OAO LUKOIL Board of Directors Summarizes Preliminary Results of Company Operation in 2007

OAO LUKOIL Board of Directors Summarizes Preliminary Results of Company Operation in 2007

OAO LUKOIL Board of Directors Summarizes Preliminary Results of Company Operation in 2007

The FINANCIAL -- OAO LUKOIL Board of Directors held a meeting on January 12 in Moscow to summarize preliminary results of LUKOIL Group activities in 2007.


According to LUKOIL, macroeconomics in 2007 was influenced by a number of various factors, which affected the Company’s operating results. On the one hand, 2007 witnessed a favorable pricing environment for oil and petroleum products on the international and domestic markets. For instance, average annual oil prices increased by more than 10%. On the other hand, Russia witnessed a considerable increase in industrial products prices (13.8%), electric power prices (13%) and Transneft tariffs (8.5%). Besides, the average annual oil export duty rate increased by 4.9%, diesel fuel duty rate grew by 5.7%, while the mineral extraction tax rose by 9%. Appreciation of RUR against USD also had a negative influence upon the company’s performance dynamics, as most of its income is denominated in USD, while the major part of its expenses is denominated in RUR.


Six oil, gas and condensate fields were discovered in 2007. According to provisional estimates, the increment of hydrocarbon reserves of LUKOIL Group (the Russian classification) exceeded 130 million tons of oil equivalent1. Thus, extraction replacement by reserves increment came to more than 115%.


According to provisional estimates, LUKOIL Group hydrocarbon production (production by subsidiaries and share in production by affiliates) in 2007 grew by 1.6%. Oil production of LUKOIL Group came to 96.6 million tons, including 91.1 million tons in Russia and 5.5 million tons abroad. Gas production2 came to 16.4 billion cubic meters. Hydrocarbon production was launched at 13 new fields in 2007.


LUKOIL Group decreased its oil exports in 2007 and increased refining throughput at its Russian facilities due to high refining margins. According to provisional estimates, crude processing at the company’s refineries in Russia grew by 7.7% in 2007 and reached 42.5 million tons primarily due to the refinery in the city of Nizhny Novgorod. Another 9.6 million tons of crude were refined at foreign refineries, which is 2% up on the 2006 results, despite a temporary slump in refining throuhput caused by a scheduled overhaul at the Burgas refinery.


The volume of retail petroleum product sales (excluding franchising) through LUKOIL Group distribution network came to 13 million tons in 2007, which is more than 15% higher than in 2006. Due to an optimization of the company’s gas station network the average daily petroleum products sales volume per gas station in Russia grew up to 9.3 tons a day.


Preliminary data suggest that the total amount of the 2007 taxes and levies paid to all levels of the Russian Federation budget amounted to almost USD 24.5 billion, which is higher than in 2006.