ANNUAL REPORT 2005 - Lukoil

FINANCIAL ACCOUNTS
develop and produce year-end estimated proved reserves based on year-end cost indices, assuming continuation of
year-end economic conditions. Estimated future income taxes are calculated by applying appropriate year-end statutory
tax rates. These rates reflect allowable deductions and tax credits and are applied to estimated future pre-tax net cash
flows, less the tax bases of related assets. Discounted future net cash flows have been calculated using a ten percent
discount factor. Discounting requires a year-by-year estimate of when future expenditures will be incurred and when
reserves will be produced.
The information provided in the tables set out below does not represent management's estimate of the Group's expected
future cash flows or of the value of the Group's proved oil and gas reserves. Estimates of proved reserve quantities
are imprecise and change over time as new information becomes available. Moreover, probable and possible reserves,
which may become proved in the future, are excluded from the calculations. The arbitrary valuation prescribed under
SFAS No. 69 requires assumptions as to the timing and amount of future development and production costs. The
calculations should not be relied upon as an indication of the Group's future cash flows or of the value of its oil and gas
reserves.
International
Russia
Total
consolidated
companies
Group's share
in equity
companies
Total
As of December 31, 2005
Future cash inflows 21,028 375,279 396,307 12,290 408,597
Future production and development costs (9,471) (200,288) (209,759) (4,513) (214,272)
Future income tax expenses (3,563) (40,135) (43,698) (2,220) (45,918)
Future net cash flows 7,994 134,856 142,850 5,557 148,407
Discount for estimated timing of cash
flows (10% p.a.) (4,140) (86,622) (90,762) (2,898) (93,660)
Discounted future net cash flows 3,854 48,234 52,088 2,659 54,747
Minority share in discounted future net
cash flows - 1,730 1,730 - 1,730
Included as a part of the $214 billion of future production and development costs are $5.6 billion of future dismantlement,
abandonment and rehabilitation costs.
International
Russia
Total
consolidated
companies
Group's share
in equity
companies
Total
As of December 31, 2004
Future cash inflows 8,290 290,189 298,479 9,630 308,109
Future production and development costs (4,507) (162,246) (166,753) (4,434) (171,187)
Future income tax expenses (537) (29,268) (29,805) (1,276) (31,081)
Future net cash flows 3,246 98,675 101,921 3,920 105,841
Discount for estimated timing of cash
flows (10% p.a.) (1,919) (64,896) (66,815) (1,980) (68,795)
Discounted future net cash flows 1,327 33,779 35,106 1,940 37,046
Minority share in discounted future net
cash flows - 531 531 - 531
Included as a part of the $171 billion of future production and development costs are $4.4 billion of future dismantlement,
abandonment and rehabilitation costs.
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