ANNUAL REPORT 2005 - Lukoil

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OAO LUKOIL Consolidated Statements of Cash Flows For the years ended December 31, <strong>2005</strong>, 2004 and 2003 (continued) (Millions of US dollars) Cash flows from financing activities Note <strong>2005</strong> 2004 2003 Net movements of short-term borrowings (638) (170) 220 Proceeds from issuance of long-term debt 2,474 1,191 1,445 Principal repayments of long-term debt (704) (778) (1,124) Dividends paid (746) (661) (467) Financing from related party 101 - - CONSOLIDATED FINANCIAL STATEMENTS Purchase of treasury stock - (502) (368) Proceeds from sale of treasury stock 46 273 290 Other – net 6 (3) - Net cash provided by (used in) financing activities 539 (650) (4) Effect of exchange rate changes on cash and cash equivalents (18) 33 43 Net increase (decrease) in cash and cash equivalents 393 (178) 183 Cash and cash equivalents at beginning of year 1,257 1,435 1,252 Cash and cash equivalents at end of year 3 1,650 1,257 1,435 Supplemental disclosures of cash flow information Interest paid 296 291 320 Income taxes paid 2,402 1,803 895 The accompanying notes are an integral part of these consolidated financial statements. 139
FINANCIAL ACCOUNTS OAO LUKOIL Notes to Consolidated Financial Statements (Millions of US dollars, except as indicated) NOTE 1. ORGANIZATION AND ENVIRONMENT The primary activities of OAO LUKOIL (the "Company") and its subsidiaries (together, the "Group") are oil exploration, production, refining, marketing and distribution. The Company is the ultimate parent entity of this vertically integrated group of companies. The Group was established in accordance with Presidential Decree 1403, issued on November 17, 1992 under which, on April 5, 1993, the Government of the Russian Federation transferred to the Company 51% of the voting shares of fifteen enterprises, and Government Resolution 861 issued on September 1, 1995 under which, during 1995, a further nine enterprises were transferred to the Group. Since 1995 the Group has carried out a share exchange program to increase its shareholding in each of the twenty-four founding subsidiaries to 100%. From formation, the Group has expanded substantially through consolidation of its interests, acquisition of new companies and establishment of new businesses. Business and economic environment The Russian Federation has been experiencing political and economic change, which has affected and will continue to affect the activities of enterprises operating in this environment. Consequently, operations in the Russian Federation involve risks, which do not typically exist in other markets. The accompanying financial statements reflect management's assessment of the impact of the business environment in the countries in which the Group operates on the operations and the financial position of the Group. The future business environments may differ from management's assessment. Basis of preparation These consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation The financial position and results of subsidiaries of which the Company directly or indirectly owns more than 50% of the voting interest and which the Company controls, are included with the financial position and results of the Company in these consolidated financial statements unless minority interest holders have substantive participating rights. The Group applies the same principles of consolidation for variable interest entities where it is determined to be the primary beneficiary. Other significant investments in companies of which the Company directly or indirectly owns between 20% and 50% of the voting interest and over which the Company exercises significant influence but not control, are accounted for using the equity method of accounting. Investments in companies of which the Company directly or indirectly owns more than 50% of the voting interest but where minority interest shareholders have substantive participating rights are accounted for using the equity method of accounting. Investments in other companies are recorded at cost. Equity investments and investments in other companies are included in "Investments" in the consolidated balance sheets. Use of estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include the carrying value of oil and gas properties and other property, plant and equipment, goodwill impairment assessment, asset retirement obligations, deferred income taxes, valuation of financial instruments, and obligations related to employee benefits. Eventual actual amounts could differ from those estimates. Revenue recognition Revenues from the production and sale of crude oil and petroleum products are recognized when title passes to customers. Revenues from non-cash sales are recognized at the fair market value of the crude oil and petroleum products sold. 140
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ANNUAL REPORT 2005
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ANNUAL REPORT, 2005 ADDRESS TO SHAR
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ANNUAL REPORT, 2005 LUKOIL signific
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LUKOIL IS ONE OF THE MAJOR INTERNAT
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The Company buys 15 filling station
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August The first stage of a coke ca
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LUKOIL completes eradication of the
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289 filling stations and 132 diesel
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ANNUAL REPORT, 2005 LUKOIL is reali
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ANNUAL REPORT, 2005 GEOLOGICAL EXPL
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ANNUAL REPORT, 2005 Russia Total ex
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ANNUAL REPORT, 2005 Western Siberia
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ANNUAL REPORT, 2005 In 2005 LUKOIL
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ANNUAL REPORT, 2005 Distribution of
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ANNUAL REPORT, 2005 LICENSING The C
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ANNUAL REPORT, 2005 increased by 1.
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ANNUAL REPORT, 2005 Creation of the
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ANNUAL REPORT, 2005 Gas Production
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KAZAKHSTAN Kumkol 50% LUKOIL INTERN
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ANNUAL REPORT, 2005 Main oil export
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47.6 REFINING, PETROCHEMICALS AND M
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Russia Growth of export duties in 2
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The catalytic reforming unit was ov
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GAS PROCESSING The Company's gas-pr
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up to 200,000 tonnes of caustic sod
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LUKOIL bought share stakes in 2005,
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Trading with third parties LITASCO
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ANNUAL REPORT, 2005 Effect from EOR
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TRADE BALANCE OF LUKOIL SUBSIDIARIE
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ANNUAL REPORT, 2005 Work by LUKOIL
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ANNUAL REPORT, 2005 management of t
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ANNUAL REPORT, 2005 as investments
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ANNUAL REPORT, 2005 AA 1000 standar
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ANNUAL REPORT, 2005 took part in cr
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CORPORATE GOVERNANCE The Company vi
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THE MARKET FOR COMPANY SECURITIES R
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than in the first quarter of the ye
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Alexander Shokhin Independent Direc
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Vagit Sharifov Vice-President, Head
Page 79 and 80: The general meeting of shareholders
Page 81 and 82: the Group's organizations and struc
Page 83 and 84: ANNUAL REPORT, 2005 Projects of LUK
Page 85 and 86: ANNUAL REPORT, 2005 Fields and lice
Page 87 and 88: ANNUAL REPORT, 2005 erves were not
Page 89 and 90: ANNUAL REPORT, 2005 The company's r
Page 91 and 92: FINANCIAL ACCOUNTS MANAGEMENT'S DIS
Page 93 and 94: FINANCIAL ACCOUNTS Strategic Partne
Page 95 and 96: FINANCIAL ACCOUNTS The table below
Page 97 and 98: FINANCIAL ACCOUNTS The mineral extr
Page 99 and 100: FINANCIAL ACCOUNTS lack refining ca
Page 101 and 102: FINANCIAL ACCOUNTS YEAR ENDED DECEM
Page 103 and 104: FINANCIAL ACCOUNTS 2005 2004 Realiz
Page 105 and 106: FINANCIAL ACCOUNTS Operating expens
Page 107 and 108: FINANCIAL ACCOUNTS Excise and expor
Page 109 and 110: FINANCIAL ACCOUNTS YEAR ENDED DECEM
Page 111 and 112: FINANCIAL ACCOUNTS Sales revenue Sa
Page 113 and 114: FINANCIAL ACCOUNTS Wholesale of ref
Page 115 and 116: FINANCIAL ACCOUNTS The increase in
Page 117 and 118: FINANCIAL ACCOUNTS Analysis of capi
Page 119 and 120: FINANCIAL ACCOUNTS GUARANTEES, OFF-
Page 121 and 122: FINANCIAL ACCOUNTS ing filed by the
Page 123 and 124: FINANCIAL ACCOUNTS CRITICAL ACCOUNT
Page 125 and 126: FINANCIAL ACCOUNTS CONSOLIDATED FIN
Page 127 and 128: FINANCIAL ACCOUNTS OAO LUKOIL Conso
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Page 133 and 134: FINANCIAL ACCOUNTS Property, plant
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Page 137 and 138: FINANCIAL ACCOUNTS Investments in "
Page 139 and 140: FINANCIAL ACCOUNTS members of the G
Page 141 and 142: FINANCIAL ACCOUNTS Russian ruble bo
Page 143 and 144: FINANCIAL ACCOUNTS The following ta
Page 145 and 146: FINANCIAL ACCOUNTS The real returns
Page 147 and 148: FINANCIAL ACCOUNTS The Company's ne
Page 149 and 150: FINANCIAL ACCOUNTS In January 2005,
Page 151 and 152: FINANCIAL ACCOUNTS Environmental li
Page 153 and 154: FINANCIAL ACCOUNTS NOTE 22. COMPENS
Page 155 and 156: FINANCIAL ACCOUNTS Geographical seg
Page 157 and 158: FINANCIAL ACCOUNTS OAO LUKOIL Suppl
Page 159 and 160: FINANCIAL ACCOUNTS III. Results of
Page 161 and 162: FINANCIAL ACCOUNTS Estimated net pr
Page 163 and 164: FINANCIAL ACCOUNTS develop and prod
Page 165 and 166: FINANCIAL ACCOUNTS Group's share in
Page 167 and 168: FINANCIAL ACCOUNTS and the Governme
Page 169 and 170: FINANCIAL ACCOUNTS A corporate hold
Page 171: ANNUAL REPORT, 2005 REFERENCE INFOR
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ANNUAL REPORT 2005 - Lukoil

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