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Rosneft Posts 9% Growth of Crude Oil Production, 56% Growth of EBITDA, Reduces Net Debt by USD 2.7 bln in the First Half of 2010

26 July 2010
 H1 2010 H1 2009 Change, %  Q2 2010 Q1 2010 Change, %
Revenue, USD mln 30,192 19,211 +57%   15,431 14,761 +5%
EBITDA, USD mln 9,188 5,892 +56%   4,745 4,443 +7%
Net income, USD mln 5,048 3,678 +37%   2,556 2,492 +3%
 
Net cash provided by operating activities, USD mln 7,182 4,742 +51%   4,895 2,287 +114%
Capital expenditures, USD mln 3,845 3,387 +14%   2,091 1,754 +19%
Net debt, USD bln 15.8 19.2 -18%   15.8 18.5 -15%
 
Crude oil production, th. bpd 2,301 2,118 +8.6%   2,315 2,288 +1.2%
Petroleum product output, mln t 23.22 23.25 -0.1%   11.16 12.06 -7.5%

In H1 2010, Rosneft’s revenues increased by 57% year-on-year, to USD 30.2 bln. The increase was due to the growth of crude oil production by 8.6%, higher crude oil and petroleum product prices and increase in volumes of more efficient sales through own marketing network. In Q2 2010, the Company’s revenues amounted to USD 15.4 bln, which is an increase of 5% quarter-on-quarter.

Rosneft’s EBITDA amounted to USD 9.2 bln in H1 2010, which is 56% higher than in H1 2009. The increase was tempered by a series of factors beyond control: real strengthening of the ruble against the USD, higher tax payments and growth of transportation tariffs, substantially exceeding inflation rates. In Q2 2010, EBITDA increased by 7%, to USD 4.7 bln, which is a record high since 2008.

In H1 2010, net income amounted to USD 5.0 bln, up 37% year-on-year. Net income for Q2 2010 reached USD 2.6 bln.

In Q2 2010, Rosneft’s free cash flow reached a record high of USD 2.8 bln, allowing continued reduction of the Company’s net debt, which decreased to USD 15.8 bln. Net debt to LTM EBITDA ratio was 0.94 at the end of the quarter.

In Q2 2010, Rosneft’s average daily crude oil output (including production by subsidiaries and share in production by affiliates) increased by 8.8% year-on-year, to 2,315 th. barrels per day. The main growth drivers were the Vankor and Verkhnechonsk fields in Eastern Siberia, as well as fields of Samaraneftegaz and Udmurtneft, where the Company managed to efficiently increase output despite high level of reserve depletion.

Rosneft remains the industry leader by lifting costs and general and administrative expenses. In Q2 2010, these expenses amounted to USD 2.8 and USD 1.9 per bbl, respectively.

The Company’s success in cost control was muted by increase in transportation tariffs and tax burden. In H1 2010, transportation costs grew by 40% year-on-year, to USD 3.5 bln due to the increase in transportation tariffs of natural monopolies. Share of tax payments in total revenues increased from 41% to 49%.

Commenting on the results, Rosneft’s President Sergey Bogdanchikov said: “The second quarter was remarkable not only for the record high free cash flow and EBITDA, but also for excellent operating results. We were able to achieve year-end target daily production level at the Vankor field as early as May and to outperform planned daily output at Yuganskneftegaz fields by 3%. This was made possible by higher than expected flow rates of new wells, more wells drilled within the planned budget and more efficient well interventions. We made further steps in upgrading our refining capacities – a fifth unit was launched at the Samara group of refineries starting from the second half of 2009”.

Rosneft Information Division
Tel.: +7 (495) 221-31-07
Fax: +7 (495) 411-54-21
n_manvelov@rosneft.ru
July 26, 2010

Financial information in this press-release does not constitute interim consolidated financial statements. Rosneft’s US GAAP financial statements and Management’s Discussion and Analysis (MD&A) for Q2 2010 and H1 2010 and a related investor presentation will be available on August 2, 2010 at the Company’s website at www.rosneft.com.
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.