additional 9.9 percent interest not owned by the Group, since the Group assumes certain economic and operational
risks related to this interest.
72
PAO NOVATEK
For convenience, reserves estimates are provided both in English and Metric units.
Net proved reserves of natural gas are presented below.
Group’s share in
Net proved reserves joint ventures Total net proved reserves
Billions Billions Billions
Billions of of cubic Billions of of cubic Billions of of cubic
cubic feet meters cubic feet meters cubic feet meters
At 31 December 2017 44,988 1,274 29,097 824 74,085 2,098

Changes attributable to:
Revisions of
previous estimates 288 8 433 13 721 21
Extension and discoveries 483 14 1,294 36 1,777 50
Acquisitions (1) 3,426 97 - - 3,426 97
Disposals (2) - - (699) (20) (699) (20)
Production (1,478) (42) (951) (27) (2,429) (69)
At 31 December 2018 47,707 1,351 29,174 826 76,881 2,177

Revisions of
previous estimates (1,296) (37) 494 14 (802) (23)
Extension and discoveries 5,030 143 2,611 74 7,641 217
Acquisitions (3) 3,698 105 - - 3,698 105
Disposals (4) (5,884) (167) - - (5,884) (167)
Reclassifications (5) (7,267) (206) 7,267 206 - -
Production (1,391) (40) (1,247) (35) (2,638) (75)
At 31 December 2019 40,597 1,149 38,299 1,085 78,896 2,234
Net proved developed reserves (included above)

At 31 December 2017 12,685 359 12,820 363 25,505 722
At 31 December 2018 12,187 345 14,103 399 26,290 744
At 31 December 2019 11,527 326 18,612 527 30,139 853
Net proved undeveloped reserves (included above)

At 31 December 2017 32,303 915 16,277 461 48,580 1,376
At 31 December 2018 35,520 1,006 15,071 427 50,591 1,433
At 31 December 2019 29,070 823 19,687 558 48,757 1,381
(1)
Represent reserves attributable to the 100 percent participation interests in AO Geotransgas (renamed to AO NOVATEK-
Pur) and OOO Urengoyskaya gasovaya companiya (merged into OOO NOVATEK-Yurkharovneftegas) acquired in 2018.
(2)
Represent reserves attributable to the disposal of a 3.3 percent effective participation interest in the joint venture
AO Arcticgas.
(3)
Relate to reserves of the Soletskoye-Khanaveyskoye field acquired in the third quarter of 2019 and an additional 50 percent
interest in reserves of the North-Chaselskiy and Yevo-Yakhinskiy license areas acquired by the Group as a result of the
reorganization of Arcticgas.
(4)
Represent reserves attributable to the disposal of a 40 percent participation interest in OOO Arctic LNG 2 in 2019.
(5)
Represent reclassification of reserves attributable to the Group’s retained 60 percent participating interest in Arctic LNG 2,
which after the sale of a 40 percent participating interest in 2019 is accounted for as an investment in a joint venture. This
item also includes reclassification of a 50 percent interest in reserves of the North-Chaselskiy and Yevo-Yakhinskiy license
areas which were transferred to the Group as a result of the reorganization of Arcticgas in 2019.
73
PAO NOVATEK
The net proved reserves of natural gas reported in the table above included reserves attributable to a non-controlling
interest in a Group’s subsidiary of 231 billion cubic feet (seven billion cubic meters) and 238 billion cubic feet
(seven billion cubic meters) at 31 December 2019 and 2018, respectively, and reserves attributable to an additional
9.9 percent interest in Yamal LNG not owned by the Group (see above) of 2,413billion cubic feet (68 billion cubic
meters) and 2,471 billion cubic feet (70 billion cubic meters) at 31 December 2019 and 2018, respectively.
Net proved reserves of crude oil, gas condensate and natural gas liquids are presented below.
Group’s share in
Net proved reserves joint ventures Total net proved reserves
Millions Millions of Millions Millions of Millions Millions of
of barrels metric tons of barrels metric tons of barrels metric tons
At 31 December 2017 702 83 698 81 1,400 164

Revisions of
previous estimates 31 4 50 5 81 9
Extension and discoveries 35 4 88 11 123 15
Acquisitions (1) 77 9 - - 77 9
Disposals (2) - - (31) (4) (31) (4)
Production (53) (7) (46) (5) (99) (12)
At 31 December 2018 792 93 759 88 1,551 181

Revisions of
previous estimates (4) - (7) (1) (11) (1)
Extension and discoveries 150 17 82 9 232 26
Acquisitions (3) 39 5 - - 39 5
Disposals (4) (56) (6) - - (56) (6)
Reclassifications (5) (47) (5) 47 5 - -
Production (52) (6) (49) (6) (101) (12)
At 31 December 2019 822 98 832 95 1,654 193
Net proved developed reserves (included above)

At 31 December 2017 307 38 359 41 666 79
At 31 December 2018 340 42 387 44 727 86
At 31 December 2019 335 42 457 52 792 94
Net proved undeveloped reserves (included above)

At 31 December 2017 395 45 339 40 734 85
At 31 December 2018 452 51 372 44 824 95
At 31 December 2019 487 56 375 43 862 99
(1)
Represent reserves attributable to the 100 percent participation interests in AO Geotransgas (renamed to AO NOVATEK-
Pur) and OOO Urengoyskaya gasovaya companiya (merged into OOO NOVATEK-Yurkharovneftegas) acquired in 2018.
(2)
Represent reserves attributable to the disposal of a 3.3 percent effective participation interest in the joint venture
AO Arcticgas.
(3)
Relate to reserves of the Soletskoye-Khanaveyskoye field acquired in the third quarter of 2019 and an additional 50 percent
interest in reserves of the North-Chaselskiy and Yevo-Yakhinskiy license areas acquired by the Group as a result of the
reorganization of Arcticgas.
(4)
Represent reserves attributable to the disposal of a 40 percent participation interest in OOO Arctic LNG 2 in 2019.
(5)
Represent reclassification of reserves attributable to the Group’s retained 60 percent participating interest in Arctic LNG 2,
which after the sale of a 40 percent participating interest in 2019 is accounted for as an investment in a joint venture. This
item also includes reclassification of a 50 percent interest in reserves of the North-Chaselskiy and Yevo-Yakhinskiy license
areas which were transferred to the Group as a result of the reorganization of Arcticgas in 2019.
74
PAO NOVATEK
The net proved reserves of crude oil, gas condensate and natural gas liquids reported in the table above included
reserves attributable to a non-controlling interest in a Group’s subsidiary of 75 million barrels (10 million metric
tons) and 82 million barrels (11 million metric tons) at 31 December 2019 and 2018, respectively, and reserves
attributable to an additional 9.9 percent interest in Yamal LNG not owned by the Group (see above) of 20 million
barrels (two million metric tons) and 22 million barrels (two million metric tons) at 31 December 2019 and 2018,
respectively.
75
PAO NOVATEK
Contact Information
PAO NOVATEK was incorporated as a joint stock company in accordance with the Russian law and is domiciled
in the Russian Federation.
The Group’s registered office is:
Ulitsa Pobedy 22a

629850 Tarko-Sale
Yamal-Nenets Autonomous Region
Russian Federation
The Group’s office in Moscow is:
Ulitsa Udaltsova 2
119415 Moscow
Russian Federation
Telephone: 7 (495) 730-60-00

Fax: 7 (495) 721-22-53
www.novatek.ru
76

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PAO NOVATEK

IFRS CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

AND INDEPENDENT AUDITOR’S REPORT

Independent Auditor’s Report ................................................................................................................................. 3

To the Shareholders and Board of Directors of PAO NOVATEK:

Basis for opinion

 Overall group materiality: Russian Roubles (“RUB”) 11,000 million

 We conducted audit work covering all significant components in

 Disposal of a 40% participation interest in OOO Arctic LNG 2.

How we determined it 4% of adjusted profit before tax excluding currency differences,

Key audit matters

Disposal of a 40% participation interest in OOO

How we tailored our Group audit scope

Responsibilities of management and those charged with governance for the

Total revenues 862,803 831,758

Profit from operations 869,589 227,184

Profit before income tax 1,003,115 228,534

Profit 883,461 182,947

Profit 883,461 182,947

Profit before income tax 1,003,115 228,534

Net cash provided by operating activities 307,433 216,349

Net cash used for investing activities (169,044) (153,046)

Cash flows from financing activities

Net cash used for financing activities (119,448) (93,658)

Total comprehensive income (loss) - - - - 1,581 - 162,905 164,486 19,205 183,691

Dividends (Note 17) - - - - - - (51,979) (51,979) (18,684) (70,663)

Profit - - - - - - 865,477 865,477 17,984 883,461

Total comprehensive income (loss) - - - - 5,516 - 864,296 869,812 17,984 887,796

1 ORGANIZATION AND PRINCIPAL ACTIVITIES

Average rate for the year

US dollar (USD) 61.91 69.47 64.74 62.71

2 BASIS OF PREPARATION (CONTINUED)

3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (CONTINUED)

3 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (CONTINUED)

4 ACQUISITIONS AND DISPOSALS

Disposal of a 10 percent participation interest in OOO Arctic LNG 2 in March 2019

Property, plant and equipment 53,955

Total assets classified as held for sale 61,420

Non-current liabilities 3,539

Total liabilities associated with assets held for sale 4,881

4 ACQUISITIONS AND DISPOSALS (CONTINUED)

Cash payment 85,540

Total consideration 161,796

Gain on the sale of a 10 percent participation interest 308,578

4 ACQUISITIONS AND DISPOSALS (CONTINUED)

Property, plant and equipment 73,102

Total identifiable net assets at disposal 33,821

Carrying value of the net assets at disposal 33,821

The carrying value of the retained 90 percent participation interest 221,049

4 ACQUISITIONS AND DISPOSALS (CONTINUED)

Disposal of a 30 percent participation interest in OOO Arctic LNG 2 in July 2019

Cash payment 245,331

Total consideration 440,073

Gain on the sale of 30 percent participation interest 366,390

4 ACQUISITIONS AND DISPOSALS (CONTINUED)

Fair value of investments in new subsidiaries 19,650

Gain on reorganization 7,765