1st Quarter Results

18 Jun 2007 11:34

OJSC OC Rosneft18 June 2007 ROSNEFT REPORTS AUDITED US GAAP RESULTS FOR THE THREE MONTHS ENDING MARCH 31, 2007 OJSC Rosneft (Rosneft or "the Company") today, June 18, reported itsconsolidated financial results in accordance with US GAAP for the three monthsending March 31, 2007. Financial review USD million Q1 2007 Q4 2006 Chg. Q/Q % Q1 2006 Chg. YTD % Revenue 8,220 8,213 0.1% 7,327 12.2% EBITDA* 1,741 880 97.8% 1,920 (9.3%) Net income* 602 603 (0.2%) 802 (24.9%) Net cash provided byoperating activities 894 (967) - 1,413 (36.7%) *Adjusted for the effect of non-operating accrual of fines and penalties relatedto pre-acquisition Yuganskneftegaz tax debt In the first quarter of 2007, Rosneft's total revenues increased by 12.2%year-to-date and by 0.1% quarter-on-quarter. Total revenues were USD 8,220million, up from USD 7,327 million in the first quarter of 2006 and from USD8,213 million in the fourth quarter of 2006. The increase in revenue isprimarily due to increased sales volumes of crude oil, natural and associatedgas and refined products. EBITDA, adjusted for the effect of accrual of fines and penalties related topre-acquisition Yuganskneftegaz tax debt in the amount of USD 297 mln, decreasedby 9.3% year-to-date but increased by 97.8% quarter-on-quarter to USD 1,741million, which is down from USD 1,920 million in the first quarter of 2006 butup from USD 880 million in the fourth quarter of 2006. Net income, adjusted byUSD 332 million for the effect of accrual of fines and penalties related topre-acquisition Yuganskneftegaz tax debt in the amount of USD 332 million aswell as resulting change in effective tax rate, over the first three months of2007 decreased by 24.9% year-to-date and by 0.2% quarter-on-quarter to USD 602million, down from USD 802 million in the first quarter of 2006 and from USD 603million in the fourth quarter of 2006. The decrease in both EBITDA and net income in the first quarter of 2007 over thesame period in 2006 was largely due to an increase in export duties of 23.8% andreal ruble appreciation of 11.7%. Despite continuing real ruble appreciation versus the US dollar in the firstquarter of 2007, Rosneft successfully kept operating costs to a minimum.Operating expenses were down 26% quarter-on-quarter while general andadministrative expenses were down 7% quarter-on-quarter. Net cash provided by operating activities in the first quarter of 2007 was alsosubstantially stronger quarter on quarter at USD 894 million compared to USD(967) million in the fourth quarter of 2006. Capital expenditures decreased by22.4% quarter-on-quarter to USD 1,033 million. This is up from USD 590 millionin the first quarter of 2006 and down from USD 1,331 million in the fourthquarter of 2006. The growth year-to-date was primarily due to further fielddevelopment at Yuganskneftegaz, where capital expenditures grew by 44.2% to USD457 million, and the commencement of full-scale development at the Vankor field,where investments in the first quarter of 2007 totaled USD 276 million (versusUSD 1 million in the first quarter of 2006). The quarter-on-quarter decrease incapital expenditures was due to seasonal factors. In the first quarter of 2007, Rosneft made further improvements to its trackrecord of industry-leading crude oil production growth, substantially outpacingmost of its peers both in Russia and globally. Rosneft and its consolidatedsubsidiaries increased crude oil production by 8.7% to 147.9 million barrels (upfrom 136.1 million barrels in the first quarter of 2006). This growth waslargely due to increased production at Yuganskneftegaz and to increased outputat the Sakhalin-1 project, where Rosneft holds a 20% stake. Yuganskneftegazincreased its production by 8.1% in the first quarter of 2007 to 103.99 millionbarrels, up from 96.21 million barrels in the first quarter of 2006. Crude oil production, including equity share in affiliates, increased by 12.5%to 154.38 million barrels (up from 137.24 million barrels in the first quarterof 2006) with growth primarily due to the acquisition of an effective stake of49.4% in Udmurtneft. Daily crude oil production of Rosneft and its consolidated subsidiaries in thefirst quarter of 2007 was 1,643.36 thousand barrels as compared with 1,512.34thousand barrels in the first quarter of 2006. Among the factors contributing tothis increase was a growth in average well flow rates, which increased from107.24 barrels per day in the first quarter of 2006 to 109.73 barrels per day inthe first quarter of 2007. The increase in well flow rates was particularlynoticeable at newly drilled wells, whose rates increased from 705.82 barrels perday to 806 barrels per day. Rosneft's production of natural and associated gas increased by 13% in the firstquarter of 2007 to 3.98 billion cubic meters (bcm), which was primarily due toproduction growth at Krasnodarneftegaz and Purneftegaz. Including share inaffiliates, production increased by 13.3% to 3.99 bcm. The level of associatedgas utilization was 64.2% in the first quarter of 2007 compared to 61.9% in thefirst quarter of 2006. Prices realized for gas sold increased from USD 20.92 inthe first quarter of 2006 to USD 30.84 per thousand cubic meters in the firstquarter of 2007. In the first quarter of 2007, the total output of petroleum products fromRosneft-produced crude oil, including output at mini-refineries and refineriescontrolled by third parties, increased by 15% to 6.6 million tonnes, up from5.74 million tonnes in the first quarter of 2006. Rosneft's proprietaryrefineries increased their output by 11.1% to 3 million tonnes, up from 2.7million tonnes in the first quarter of 2006. On March 27, 2007, RN-Razvitiye, a wholly-owned subsidiary of Rosneft, won atender for the acquisition from YUKOS of 9.44% of the Company's share capital,as well as Yuganskneftegaz promissory notes with a face value of RUB 3,558billion (USD 136 million at the CBR exchange rate in effect as of the date ofthe auction) for a total consideration of RUB 197.84 billion (USD 7.59 billionat the CBR exchange rate in effect as at the date of the auction). Title to theshares and promissory notes was transferred to RN-Razvitiye LLC on April 17,2007. Rosneft's US GAAP financial statements and management discussion and analysis(MD&A) for the first three months of 2007 and previous periods are available fordownload on the Company's website at www.rosneft.com. OJSC Rosneft Information Division Tel.: +7 (495) 221 3107 Fax: +7 (495) 411 5421 n_manvelov@rosneft.ru June 18, 2007 These materials contain statements about future events and expectations that areforward-looking in nature. Any statement in these materials that is not astatement of historical fact is a forward-looking statement that involves knownand unknown risks, uncertainties and other factors which may cause actualresults, performance or achievements expressed or implied by suchforward-looking statements to differ. We assume no obligations to update theforward-looking statements contained herein to reflect actual results, changesin assumptions or changes in factors affecting these statements. This information is provided by RNS The company news service from the London Stock Exchange