First Half US GAAP Results

4 Oct 2006 11:00

OJSC OC Rosneft04 October 2006 ROSNEFT REPORTS US GAAP RESULTS FOR THE THREE AND SIX MONTHS ENDING JUNE 30, 2006 OJSC Rosneft (Rosneft or "the Company") today, October 4, reported itsconsolidated financial results in accordance with US GAAP for the second quarterand first half of 2006, both periods ending June 30, 2006. Financial review USD million 2Q 2006 2Q 2005 1H 2006 1H 2005 Revenue 8,840 5,501 16,356 9,864EBITDA 2,261 1,757 4,178 3,302Net income 1,077 1,662 1,879 2,386Net Income before minority interestadjusted for the sale of CJSCSevmorneftegaz 1,108 978 1,953 1,710 Return on average capital employed(ROACE), annualized 25,2% 20,6% 24,1% 20,4%Return on average equity (ROAE),annualized 42,6% 52,2% 39,0% 47,8% Net cash provided by operatingactivity 2,823 1,167 In the first six months of 2006, Rosneft's total revenues increased by 65.8% toUSD 16,356 million from USD 9,864 million in the first six months of 2005. Inthe second quarter of 2006 Rosneft's total revenues increased by 60.7% to USD8,840 million from USD 5,501 million in the second quarter of 2005. In the firstsix months of 2006 EBITDA grew by 26.5% to USD 4,178 million from USD 3,302million in the first six months of 2005. In the second quarter of 2006 EBITDAincreased by 28.7% to USD 2,261 million from USD 1,757 million in the secondquarter of 2005. Net income adjusted for the sale of CJSC Sevmorneftegaz andminority interest in the income of subsidiaries increased by 14.2% to USD 1,953million as for the first six months of 2006 from USD 1,710 million as for thefirst six months of 2005. Similarly, Net income for the second quarter of 2006,adjusted for the sale of CJSC Sevmorneftegaz and minority interest in the incomeof subsidiaries, increased by 13.3% to USD 1,108 million from USD 978 million inthe second quarter of 2005. In the first six months of 2006 return on average capital employed (annualized)increased to 24.1% from 20.4%. Return on average equity (annualized) decreasedto 39% from 47.8% as the Company's capital structure continued to normalize. Inparticular, increased equity, led to a decrease in gearing to 51% as of June 30,2006 from 54% as of December 31, 2005, indicating further progress by theCompany toward achieving its mid-term target of 30%. In the first six months of 2006, the Company further strengthened its cash flowgeneration. In particular, net cash provided by operating activities increasedby 141.9% to USD 2,823 million compared to USD 1,167 million in the first sixmonths of 2005. Capital expenditures increased by 56.8% to USD 1,403 millionfrom USD 895 million. This increase is primarily attributed to the expansion ofoperations at Yuganskneftegaz and commencement of full-scale development at theVankor field. Adjusted free cash flow before interest increased by a factor of3.16 to USD 1,785 million from USD 565 million. In the first six months of 2006 crude oil production of the consolidatedsubsidiaries increased by 8.2% to 38.111 million tonnes (1,540 kbpd) from 35.227million tonnes (1,424 kbpd) in the same period of 2005. In the second quarter of2006 crude oil production of the consolidated subsidiaries increased by 9.8% to19.504 million tonnes (1,568 kbpd) from 17.757 million tonnes (1,427 kbpd) inthe second quarter of 2005. In the first six months of 2006 crude oil productionincluding equity share in affiliates increased by 8.1% to 38.429 million tonnes(1,553 kbpd) from 35.549 million tonnes (1.437 kbpd) in the first six months of2005. In the second quarter of 2006 crude oil production including equity sharein affiliates increased by 9.1% to 19.565 million tonnes (1,573 kbpd) from17.925 million tonnes (1,441 kbpd) in the second quarter of 2005. Productiongrowth in the first half of 2006 was mainly driven by increased production atYuganskneftegaz (increase by 8.5% to 26.9 million tonnes (1,085 kbpd) from 24.8million tonnes (1,001 kbpd)) and Severnaya Neft (increase by 24% to 2.8 milliontonnes (111 kbpd) from 2.2 million tonnes (90 kbpd)). Natural and associated gasproduction by consolidated companies increased by 10.6% to 6.77 bcm in the firstsix months of 2006 from 6.12 bcm in the first six months of 2005. In the secondquarter of 2006 natural and associated gas production by consolidated companiesgrew 4.6% to 3.21 bcm from 3.07 bcm in the second quarter of 2005. Theseincreases came mainly from fields at Krasnodarneftegaz and Selkupneftegaz. In line with Rosneft's strategy of continuous upstream portfolio expansion, theCompany made a number of acquisitions. In the first six months of 2006, theCompany acquired licenses for exploration and development of the Tukolandsky,Vadinsky and Pendomayakhsky blocks in the Krasnoyarsk Territory as well aslicenses for exploration and development of the East Sugdinsky, Sanarsky,Mogdinsky and Danilovsky blocks in the Irkutsk Region. As a result of theseacquisitions, the Company added 2.8 billion barrels of category C3 and D crudeoil resources and 318 bcm of category C3 and D gas resources. The amount paidfor these and other licenses during the first six months of 2006 totaled USD 464million. In the first half of 2006, Rosneft announced its intention to exercise itsoption to acquire 51% of shares in OJSC Udmurtneft from Sinopec (China Petroleum& Chemical Corp), Sinopec having reached an agreement with TNK-BP (owner of96.86% of Udmurtneft) on the acquisition of the Udmurt enterprise's assets. Theoption exercise by Rosneft for the acquisition of the controlling stake inUdmurtneft will be completed on the basis of an option agreement reached betweenRosneft and Sinopec in May of this year. In July 2006, Rosneft completed the initial public offering of its shares andglobal depositary receipts. The total amount of funds raised during theplacement was USD 10.6 billion making Rosneft's IPO the fifth largest in theworld. Rosneft's shares have been listed and are traded on Russia's RTS andMICEX exchanges, and the GDRs are traded on the London Stock Exchange underticker ROSN. Rosneft's US GAAP financial statements and management discussion and analysisfor the first six months of 2006 and previous periods are made available fordownload at www.rosneft.com. OJSC Rosneft Information Division +7 495-221-31-07 phone +7 495-411-54-21 fax n_manvelov@rosneft.ru October 4, 2006 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