ROSN.L Regulatory News (ROSN)

15 May 2007 12:21

OJSC OC Rosneft15 May 2007 ROSNEFT REPORTS AUDITED US GAAP RESULTS FOR THE TWELVE MONTHS ENDING DECEMBER 31, 2006 OJSC Rosneft (Rosneft or "the Company") today, May 15, reported its auditedconsolidated financial results in accordance with US GAAP for the full year of2006. Financial review USD million 2006 2005 Revenue 33,099 23,863EBITDA 7,276 7,029Net income 3,533 4,159Net income before minority interest adjusted for the sale ofCJSC Sevmorneftegaz 3,625 3,615 Net cash provided by operating activities (excluding advancetax paid on Yukos receivables) 3,878 2,941 In 2006, Rosneft's total revenues increased by 38.7% to USD 33,099 million fromUSD 23,863 million in 2005. EBITDA grew by 3.5% to USD 7,276 million from USD7,029 million. Net income over the twelve months of 2006 adjusted for the saleof CJSC Sevmorneftegaz and minority interest in the income of subsidiariesincreased by 0.3% to USD 3,625 million from USD 3,615 million over the sameperiod in 2005. The slowdown in net income growth in 2006 was largely due to anincreased tax burden as taxes other than income tax increased by 31.2% andexport duties increased by 77.8%. Net cash provided by operating activities in 2006 increased by 32% to USD 3,878million from USD 2,941 million in 2005 excluding the effect of an advance taxpayment on Yukos receivables awarded in 2006. Rosneft expects the claims to besettled in the second half of 2007 following the completion of Yukos bankruptcyprocess. Capital expenditures increased by 78% to USD 3,462 million from USD 1,944million. This increase can primarily be attributed to the expansion ofoperations at Yuganskneftegaz and the commencement of full-scale development atthe Vankor field. In 2006, Rosneft continued to demonstrate industry leading organic crude oilproduction growth, substantially outpacing its Russian peers. Crude oilproduction of consolidated subsidiaries, including equity affiliates, increasedby 7.8% to 582.7 million barrels from 540.4 million barrels in 2005. Primarygrowth drivers were Yuganksneftegaz and Severnaya Neft. Production increased atYuganksneftegaz by 9% in 2006 to 409.6 million barrels from 374.6 millionbarrels in 2005. Severnaya Neft increased production by 15% to 41 millionbarrels from 35.7 million barrels. Production growth was also fuelled byincreased well flow rates from 101.7 barrels per day in 2005 to 109 barrels perday in 2006, which was driven by the increase in well flows at new wells from662.7 barrels per day to 715.4 barrels per day. Natural and associated gas production increased by 4.2% to 13.58 billion cubicmeters (bcm) in 2006 from 13.03 bcm in 2005. The increase is primarilyattributed to production growth at Krasnodarneftegaz and Purneftegaz. In 2006 Rosneft maintained its status as the most efficient Russian oil companyin terms of cost control. Upstream operating expenses were USD 2.83 per barrelof crude oil produced and USD 2.49 per barrel of oil equivalent produced, anincrease of just 13.7% and 14.2% respectively, which was well below real rubleappreciation vs the US Dollar of 16.7% for the same period. Excluding the effectof Sakhalin-1, where significant operating expenses were incurred before theproduction was started, upstream operating expenses were USD2.78 per barrel ofcrude oil produced and USD 2.44 per barrel of oil equivalent produced,representing an increase of just 11.6% and 11.9% respectively. In 2006, production of refined products, including at third-party refineries,amounted to 22.66 million tonnes, an increase of 6.6% over the 21.26 milliontonnes produced in 2005. Output of oil products at proprietary refineriesincreased by 1.3% to 10.49 million tonnes from 10.38 million tonnes in 2005. In October 2006, the Company consolidated 12 of its main subsidiaries. Theconsolidation created a vertically-integrated company with a single profitcenter and management structure. The completion of this process simplified theCompany's operating structure, thereby increasing the effectiveness of capitalinvestments and Rosneft's performance in general. After converting their sharesinto Rosneft shares, minority shareholders became shareholders in Russia'slargest oil company and will now be benefit from the success of united,integrated Company with improved share liquidity following the Company's IPO inJuly, 2006. In 2006, Rosneft acquired a number of licenses to new oilfields, whichsignificantly increased its position in Eastern Siberia and the Timano-Pechoraoil province. In February 2006, the Company obtained geological explorationlicenses to the Tukolandsky, Vadinsky and Pendomayakhsky oil and gas blocks inthe Krasnoyarsk Territory. In March 2006, an exploration and production licenseto the East Sugdinsky block was obtained. In April 2006, the Company receivedlicenses to develop and produce oil and gas at the Mogdinsky and Sanarsky oiland gas-bearing blocks in the Irkutsk Region. In June 2006, the Company won anauction for a development and production license to the Danilovsky oil and gasblock in the Irkutsk Region. In July 2006, Rosneft won a license to develop andproduce oil at the North Charsky oil and gas block, which borders the Taimyrskyregion and the Yamalo-Nenets Autonomous District. In July 2006, the Company alsoacquired an exploration and production license to the Osoveisky block in theNenets Autonomous District, and in August 2006, it received a license to developand produce oil and gas at the prospective Kulindinsky oil and gas block inEvenkia. In December 2006, Rosneft finalized the acquisition of its stake in OJSCUdmurtneft. Previously, in April 2006, Rosneft and theChina Petrochemical Corporation ("Sinopec") signed an option agreement,entitling Rosneft to buy an interest in Udmurtneft if Sinopec were to win thetender to purchase Udmurtneft from TNK-BP. In June 2006, TNK-BP announced thesale of a 96.86% stake in Udmurtneft to Sinopec. To manage Udmurtneft, a jointventure was created with 51% and 49% stakes, respectively, going to Rosneft andSinopec. The financing of the Company's acquisition of Udmurtneft was organizedby Sinopec as per the option agreement, and this financing will be repaid fromthe cash flows of Udmurtneft directly, without recourse to Rosneft. The Companydoes not to consolidate Udmurtneft in its US GAAP statements. Sergey Bogdanchikov, president of Rosneft, said, "Despite industry leadingproduction growth and successful cost control, in 2006 our earnings and cashflow growth slowed due to a shortage of downstream capacity compounded bysubstantially higher taxes and strong real ruble appreciation. We have sincevastly improved our downstream capabilities through the recent acquisition of 5refineries in Russia and a network of retail stations. We are now focused onintegrating these assets with recently acquired production assets to improve ourtrading performance and complement our continued leading volume growth withearnings and cash flow growth. We look forward to providing a comprehensiveupdate on performance and strategic priorities to our shareholders in July." Rosneft's US GAAP financial statements and management discussion and analysis(MD&A) for the twelve months of 2006 and previous periods are made available fordownload on Rosneft's website at www.rosneft.com. Paste the following link into your web browser to download the PDF document related to this announcement: http://www.rns-pdf.londonstockexchange.com/rns/6082w_-2007-5-15.pdf http://www.rns-pdf.londonstockexchange.com/rns/6082w_2-2007-5-15.pdf OJSC Rosneft Information Division Tel.: +7 (495) 221 3107 Fax: +7 (495) 411 5421 n_manvelov@rosneft.ru May 15, 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. 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