Last checked at 23 Oct 2008 07:00
23 October 2008
OAO Tatneft published its consolidated interim condensed U.S. GAAP financial statements for the first 6 months of 2008
OAO Tatneft (the "Company") announces today that it published on its web-site http://www.tatneft.ru/eng/buh.htm the reviewed interim condensed consolidated financial statements for the first 6 months of 2008 prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") (the "Financial Statements") and related Management Discussion and Analysis of Results of Operations (the "MD&A").
The Company's representatives will discuss the U.S. GAAP financial highlights for the 6 months of 2008 ended June 30, 2008 on a conference call (to be held in English) on 23 October 2008 at 12.00 p.m. Moscow time, 9.00 a.m. BST.
To participate in the conference call please dial the following number in the United Kingdom +44 20 8974 7900 using PIN 766 303.
The conference call replay will be available for 14 days from 13:00 BST, 23d October 2008 by dialing +44 20 7136 9233 in the U.K. using passcode 47222762.
Selected operating and financial highlights below are based on the respective U.S. GAAP financial statements of the Company. These highlights do not replace the Financial Statements or the MD&A and the Company's investors and shareholders are encouraged to read these documents for full understanding of the first 6 months of 2008 U.S. GAAP results.
Key operating results
Crude oil production by Tatneft group within the first half of 2008 was 13.2 million tons or 94.2 million barrels, an increase of 1.2% compared to the same period of 2007. Gas production within the period decreased slightly by 0.3% in comparison to the corresponding period of 2007 and reached 408.5 million cubic meters. In the petrochemical segment the Company produced 5.96 million tires.
Key financial results
Sales and other operating revenues increased in the first half of 2008 by 57% to RR 246,487 million from RR 157,185 million in the corresponding period of 2007. Rising crude oil prices within the reporting period was the major contributor to this increase.
Prior to nonrecurring adjustments total costs and other deductions increased in the first half of 2008 by 49.4% to RR 198,467 million, after adjusted for nonrecurring charges 60% to RR 212,947 (summarized below), from RR 132,825 million in the corresponding period of 2007. Increases in taxes other than income tax (majority of which are linked to price of oil), the price of purchased crude oil and refined products as well as increase of transportation cost were the major factors contributing to the overall increase of total costs.
EBITDA before nonrecurring charges in the first half of 2008 was RR 50,523 million, EBITDA (incorporating nonrecurring charges) increased by 24% to RR 36,043,million from RR 29,050 million in the corresponding period of 2007.
Adjusted net income in the first half of 2008 was RR 35,485 million. Net income, after adjusted for nonrecurring charges, increased by 27% to RR 21,005 million from RR 16,493 million in the corresponding period of 2007.
Summary of nonrecurring charges
Included in the first half of 2008 U.S. GAAP results are RR 14,480 million of nonrecurring charges. The single largest item relates to a RR 10,307 million bad debt provision relating to sales to Ukraine (Kremenchug refinery) prior to October 2007 (reflected in sub-category "general" under the general, selling and administrative expenses of the Financial Statements), which was made pursuant to respective accounting pronouncements despite the Company's belief that such debt is recoverable in due course. The remaining RR 4,173 million comprises a mix of cash and non-cash impairments and expenses. Further detail of such nonrecurring charges is provided in the reconciliation of net income and EBITDA below, and more information can be found in the MD&A.
Reconciliation of Net income and EBITDA to Net income and EBITDA before nonrecurring charges
| FIRST HALF OF 2008 | RR millions |
| Net income | 21,005 |
| EBITDA | 36,043 |
| Nonrecurring charges: | |
| Bad debt provision related to Ukrainian sales | 10,307 |
| Write-off of unrecoverable debt | 960 |
| Losses of the first time consolidated company | 689 |
| Disposal of a medical facility - social asset for the benefit of the employees | 1,345 |
| Exploration expenses of newly consolidated E&P companies | 1,179 |
| Net income before nonrecurring charges | 35,485 |
| EBITDA before nonrecurring charges | 50,523 |
Net income before nonrecurring charges is not a U.S. GAAP financial measure. The Company believes that net income before nonrecurring charges provides useful information to investors because it is an indicator of the strength and performance of our continuing business operations. Net income before nonrecurring charges should not be considered in isolation as an alternative to net income, operating income or any other measure of performance under U.S. GAAP.
EBITDA and EBITDA before nonrecurring charges are not U.S. GAAP measures.
Current position of the Company
Amid unprecedented instability in the financial markets and its negative effect on the commodities market as well as business activities worldwide, the Company's management believes it is important to emphasize Tatneft's strengths which would allow us to navigate this challenging environment. These strengths are supported by the following key factors: Tatneft enjoys a strong balance sheet which is supported by healthy cash flow generation; the Company has low level of debt (5% of long-term debt to equity, based on the Financial Statements); the Company's financial projections have been based on conservative oil price assumptions (e.g. $80/bbl for 2008); the Company has proved to be effective in implementing cost controls (demonstrated by, inter alia, a 4% decrease in SG&A expenses in the first half of 2008 compared to the same period of 2007, adjusted for nonrecurring charges discussed above); the majority of the Company's capital expenditures program has been financed from the cash flow and Tatneft is not exposed to significant portion of high risk projects which require immediate large investments.
The Financial Statements have been filed with the Document Viewing Facility of the UKLA.
Contacts:
OAO Tatneft
Vladlen Voskoboinikov
Head of International Financial Reporting,
Member of the Management Board
Vasily Mozgovoi
Assistant to the General Director
On Corporate Finance Issues
Tel. +7 (495) 980-5256
E-mail: vladv@tatneft.net
E-mail: mozgovoi@tatneft.net
Forward-looking statements: These materials contain statements about future events and expectations that are forward-looking in nature. Any statement in these materials that is not a statement of historical fact is a forward-looking statement that involves known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements expressed or implied by such forward-looking statements to differ. OAO Tatneft assumes no obligations to update the forward-looking statements contained herein to reflect actual results, changes in assumptions or changes in factors affecting these statements.