Ruspetro Regulatory News (RPO)

RusPetro Interim Results for the Six Months To 30 June 2012

London, 29 August 2012: RusPetro plc (LSE: RPO), the independent oil & gas development and production company listed on the London Stock Exchange, publishes today its interim results for the six months ended 30 June 2012 and an update on its operations located in the Khanty-Mansiysk region of the West Siberian basin up to 28 August 2012.

Key Highlights

·; Geological model confirmed by drilling to date: proved reserves increase to 183 million barrels at 30 June 2012 (DeGolyer and MacNaughton reserves audit): by 6% from 31 December 2011 and 16% from August 2011

·; 16 wells drilled and completed to date (five completed as at 30 June 2012, 11 additional wells completed since period end)

·; 6,100 bopd of current production

·; On-going successful execution of the field development programme, with capital expenditure, including new wells, for the period of $52.7 million (H1 2011: $12.5 million) with:

o Sales pipeline built on time and below budget; and

o Surface infrastructure ahead of schedule

·; Total production of 720,026 bbls (H1 2011: 270,220 bbls), with average production for the period of 3,956 bopd (H1 2011: 1,494 bopd); resulting revenues of $33.8 million (H1 2011: $11.04 million)

·; Operating cash flow before working capital adjustments of -$6.4 million (H1 2011: -$1.3 million)

·; Cash balance of $90.2 million (end 2011: $1.3 million)

·; RusPetro's operational capability and staffing enhanced significantly, with new drilling, engineering, geosciences and finance senior management appointments

OUTLOOK

·; Production will accelerate strongly through to the end of 2012

·; Target unchanged for 2012 production exit rate of 10,400 bopd

·; Full-year average production rate is expected to be approximately 5,600 bopd for the year

·; Drilling now running ahead of expectations: 16 wells completed to date with 8 wells in process

Don Wolcott, Chief Executive, commented:

"We have achieved a lot of progress since our flotation in January this year. We are pleased to present a further increase in our proved reserves base as audited by DeGolyer and MacNaughton. Our reserves have now grown by 16% since August 2011. We have also continued building out our team and have now developed a highly skilled organisational capacity to exploit the high potential of our assets. We have demonstrated our ability to increase the pace of well completions considerably since the beginning of the year, despite the challenges presented to us by our contractors. We are now focussed on delivering greater productivity and we have taken the necessary steps to achieve this important goal. The capital investments that we have made to date position us well to achieve our growth objectives."

Enquiries

Media

Patrick Handley / Natalia Erikssen, Brunswick+44 207 404 5959

Investors / Analyst enquiriesDominic Manley, RusPetro+44 207 318 1265

About RusPetro

RusPetro plc is an independent oil & gas development and production company, listed on the premium segment of the London Stock Exchange (LSE: RPO). The Company's operations are located on three contiguous licence blocks in the middle of the Krasnoleninsk Arch in Western Siberia. RusPetro's assets include proved and probable (2P) reserves of over 1.5 billion barrels of oil.

INTERIM RESULTS

OPERATIONAL REVIEW

The first half of 2012 has been transformational for RusPetro plc. We successfully completed our IPO on 19 January with a premium listing on the LSE, adhering to high standards of transparency, corporate governance and free float. This enabled RusPetro to be included in the FTSE 250 Index in March of this year.

We have a management team committed to delivering on the promises set out at the time of our IPO. The management team has been substantially augmented this year with the addition of experienced leaders to head our subsurface team with key appointments in the drilling, geosciences, engineering and operations areas of the business. Our investment in building a first class team has included key appointments of an additional Financial Controller, a new Company Secretary and Group Compliance Officer as well as a new head of HR and HSE and senior additions within the IT and ERP functions.

Proved reserves continue to increase, reducing the gap between our proved and probable reserves numbers. Our reserves' auditors, DeGolyer and MacNaughton, in their report dated 30 June 2012 have confirmed an increase in our proved reserves by 6% to 183 million barrels from 173 million barrels as at the 31 December 2011. Since their report of August 2011, our proved reserves have increased by 16%.

Group production for the first half of 2012 was 720,026 bbls of crude oil with resulting revenue of $33.1 million. Production for the first six months was made up of 642,831 bbls of crude oil and 77,195 bbls of condensate.

Operationally we have made significant progress in developing our drilling, production and surface infrastructure programmes since our listing. Most of the surface infrastructure projects were completed ahead of schedule and under budget which is testimony to our operational discipline.

We continue to see productive sands confirming our geological model. Additionally our geophysical model is currently being updated to improve our understanding of the reservoirs in our field. Our increased drilling rate, weighted towards the second half, means that we have a steady stream of new wells coming online. This puts us in a position to maintain our year end exit rate of 10,400 barrels of oil per day.

DRILLING

Having started the year with just one rig in the field on Pad 21, we now have four rigs in operation on two pads in the northwest of the field and two pads in the northeast of the field. We are working very closely with our contractors to optimise drilling days and minimise spud to completion periods for new wells. However, spud to completion times so far this year on Pad 21 have been significantly slower than our targeted 36 days but with the removal of the contractor from the field at the end of this year and working with more technologically evolved rigs throughout the field, we expect that we will be able to reduce completion times for new wells.

We are currently commissioning a new rig on Pad 27 which will have faster spud to completion times and enable us to have greater bottom hole location accuracy than the contractor on Pad 21 currently affords us.

The wells completed on Pad 19 have produced lower flow rates than expected due to the lower permeability of the reservoir. Although the thickness, porosity and scale of the reservoir are as modelled, we are now examining different completion technique options to make this reservoir more productive.

Pad 1 wells, in the north east of the field, are continuing to exceed our expectations in terms of the quantity of condensate and gas capable of being produced from this reservoir. We continue to build on our drilling programme from this pad. The reservoir is broader than previously estimated giving us a number of high grade well locations achievable from this Pad.

Wells being tested in the north-eastern area of our field are producing a 51° API condensate. We have initiated sales directly from the wellhead to a domestic off-taker at a $9 premium per barrel to our domestic sales price. Sales by rail of this condensate have also been initiated and this sales channel is currently generating a $7.60 per barrel premium compared to the domestic sales price. Rail sales volumes are currently low but capacity will pick up considerably towards the end of the year. This area of the field is proving to be productive and in response to this we are fast-tracking the 4,000 barrels of oil per day oil processing facility planned for this area.

Up to the end of the period we had 14 wells drilled and cased in total since the beginning of the year, five of which have been fractured and connected to the production network and nine were ready to be fractured and connected. We now have a total of 16 wells that have been drilled and completed in 2012. We have a further eight wells currently being drilled and completed.

Although we now have in place best practice solids control, drilling bit technology and bottom hole assembly allowing us to complete wells faster based on the standardised procedures now in place, our drilling programme has suffered from the lack of a consistently available fracturing fleet and this element of our well completions has recently been an area in our operations that has caused us delays. We are planning to work with a new highly regarded US based contractor, Weatherford, who is active in Russia, which should enable us to achieve our budget and timescale targets for well completions.

Our water flood programme has started with the conversion of two injector wells on Pad 21 in the west of the field which is expected to start delivering results in the first quarter 2013. Pad 21 is where the majority of our most productive wells are situated and currently produces about 2,600 bopd. Water flood will halt the natural declines and maintain the pressure allowing the production to pick up by approximately 25% in this area by the end of 2013. That higher production level is expected to be maintained into 2017.

INFRASTRUCTURE

We have improved our surface infrastructure considerably since our IPO. Most significantly we have completed and commissioned the 27 kilometre sales pipeline from our central processing facility to our custody transfer station on the Transneft pipeline. This not only reduces the cost of transporting our oil to the sales point by $2.20 per barrel but it also makes our day to day operations more efficient by eliminating the need for trucking completely from our central processing facility.

The upgrade of our central processing facility will now be to 20,000 bopd in the immediate term as we install new stock tanks and a new heater treater at this facility. Our in-field oil pipeline and water injection line development programmes are progressing on schedule.

The early processing facility in the north east of the field, with a capacity of 4,000 bopd, will be online in September enabling us to increase production from this area of the field.

To enable us to have better control over our infrastructure projects we have also obtained a general contractor licence in Russia. This allows us to make cost and time savings on infrastructure projects that we can now manage in-house when appropriate.

FINANCIAL REVIEW

Domestic Crude oil sales amounted to 406,338 bbls and export sales were at 261,151 bbls. The Group also realised domestic condensate sales of 45,320 bbls in the first half.

Total revenue for the period including other income for the provision of metering services was $33.8 million, compared to $11 million for the equivalent period in 2011.

Cost of sales in the period was $31.4 million (H1 2011: $16.1 million), of which, mineral extraction tax was $15.1 million, lifting costs were $10.5 million and depletion, depreciation and amortization was $5.8 million.

Administrative expenses for the period were $27 million including the non-recurring, non-cash cost of the share-based management incentive scheme amounting to $12 million.

Other income of $20.8 million largely reflects the one off gain from the settlement through share conversion of a $47.5 million payable owed to one of our principal Russian shareholders, Makayla, through the issue of 12,707,584 ordinary shares at the IPO at a price of 134 pence to a value of $26.2 million.

The reported resulting loss after tax for the period was $27.7 million.

Cash Flow

Reflecting the expansion in the Group's business activities, including significant investment in its management resources, there was a resulting operating cash outflow before changes in working capital of $6.4 million (H1 2011: -$1.3 million). Capital expenditure in the period amounted to $52.7 million:

The Group's cash flows from its financing activities during H1 2012 reflects the $214 million net proceeds of its Initial Public Offering, and following the listing of its shares, use of the proceeds to reduce borrowings and settle debt obligations aggregating to $55.7 million. After these payments, the net cash available from the IPO amounted to $158.1 million.

Balance Sheet

Our balance sheet position has improved significantly during the period as a result of the initial public offering and the associated restructuring of borrowings and certain other liabilities. Net debt at 30 June 2012 was $277.0 million (31 Dec. 2011: $405.2 million), including cash and cash equivalents of $90.1 million, with short and long-term borrowings during the period reduced by $39.3 million. The reduction in total liabilities during the period was $76.2 million, including the settlement of the payable to Makayla through conversion into equity, reflected also in other income, as indicated above.

Borrowings:

Going concern

The directors consider it appropriate to prepare the Group's financial statements on a going concern basis, taking into account its existing financial resources and projected operating cash flows.

Business risks

RusPetro faces a variety of external and internal risks which have not changed significantly since the year end. A summary of these risks can be seen in the 2011 Annual Report and Accounts which is available on RusPetro's website (www.ruspetro.com)

OUTLOOK

Production will accelerate strongly through to the end of 2012 as our pipeline of new wells being drilled are fractured and connected to the production network.

Our focus is now on delivering improved well performance and drilling high grade bottom-hole locations. We continue to be impressed by results from Pad 1 in the north east of the field. From this Pad, we are drilling into a broader reservoir than previously anticipated with a high gas-to-oil ratio that is producing high value condensate.

An experienced international team is now in place both in our geology department and operationally in the field. Amongst their immediate tasks is to update our seismic data to give greater detail on the reservoir quality allowing us to understand the permeability of the reservoirs and to target high grade drilling locations.

As we develop this large reserve base new opportunities are presenting themselves, and will continue to do so, giving us confidence that this large-scale, attractive hydrocarbon resource will give us multiple opportunities for value creation.

While our target exit rate remains at 10,400 bopd the slower increase in production means that our average production for the year will be approximately 5,600 bopd.

Directors Responsibility Statement

The Directors confirm that to the best of their knowledge:

(a) the condensed financial statements have been prepared in accordance with International Accounting Standards (IAS) 34 "Interim Financial Reporting"; and

(b) the Interim Management Report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principle risks and uncertainties for the remaining six months of the year); and

(c) the Interim Management Report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

The Directors of RusPetro plc are listed in the Group's 2011 Annual Report and Accounts. A list of the current Directors is maintained on the RusPetro plc website: www.ruspetro.com.

By order of the Board,

Donald Walcott Thomas Reed

Chief Executive Officer Chief Financial Officer

28 August 2012 28 August 2012

Disclaimer

This statement contains certain forward-looking statements that are subject to the usual risk factors and uncertainties associated with the oil and gas exploration and production business. Whilst the Group believes the expectations reflected herein to be reasonable in light of the information available to them at this time, the actual outcome may be materially different owing to factors beyond the Group's control or otherwise within the Group's control where, for example, the Group decides on a change of plan or strategy. Accordingly no reliance may be placed on the figures contained in such forward-looking statements.

Independent review report to RusPetro plc

For the six month period 30 June 2012

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2012, which comprises the Group Statement of Comprehensive Income, the Group Statement of Financial Position, the Group Statement of Changes in Equity, the Group Statement of Cash Flow and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2012 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PricewaterhouseCoopers LLPChartered AccountantsAberdeen

28 August 2012

Notes:

(a) The maintenance and integrity of the RusPetro plc web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the web site.

(b) Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.

 Ruspetro Plc

Interim Consolidated Condensed Financial Statements

As at and for the six months ended 30 June 2012

Interim Consolidated Condensed Statement of Comprehensive Income

for the six months ended 30 June 2012

(presented in US$ thousands, except otherwise stated)

___________________ ___________________

Donald Wolcott Thomas Reed

Chief Executive Officer Chief Financial Officer

Interim Consolidated Condensed Statement of Changes in Equity 

for the six months ended 30 June 2012

(presented in US$ thousands, except otherwise noted)

___________________ _____________________

Donald Wolcott Thomas Reed

Chief Executive Officer Chief Financial Officer

Interim Consolidated Condensed Statement of Cash Flows

for the six months ended 30 June 2012

(presented in US$ thousands, except otherwise stated)

____________________ _____________________

Donald Wolcott Thomas Reed

Chief Executive Officer Chief Financial Officer

Notes to the Interim Consolidated Condensed Financial Statements (Unaudited)

for the six months ended 30 June 2012

(all tabular amounts are in US$ thousands unless otherwise noted)

1. Corporate information

The interim consolidated condensed financial statements of RusPetro plc (the 'Parent' or 'Ruspetro') and its subsidiaries, together referred to as 'the Group' for the six months ended 30 June 2012 were approved by its Board of Directors on 28 August 2012.

The Parent was incorporated in the United Kingdom on 20 October 2011 as a public company under the provisions of the Companies Act 2006 of England and Wales. The Parent's registered office is 57/59 St James's street, London, England.

On 18 January 2012 the Parent became a parent of the Group through a series of shares exchanges (see Note 17).

Although these interim consolidated condensed financial statements have been released in the name of the Parent, it represents an in-substance continuation of the existing Group, headed by the Ruspetro Holding Limited (the 'Previous Parent') and the following accounting treatment has been applied to account for the reorganisation:

• the consolidated assets and liabilities of the subsidiaries were recognised and measured at the pre-reorganisation carrying amounts, without restatement to fair value;

• the retained earnings and other equity balances recognised in the consolidated statement of financial position reflect the consolidated retained earnings and other equity balances of the Previous Parent immediately prior to the reorganisation, and the results of the period from 1 January 2012 to the date of the reorganisation are those of the Previous Parent as the Parent was not active prior to the reorganisation. Subsequent to the reorganisation, the equity structure reflects the applicable movements in equity of the Parent, including the equity instruments issued to effect the reorganisation and the Initial Public Offering (IPO) (Note 17); and

• comparative numbers presented in the condensed interim consolidated financial statements are those reported in the interim consolidated financial statements of the Previous Parent for the six months ended 30 June 2011 and in the consolidated financial statements of the Previous Parent for the year ended 31 December 2011.

The principal activities of the Group are exploration for and production of crude oil. The operating subsidiaries of the Group - OJSC INGA and OJSC Trans-oil (hereinafter referred to as INGA and Trans‑oil respectively) hold three licenses for exploration for and extraction of crude oil and natural gas in the Khanty-Mansiysk region of the Russian Federation. Although, the initial terms of these licenses expire between December 2012 and June 2017, the Directors believe that the licenses will be renewed for the economic lives of the fields which are projected to be up to 2040 (two licenses held by INGA) and 2029 (the license held by Trans-oil). The appraised economic lives of the fields are also used as the basis for impairment analysis.

In June 2012, the Group submitted an application to extend the term of the license that expires in December 2012. The decision on the extension is expected to be taken by the appropriate authorities before November 2012. It is expected that the license will be renewed.

Details of subsidiaries consolidated within the Group are as follows:

On 19 January 2012, LLC Sberbank Capital transferred its 5% participating interest in Ruspetro Russia to the Parent in consideration for a pro rata number of shares in the Parent. As of this date, all of the Group's subsidiaries were 100% owned.

2. Basis of preparation

The Group's interim consolidated condensed financial statements for the six months ended 30 June 2012, have been prepared in accordance with IAS 34, "Interim financial reporting". The interim consolidated condensed financial statements are prepared under the historical cost convention.

The interim consolidated condensed financial statements are presented in US dollars (US$) and all values are rounded to the nearest thousand unless otherwise indicated.

The interim consolidated condensed financial statements should be read in conjunction with the annual consolidated financial statements of the Previous Parent for the year ended 31 December 2011, which have been prepared in accordance with IFRS.

Going concern

These interim consolidated condensed financial statements are prepared on a going concern basis, which presumes that the Group will be able to realize its assets and discharge its liabilities in the normal course of business in the foreseeable future.

On 19 January 2012, the Parent completed an Initial Public Offering (IPO) on the London Stock Exchange. As a result of this transaction 126,128,848Ordinary Shares were issued. Net cash proceeds from the Public Offering amounted to US$213.7 million. As a result, the Parent's Board considers that the Group has sufficient financial resources to undertake its planned business activities.

3. Summary of significant accounting policies and accounting estimates

The principal accounting policies followed by the Group and the critical accounting estimates in applying accounting policies are consistent with those disclosed in the consolidated financial statements of the Previous Parent for the year ended 31 December 2011. There were no revisions in the accounting policies and estimates in these interim consolidated condensed financial statements.

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2011, with the exception of changes in estimates that are required in determining the provision for income taxes.

Interim period income tax expense is accrued using the tax rate that would be applicable to expected total annual earnings, that is, the estimated average annual effective income tax rate applied to the pre-tax income of the interim period.

Foreign currency translation

The US$ to RUR exchange rates were 32.82 and 32.20 as at 30 June 2012 and 31 December 2011, respectively and the average rates for the six months ended 30 June 2012 and 2011 were 30.60 and 29.26 respectively. The US$ to GBP exchange rates were 0.64 and 0.65 as at 30 June 2012 and 31 December 2011, respectively and the average rates for the six months ended 30 June 2012 and 2011 were 0.63 and 0.62 respectively. The increase in the US$ to RUR exchange rate for the six months period ended 30 June 2012 has resulted in a loss of US$ 8,039 thousand in the statement of comprehensive income and an adjustment of US$4,517 thousand in Other comprehensive income (refer to Notes 10, 11 and 12).

4. Segment reporting 

The management views the operations of the Group as one operating segment. Should the Group diversify its operations the financial reporting will be adjusted to reflect the change.

The Parent's Board of directors evaluates performance of the Group on the basis of different measures, including production volumes, related revenues, capital expenditures, operating expenses per barrel and others.

5. Revenue

Other revenue includes proceeds from third parties for crude oil transportation.

6. Cost of sales

Production services include mainly pump rent and electricity expenses.

7. Selling and Administrative expenses

Oil transportation costs represent the cost of transferring oil to customers through the 'Transneft' pipeline system.

Professional services include insurance, recruiting expenses, public relations expenses.

Other selling and administrative expenses include primarily travel expenses and rent expenses.

8. Other income

On 13 December 2011, Itera Group Limited agreed to sell a receivable from Ruspetro relating to deferred consideration arising from the acquisition of INGA and Trans-oil (the 'Itera debt') to Makayla Investments Limited ("Makayla"), a related party and shareholder of the Parent. As at 31 December 2011, Ruspetro had a related liability of US$47,453 thousand, including accrued interest recorded in its consolidated financial statements.

Under an agreement entered into by Ruspetro and Makayla on 13 December 2011, Ruspetro was granted the option to acquire the debt owing to Makayla by no later than 25 January 2012 for US$26,171 thousand.

On 18 January 2012, the Parent issued 12,707,584 Ordinary Shares at GBP 1.34 each to Makayla to acquire this debt for a total value of US$26,171 thousand. An amount of US$21,282 thousand representing the difference between the nominal value of the debt and the fair value of the issued ordinary shares was recognised as other income in the accompanying interim financial statements.

9. Finance costs

For the six months ended 30 June 2012 and 2011, borrowing costs amounting to US$2,794 thousand and US$739 thousand, respectively, were capitalised in Property, plant and equipment and are not included above. Capitalised borrowing costs related to the loans obtained for development of oil and gas assets. The capitalisation rates used to determine the amount of borrowing costs eligible for capitalisation for the six months ended 30 June 2012 and 2011 were 10% and 10% per annum, respectively.

10. Income tax

The major components of income tax expense for the periods ended 30 June 2012 and 2011 are:

Income tax for the reporting period is calculated in accordance with the policy disclosed in Note 3.

Profit before taxation for financial reporting purposes is reconciled to the tax calculation for the period as follows:

Differences between IFRS and statutory taxation regulations in Russia give rise to temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and their tax bases. The tax effect of the movements in these temporary differences is detailed below and is recorded at the rate of 20% for Group companies incorporated in the Russian Federation.

The movements in deferred tax assets and liabilities relates to the following:

The Group did not recognise deferred income tax assets of US$35,160 thousand and US$38,935 thousand, in respect of losses that can be carried forward against future taxable income amounting to US$175,800 thousand and US$194,675 thousand as at 30 June 2012 and 31 December 2011, respectively. Losses amounting to US$76,565 thousand, US$43,020 thousand, US$28,990 thousand and US$46,100 thousand expire in 2018, 2019, 2020, 2021 respectively.

11. Property, plant and equipment

For the six months ended 30 June 2012, additions to Construction in progress is primarily made up of additions to production facilities, including wells as well as additions to infrastructure. As at 30 June 2012, the construction in progress balance mainly represents exploration wells and oil production infrastructure not finalized (e.g. roads, electricity grids, etc.).

None of the Group's property, plant and equipment was pledged as at the reporting dates.

12. Mineral rights and other intangibles

Intangible assets of the Group are not pledged as security for liabilities and their titles are not restricted.

13. Inventories

The Group did not have any obsolete or slow-moving inventory at any of the reporting dates.

14. Trade and other receivables

Trade receivables are mainly denominated in US$ and are not past-due or impaired. Other receivables and prepayments are mostly RUR denominated and relate to counterparties with no history of delays in settlements. VAT recoverable is used to offset against payments of mineral extraction tax or recovered in cash.

As at 30 June 2012 and 31 December 2011, the Group did not have any past due or impaired receivables. In determining the recoverability of trade and other receivables the Group considers any change in the credit quality of the receivable from the date credit was initially granted up to the reporting date.

15. Options on shares of the Parent

On 2 December 2011, the Parent and LLC "Sberbank Capital" entered into an option agreement pursuant to which LLC "Sberbank Capital" granted the Parent a call option to acquire the 10,362,632 Ordinary Shares held by LLC "Sberbank Capital". The call option may be exercised once only at any time prior to the day which is 15 months from the date of Admission, at an exercise price equal to the Offer Price (GBP1.34) per share less 10%.

The fair value of this call option amounted to US$4,059 thousand. Fair value of this option was calculated using the Black-Scholes option pricing model and was recognised in these interim consolidated condensed financial statements as a current asset.

The following weighted average assumptions were used in calculating the fair value of this call option:

Expected volatility was determined on the basis of the historic share price volatility of certain peer companies of the Group.

In addition, pursuant to this agreement LLC "Sberbank Capital" may put the Ordinary Shares issued back to the Parent. The put option may be exercised once only at any time between the second and third anniversary of Admission, at an exercise price equal to the Offer Price (GBP1.34) less 20%. With respect to the put option, a liability of US$14,372 thousand has been recorded as at 30 June 2012.

16. Cash and cash equivalents

Cash balances generally bear no interest. The Group holds its cash with Sberbank (Moody's rating Baa1/ D+/P2 (Negative) at 30 June 2012), Bank of America (Moody's rating Baa2/P2 (Negative) at 30 June 2012) and Bank of Cyprus (Moody's rating B2/E+/NP (Under review) at 30 June 2012).

17. Shareholders' equity

Share capital

The issued share capital of the Previous Parent as at 31 December 2011 comprised 6,563 fully paid ordinary shares at a nominal value of US$1 each.

Reorganisation the Group and Initial Public Offering (IPO)

On 18 January 2012, a new holding structure became effective. The reorganisation was effected through a series of shares exchanges as described below.

On 18 January 2012, the existing shareholders of the Previous Parent transferred their shares in the Previous Parent to the Parent in consideration for the issue of 196,890,000 Ordinary Shares in the Parent, representing 95% of the issued share capital of the Parent at the date of transfer with nominal value of GBP 0.10 each.

On 19 January 2012, LLC Sberbank Capital transferred its 5% participating interest in Ruspetro Russia to the Parent in consideration for the issue of 10,362,632 Ordinary Shares in the Parent, representing approximately 5% of the issued share capital of the Parent at the date of transfer with nominal value of GBP 0.10 each.

Also on 19 January 2012, the Parent completed an Initial Public Offering (IPO) on the London Stock Exchange. As a result of the IPO, 126,128,848 Ordinary Shares were issued with nominal value of GBP 0.10 each at a price of GBP 1.34 per Ordinary Share, including 12,707,584 Ordinary Shares to the value of $26.2 million in settlement of the debt owing to Makayla, related to the original Itera debt (Note 8). The IPO related transaction costs amounted to US$19 million.

Directors' options

On 17 January 2012, the Parent granted two executive directors the options to acquire 10,362,632 Ordinary Shares with an exercise price of GBP 1.34. The options are not subject to service and performance conditions, therefore the value of these options was expensed at the grant date. The options are exercisable in equal instalments starting from the following dates: 17 January 2013, 17 January 2014 and 17 January 2015 and up to 16 January 2022.

The fair value of the options amounted to US$12,035 thousand and was calculated using the Trinomial option pricing model and recognised in these interim consolidated condensed financial statements as a component of equity, with a corresponding amount recognised in selling, general and administrative expenses.

The following weighted average assumptions were used in calculating the fair value:

Expected volatility was determined on the basis of the historic share price volatility of the certain peer companies of the Group.

18. Borrowings

Sberbank credit facilityThe Group has a non-revolving US$ denominated credit facility from Sberbank. The annual interest rate on the facility is 10.9% per annum. The Group provided its shares in INGA and Trans-oil to Sberbank as collateral for this credit facility.

According to an Amended Agreement with Sberbank, payment of a portion of the accrued interest, which amounted to US$27 million as at 31 December 2011, is payable out of the proceeds of the Initial Public Offering (IPO) with the remainder to be paid in April 2015 on the maturity date of the credit facility. Annual interest is payable half-yearly in May and November each year. The change in terms is not considered to be a substantial modification, it is therefore considered not to result in the extinguishment of the original liability.

On 3 February 2012, under the Amended Agreement with Sberbank, Ruspetro made a repayment of US$45 million, which represented US$27.1 million of outstanding interest and US$17.9 million of principal.

On 25 May 2012, Ruspetro made a further repayment of US$10.6 million of outstanding interest.

The Group recognised a net foreign exchange loss amounting to US$3,343 thousand and a net foreign exchange gain amounting to US$25,877 thousand during the six months ended 31 June 2012 and 2011 respectively on the Sberbank credit facility and outstanding accrued interest which is denominated in US$.

Loans from shareholders of the Parent The Group has a number of US$ denominated loans obtained from the Shareholders of the Parent. All of these loans are unsecured and the effective interest rate on most of these loans is Libor+10% per annum. Certain loans have matured by 30 June 2012 and are presented as current liabilities as at this date.

On 17 January 2012, the Parent and one of the shareholders agreed that the Parent will issue new Ordinary Shares to that shareholder on the date that is 13 months from the date of Admission in full settlement of a loan obtained from the shareholder. The number of Ordinary Shares to be issued will be calculated by reference to the principal and accrued interest outstanding at the date of conversion and the volume weighted average price of the Ordinary Shares for an agreed period. This conversion is subject to certain conditions, some of which have not been met as at the date of these interim consolidated condensed financial statements. Thus no effect from this agreement has been recognized in these interim consolidated condensed financial statements. As at 30 June 2012, the principal and accrued interest outstanding of this convertible loan was equal to US$58,714 thousand.

19. Provision for dismantlement

The provision for dismantlement represents the net present value of the estimated future obligations for abandonment and site restoration costs which are expected to be incurred at the end of the production lives of the oil and gas fields which is estimated to be in 23 years from 30 June 2012.

This provision has been created based on the Group's internal estimates. Assumptions, based on the current economic environment, have been made which management believe are a reasonable basis upon which to estimate future dismantlement liability. These estimates are reviewed regularly to take into account any material changes to the assumptions. However, actual dismantlement costs will ultimately depend upon future market prices for the necessary dismantlement works required which will reflect market conditions at the relevant time. Furthermore, the timing is likely to depend on when the fields cease to produce at economically viable levels. This in turn will depend upon future oil and gas prices and future operating costs which are inherently uncertain.

20. Trade and other payables

Trade and other payables are denominated primarily in Russian Roubles.

21. Capital commitments and other contingencies

Capital commitments

The Group did not have any non-cancellable capital commitments at 31 December 2011 or 30 June 2012.

License commitments

The Group's exploration and production licenses require certain operational commitments. These include minimum performance criteria certain of which have not been fully met during 2011. The Directors note that breach of license performance conditions has not given rise to any material fines or penalties. Furthermore, management is undertaking particular actions to meet required license performance criteria. The Directors also note that the Group's production programme has been inspected by the Russian licensing authorities subsequent to 31 December 2010 and that no material fines or penalties have resulted.

Liquidity of subsidiary undertakings

In accordance with the legal framework in the Russian Federation, creditors and tax authorities may initiate bankruptcy procedure against an entity with negative net assets. Ruspetro Russia reported net liabilities under Russian GAAP at 30 June 2012. However, no such bankruptcy procedures have been initiated either by the creditors or the tax authorities against them. The Directors consider their net liability position to be normal given that the company is still at a development stage.

Operating lease commitments - Group as Lessee

The Group has entered into leases for land plots, woodlots and motor vehicles. The land in the Russian Federation on which the Group's production facilities are located is owned by the State. The Group leases land through operating lease agreements, which expire in various years through 2021. These leases have renewal terms at the option of the lessee at lease payments based on market prices at the time of renewal. There are no restrictions placed upon the lessee by entering into these leases.

Future minimum lease payments under non-cancellable operating leases as at 30 June 2012 and 31 December 2011 were as follows:

Operating risks and contingencies

Pledge of shares and promissory notes

On the opening of its credit facility with Sberbank, the Group provided to Sberbank as collateral its shares in INGA and Trans-oil.

Taxation contingencies

Russian tax, currency and customs legislation is subject to varying interpretations, and changes, which can occur frequently. Management's interpretation of such legislation as applied to the transactions and activity of the Group may be challenged by the relevant regional and federal authorities in the Russian Federation.

Recent events within the Russian Federation indicate that the Russian tax authorities may be taking a more assertive position in their interpretation of the prevailing legislation and assessments, and it is possible that transactions and activities which have not been challenged in the past may be challenged in the future. The Supreme Arbitration Court of the Russian Federation has issued guidance to lower courts on reviewing tax cases providing a systemic roadmap for anti-avoidance claims, and it is possible that this will significantly increase the level and frequency of tax authorities' scrutiny. 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.

Amended Russian transfer pricing legislation took effect from 1 January 2012. The new transfer pricing rules is considered to be more technical and, to a certain extent, more aligned with the international transfer pricing principles developed by the Organisation for Economic Cooperation and Development (OECD). The new legislation provides the possibility for tax authorities to make transfer pricing adjustments and impose additional tax liabilities in respect of controlled transactions (transactions with related parties and some types of transactions with unrelated parties), provided that the transaction price is not arm's length. Management has implemented internal controls to be in compliance with the new transfer pricing legislation.

Management believes the transfer pricing documentation that the Group has prepared, as required by the new Russian tax legislation, provides sufficient evidence to support the Group's tax positions and related tax returns. Given that the implementation of the new Russian transfer pricing rules has not yet been reviewed by tax authorities and courts, the impact of any challenge of the Group's transfer prices cannot be reliably estimated; however, it may be significant to the financial conditions and/or the overall operations of the Group.

The Group includes companies incorporated outside of Russia. Tax liabilities of the Group are determined on the assumptions that these companies are not subject to Russian profits tax because they do not have a permanent establishment in Russia. Russian tax laws do not provide detailed rules on taxation of foreign companies. It is possible that with the evolution of the interpretation of these rules and the changes in the approach of the Russian tax authorities, the non-taxable status of some or all of the foreign companies of the Group in Russia may be challenged. The impact of any such challenge cannot be reliably estimated; however, it may be significant to the financial condition and/or the overall operations of the entity.

Management believes that its interpretation of the relevant legislation is appropriate and 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 is accrued for in these interim consolidated condensed financial statements.

22. Related party disclosures

Compensation of key management personnel of the Group

Key management includes Directors of the Group. The compensation paid or payable to key management for employee services is shown below:

Ruspetro had rented office space from a company, in which one of its directors has an interest, for an annual rent and service charge of RUR6,328 thousand / US$207 thousand (excluding VAT) pursuant to a lease dated 1 January 2010. The lease terminated in 1 May 2012.

All related party transactions are on an arms length basis and no financial period end balances have arisen as result of these transactions.

Loans from related parties

The Group has a number of loans from shareholders of the Parent with the following balances:

The effective interest rates and conversion options of loans received are disclosed in Note 18.

23. Financial risk management objectives and policies

The Group's principal financial liabilities comprise accounts payable, bank and other loans. The main purpose of these financial instruments is to manage short term cash flow and raise finance for the Group's capital expenditure program. The Group has various financial assets such as accounts receivable and cash, which arise directly from its operations.

It is, and has been throughout the six months ended 31 June 2012 and 2011, the Group's policy that no speculative trading in derivatives shall be undertaken.

The main risks that could adversely affect the Group's financial assets, liabilities or future cash flows are cash flow interest rate risk, foreign currency risk, liquidity risk and credit risk.

The interim consolidated condensed financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group's annual financial statements as at 31 December 2011.

Capital risk management

The Group considers capital to comprise both debt and equity. Total debt comprises long-term and short-term loans and borrowings, as shown in the interim consolidated condensed statement of financial position. Equity of the Group comprises share capital, share premium, other reserves, retained earnings and non-controlling interests. Equity of the Group was equal to US$178,382 thousand and US$(40,737) thousand as at 30 June 2012 and 31 December 2011 respectively.

Total debt of the Group was equal to US$367,172 thousand and US$406,447 thousand as at 30 June 2012 and 31 December 2011 respectively.

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide adequate levels of financing for its current development and production activities. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, issue new shares, attract new or repay existing loans and borrowings.

There were no changes in the Group's approach to capital management during the period. As at 30 June 2012 and 31 December 2011 the Group was not subject to any externally imposed capital requirements.

Interest rate risk

The Group is exposed to interest rate risk, however the possible impact of changes in interest rates are not significant since the Group's major borrowings are at fixed interest rates. There is no specific policy in place to hedge against possible adverse changes in interest rates.

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group's profit or loss before tax through the impact on floating rate borrowings.

Foreign currency risk

The Group has transactional currency exposures. Such exposure arises from borrowing in currencies other than the functional currency. The Group limits foreign currency risk by monitoring changes in exchange rates in the currencies in which its cash and borrowings are denominated.

The following table demonstrates the sensitivity to a reasonably possible change in the RUR:US$ exchange rate, with all other variables held constant, of the Group's loss before tax due to changes in the carrying value of monetary assets and liabilities.

Liquidity risk

The Group monitors liquidity risk by monitoring its debt rating and the maturity dates of existing debt.

The table below summarises the maturity profile of the Group's financial liabilities at 30 June 2012 and 31 December 2011 based on contractual undiscounted payments.

Credit risk

The Group trades only with recognised, creditworthy third parties. In addition, receivable balances are monitored on an ongoing basis thus the Group's exposure to bad debts is not significant.

With respect to credit risk arising from the other financial assets of the Group, which comprise cash, the Group's exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments. The credit risk on cash is limited because the counterparties are either highly rated banks or banks approved by the management of the Group. Approval is made after certain procedures to access reliability and creditability of banks are performed.

Fair values

The Group has financial instruments carried at fair value only in the 'Level 3'category.

The different levels have been defined as follows:

- Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).

- Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2).

- Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).

The following table presents the Group's assets and liabilities that are carried at fair value at 30 June 2012. As at 31 December 2011 the Group had no assets or liabilities measured at fair value through profit or loss.

Set out below is a comparison by category of carrying amounts and fair values of all of the Group's financial instruments that are carried at amortised cost in the financial statements:

24. Earnings per share

Basic

Basic earnings per share are calculated by dividing the profit attributable to equity holders of the Parent by the weighted average number of ordinary shares in issue during the period.

Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares to assume conversion of all dilutive potential ordinary shares.

The Parent has incurred a loss from continuing operations for the six months ended 30 June 2012 and the effect of considering the exercise of the options on the Parent's shares would be anti-dilutive, that is, it would reduce the loss per share.

25. Events after the statement of financial position date

There have been no material events after the end of reporting period which require disclosure in these interim consolidated condensed financial statements.

26. Supplementary information (Unaudited)

Reserve quantity information

Proved reserves are the estimated quantities of oil and gas reserves which geological and engineering data demonstrate will be recoverable with reasonable certainty in future years from known reservoirs under existing economic and operating conditions. Proved reserves do not include additional quantities of oil and gas reserves that may result from applying secondary or tertiary recovery techniques not yet tested and determined to be economic.

Proved developed reserves are the quantities of proved reserves expected to be recovered through existing wells with existing equipment and operating methods.

Probable reserves are those additional reserves which analysis of geoscience and engineering data indicate are more likely to be recovered than not.

Due to the inherent uncertainties and the necessarily limited nature of reservoir data, estimates of reserves are inherently imprecise, require the application of judgment and are subject to change as additional information becomes available.

Management has included within proved reserves significant quantities which the Group expects to produce after the expiry dates of certain of its current production licenses. The Subsoil Law 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. Since the law applies both to newly issued and old licenses, management believes that licenses will be renewed upon their expiration for the remainder of the economic life of each respective field.

Estimated net proved and probable crude oil reserves for the period ended 30 June 2012 and 30 June 2011, are shown in the tables set out below.

Estimated net proved developed crude oil reserves as at 30 June 2011, 31 December 2011 and 30 June 2012 are shown in the tables set out below.

Estimated net probable crude oil reserves as at 30 June 2011, 31 December 2011 and 30 June 2012 are shown in the tables set out below.