ANNUAL REPORT 2005 - Lukoil

LIQUIDITY AND CAPITAL RESOURCES
2005 2004 2003
(million US dollars)
Net cash provided by operating activities 6,097 4,180 2,936
Net cash used in investing activities (6,225) (3,741) (2,792)
Net cash provided by (used in) financing activities 539 (650) (4)
Net debt 3,354 2,620 3,376
Current ratio 2.14 1.89 1.50
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Total debt to equity 19% 19% 28%
Long term debt to long term debt and equity 13% 11% 12%
Total net debt to cash flow from operations 0.55 0.63 1.15
Our primary source of cash flow is funds generated from our operations. During 2005 cash generated by operating activities
was $6,097 million, an increase of $1,917 million compared to 2004. In 2005 cash inflow from operating activity was
impacted by the following factors:
increase in revenue
increase in amount of income tax paid
increase in volume of export sales and, consequently, prepayment of custom fees, export duties and transportation
tariffs.
Moreover, in 2005 our operating cash inflows were significantly affected by an increase of working capital (excluding
effect of acquisitions) by $1,540 million compared to January 1, 2005. This was mainly caused by:
an increase in trade accounts and notes receivable by $942 million, which was resulted from an increase in the price
of crude oil and refined products and expansion of marketing activities
an increase of inventory by $735 million, which was resulted from increased volumes of crude oil and refined products
in stock and increased purchase prices.
At the same time, this change in working capital was partly compensated by an increase in trade accounts and notes
payable by $194 million, which was resulted from an increase in volumes of purchased crude oil and refined products
and growth of related prices.
During 2005 the Company spent $6,856 million on capital investments and acquisitions of interests in other companies,
which was $3,131 million more than in 2004. In 2005 we paid $2,874 million (an increase of $2,397 million compared to
2004) mainly for the acquisitions of Nelson, OAO Primorieneftegaz, Oy Teboil Ab and Suomen Petrooli Oy, remaining
interest in ZAO SeverTEK, equity interest in OOO Geoilbent and increase of our share in LUKOIL Neftochim Burgas. Cash
flows from investing activities include $588 million of cash received primarily from the sale of interests in
OOO Narianmarneftegaz, ZAO Globalstroy-Engineering and ZAO Arktikneft.
In 2005 the result of our financing activity was an inflow of $539 million compared to an outflow of $650 million in 2004.
This change is explained by the loan of $1,934 million we received for financing acquisition of Nelson. Also in 2005 we
repaid short-term borrowings by $468 million more than in 2004.
The Company made payments of $746 million, $661 million, and $467 million for dividends in 2005, 2004 and 2003,
respectively.
The Company has sufficient borrowing capacity to meet unanticipated cash requirements. As of December 31, 2005
the Company had available unutilized short-term credit facilities with a number of banks in the amount of $1,264 million.
During 2005 the Group systematically worked at decreasing the level of secured debt, mainly represented by the pledge
of export receivables and fixed assets. As of December 31, 2005 the level of secured debt was 35% of the total debt,
while as of December 31, 2004 – 48%.
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