Compliance with the Corporate Governance code

Corporate governance at the Company is based on the principle of sustainable development and increasing Gazprom Neft shareholder value in the long term. The Company implements this principle through a system of responsible interaction that involves building trust with employees, suppliers, customers as well as residents in the regions of its operation.

In 2014, the Board of Directors considered information about the analysis of the Gazprom Neft corporate governance system (Minutes No. 102/61 dated 5 December 2014). In accordance with recommendations from the Russian Central Bank, the Company conducted a self-assessment of corporate governance quality based on six components, following the procedure approved by Order No. 306 of the Federal Property Agency dated 22 August 2014.

The corporate governance of Gazprom Neft is characterised by the existence of one core shareholder in OJSC Gazprom directly and indirectly owning 95.68% of Gazprom Neft shares. Key positive aspects of corporate governance practices based on the results of the self-assessment include the Company’s allocation of extensive powers to the Board of Directors with respect to approving significant transactions, the competitive selection of suppliers of goods and services, a positive dividend history, the hiring of the universally recognised audit company CJSC PricewaterhouseCoopers Audit for the IFRS and RAS audit of the Company’s financial statements, the presence of independent directors on the Board of Directors, the existence of key Committees — on Audit as well as Human Resources and Remuneration, the existence of the Internal Audit Department as well as the regulatory and methodological framework of risk management. The Company demonstrates a good level of disclosure of financial and non-financial information about its activities which is published in annual and quarterly reports on a regularly updated website. The Company implements a variety of social projects for its employees, their family members and the local population in the areas of its presence as well as charitable and sponsorship projects, has approved policies on corporate social responsibility and is preparing a social report in accordance with the GRI Sustainability Reporting Guidelines.

At the same time, the high concentration of share capital and the fact that the register of the Company’s securities is maintained by a registrar that is affiliated with the Company’s core shareholder, OJSC Gazprom has a restraining influence on a better assessment of the observance of shareholder rights. Shortcomings in corporate governance practices include the small number of independent directors on the Board of Directors and its committees. Some members of the Gazprom Neft Board of Directors are on the boards of directors of more than five other companies. The Board of Directors has no committees on strategy or nominations.

The Company fully complies with the requirements of Russian legislation on corporate governance and generally follows the recommendations of the Russian Corporate Governance Code and certain recommendations from international best practices in corporate governance.

In December 2014, the Company approved an action plan to improve the corporate governance system that may be implemented at the Company’s management level. An analysis of the quality of corporate governance for 2015 is included in the work plan of the Board of Directors for the fourth quarter of 2015.

Results of self-assesment of Corporate Governance quality
Components Calculation
Number of questions Component weight im total calculation, % Actual score Max. score Compliance level, %
I. Shareholders’ rights 22 14 65 79 82
II. The Board of Directors 56 37 115.5 202 57
III. Executive manegement 5 7 25 38 66
IV. Transparency and information disclosure 15 25 109 135 81
V. Risk management, internal control and internal audit 16 11 52 63 83
VI. Corporate social responsibility, business ethics 6 6 23 31 74
Total calculation 120 100 389.5 548 71