OJSC Rosneft US GAAP Report for the First Nine Months of 2005 Interim Consolidated Financial Statements for Nine Months Ending September 30, 2005
OJSC Rosneft (Rosneft or “the Company”) reported today, February 13, its consolidated financial results for the first nine months of 2005, reflecting the nine month period ending September 30, 2005.
Financial review
| 9 months 2005 | 9 months 2004 | |
|---|---|---|
| EBITDA margin | 33.6% | 31.7% |
| Net income margin | 18.3% | 17.8% |
| Return on average capital employed (annualized) | 24.8% | 15.4% |
| Return on equity (annualized) | 56.2% | 24.2% |
Total revenues in the first nine months of 2005 amounted to $16.94 billion. EBITDA increased to $5.69 billion, due in part to successful cost control initiatives. Operating income increased to $4.61 billion. Reported net income after minority interest was $3.7 billion, while net income before minority interest and net of $1.3 billion gain from the sale of Sevmorneftegaz, increased to $3.1 billion.
The Company saw a working capital increase of $1.8 billion, which was primarily due to VAT receivables, advances issued, etc., and its net cash inflow from operating activities in the period was $1.98 billion. Net debt was reduced from $12.6 billion to $ 10.9 billion.
Rosneft management is certain that the Company has created the necessary prerequisites to fulfill its plans for 2006 and can attain annual crude oil production growth of 6-8% through 2010.”
Operational review
| Key operational results per ton | 9 months 2005, $ | 9 months 2004, $ |
|---|---|---|
| Gross revenue of crude oil per ton | ||
| export | 332 | 214 |
| domestic | 152 | 128 |
| Gross revenue of petroleum products per ton | ||
| export | 32 | 202 |
| domestic | 346 | 298 |
| Costs, excluding DDA, taxes, excise and export duties ($/ton) | 66 | 95 |
| Excise tax and export custom duties ($/ton) | 74 | 31 |
| Taxes other than income tax ($/ton) | 69 | 45 |
| EBITDA ($/ton) | 106 | 79 |
| Net income ($/ton) | 69 | 42 |
In absolute terms, Rosneft oil production (including its share in affiliates) increased from 15.4 million tons in the first nine months of 2004 to 54.3 million tons in the same period of 2005.
Since the beginning of 2005, the Company’s daily crude oil production levels reached 210.4 ktpd (1,538 mbpd) on September 30, 2005, compared to 199 ktpd (1,455 mbpd) on January 1, 2005. Rosneft’s organic growth of 8% on an annualized basis continues to far exceed the Russian industry average of 3.6%.
Among the Company’s fastest growing subsidiaries, Severnaya Neft had the most significant growth with a daily crude oil production increase from 11 ktpd (80,4 kbpd) on January 1, 2005 to 14.7 ktpd (107 kbpd) on September 30, 2005. Currently Rosneft accounts for 16.1% of Russia’s crude oil production.
During the accounting period Yuganskneftegaz was successfully incorporated into Rosneft. The Company has managed to stabilize production at Yuganskneftegaz as well as increase its rate of daily production.
In absolute terms, gas production increased from 7.9 bcm (billion cubic meters) in the first nine months of 2004 to 9.4 bcm in the same period of 2005. Rosneft now accounts for 2.0% of Russia’s gas production.
Rosneft’s main achievements in 2005 include the beginning of production at the Sakhalin-1 project (3Q 2005) and successful well tests at the Pela-Leich and Udachnaya structures. Further reserves were confirmed at the Vankor deposit, which resulted in estimated total recoverable reserves in the area at 270 million tons.
The Company also successfully completed the preliminary stage and advanced to the practical stage at the Kurmangazy structure in Kazakhstan. In July 2005, the Company signed a production sharing agreement with the government of Kazakhstan for this project as well as a joint operation agreement with Kazakhstan’s state oil company, KazMunaiGaz.
Outlook
Rosneft’s strategic focus continues to be on increasing daily production of oil and gas and on reducing average lifting costs by implementing modern technology and operational best practices. The Company also aims to further increase its export share through investment in its transport infrastructure, substantially increase proven reserves, keep F&D costs low and improve the key profitability indicators.
The Company will continue to increase its export share through further investments in its own transport infrastructure, additional reserves confirmations, low production and geological survey costs and profit activities improvement.
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. We assume no obligations to update the forward-looking statements contained herein to reflect actual results, changes in assumptions or changes in factors affecting these statements.