ANNUAL REPORT 2005 - Lukoil

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Oil is carried to the terminal by rail, where it is trans-shipped to river-sea tankers. Annual capacity of the Ilinka terminal is currently 2 million tonnes. The terminal can handle tankers with deadweight up to 5,000 tonnes, and one of its functions is to supply oil to Iran under substitution agreements. REFINING PROJECTS IN THE CASPIAN REGION LUKOIL's goals in the region are not limited to realization of oil & gas production projects. The Company also aims to create value added by refining of hydrocarbons. In 2005 the Company decided to build a gaschemical complex in Southern Russia for refining of gas and condensate produced in the Caspian region. The complex will refine more than 14 billion cubic meters of gas and 600,000 tonnes of condensate each year and will be geographically well-placed (adjacent to domestic markets and with access to export markets). A feasibility study for investments in the main production facilities is to be carried out in 2006. LUKOIL IN THE CASPIAN REGION LUKOIL has also taken part in construction of the Karachaganak Refining Complex with annual capacity for 7 million tonnes of hydrocarbons from the Karachaganak field. The Complex separates mixed hydrocarbon inputs, carries out dehydration, stabilizes the condensate and feeds it into the pipeline, as well as carrying out gas treatment. Completion of the Complex in 2004 allowed stable gas condensate to be exported through the LUKOIL Estimated Hydrocarbon Production in the Caspian Region, thousand boe per day CPC. LUKOIL fully recognizes the strategic 1,500 importance of the Caspian region and intends to continue expansion of its 1,000 business as well as realizing current projects there. Daily production from projects already being implemented in 500 the Caspian region is forecast to reach about 1.3 million barrels by 2015. 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 99
FINANCIAL ACCOUNTS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following represents management's analysis of the financial performance and conditions of OAO LUKOIL and significant trends that may affect its future performance. It should be read in conjunction with our US GAAP consolidated financial statements and notes and supplemental oil and gas disclosure. References to "LUKOIL", "the Company", "the Group", "we" or "us" are references to OAO LUKOIL and its subsidiaries and associates. All dollar amounts are in millions of US dollars, unless otherwise indicated. Tonnes of crude oil produced are translated into barrels using conversion rates characterizing the density of oil from each of our oilfields. Tonnes of crude oil purchased as well as other operational indicators expressed in barrels are translated into barrels using an average conversion rate of 7.33. Billions of cubic feet are translated into millions of oil equivalent barrels using a conversion rate of 0.167. This report includes forward-looking statements – words such as "believes", "anticipates", "expects", "estimates", "intends", "plans", etc. – that reflect management's current estimates and beliefs, but are not guarantees of future results. Please see "Forward-looking statement" on page 179 for a discussion of some of the factors that could cause actual results to differ materially. KEY FINANCIAL AND OPERATIONAL RESULTS 2005 Change from 2004 2004 Change from 2003 2003 Sales (including excise and export tariffs) 55,774 64.8% 33,845 53.0% 22,118 Net Income 6,443 51.7% 4,248 14.8% 3,701 Net income excluding cumulative effect of change in accounting principle and gain from sale of share in Azeri, Chirag, Guneshli in 2003 6,443 51.7% 4,248 78.0% 2,386 EBITDA 10,404 44.4% 7,203 27.9% 5,630 Earnings per share of common stock (US dollars) Basic earnings 7.91 52.1% 5.20 15.0% 4.52 Diluted earnings 7.79 51.9% 5.13 15.3% 4.45 Crude oil production by consolidated subsidiaries (thousands of tonnes) 86,193 4.6% 82,408 8.3% 76,072 Crude oil production by the Group including our share in equity associates (thousands of tonnes) 90,158 4.6% 86,200 7.4% 80,226 Refined products produced by consolidated subsidiaries (thousands of tonnes) 44,182 8.2% 40,825 4.1% 39,233 During 2005 net income was $6,443 million, which is $2,195 million more than in the 2004. The increase in net income resulted from favorable price conditions in 2005 and effective cost control. However, an increased tax burden has restrained growth of our profitability. This restraining factor as well as other drivers impacting the results of our operations are considered below in detail. 100
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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
Page 39 and 40: ANNUAL REPORT, 2005 Main oil export
Page 41 and 42: 47.6 REFINING, PETROCHEMICALS AND M
Page 43 and 44: Russia Growth of export duties in 2
Page 45 and 46: The catalytic reforming unit was ov
Page 47 and 48: GAS PROCESSING The Company's gas-pr
Page 49 and 50: up to 200,000 tonnes of caustic sod
Page 51 and 52: LUKOIL bought share stakes in 2005,
Page 53 and 54: Trading with third parties LITASCO
Page 55 and 56: ANNUAL REPORT, 2005 Effect from EOR
Page 57 and 58: TRADE BALANCE OF LUKOIL SUBSIDIARIE
Page 59 and 60: ANNUAL REPORT, 2005 Work by LUKOIL
Page 61 and 62: ANNUAL REPORT, 2005 management of t
Page 63 and 64: ANNUAL REPORT, 2005 as investments
Page 65 and 66: ANNUAL REPORT, 2005 AA 1000 standar
Page 67 and 68: ANNUAL REPORT, 2005 took part in cr
Page 69 and 70: CORPORATE GOVERNANCE The Company vi
Page 71 and 72: THE MARKET FOR COMPANY SECURITIES R
Page 73 and 74: than in the first quarter of the ye
Page 75 and 76: Alexander Shokhin Independent Direc
Page 77 and 78: 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: ANNUAL REPORT, 2005 The company's r
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
Page 129 and 130: FINANCIAL ACCOUNTS OAO LUKOIL Conso
Page 131 and 132: FINANCIAL ACCOUNTS OAO LUKOIL Notes
Page 133 and 134: FINANCIAL ACCOUNTS Property, plant
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FINANCIAL ACCOUNTS Russian ruble bo
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FINANCIAL ACCOUNTS The following ta
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FINANCIAL ACCOUNTS The real returns
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FINANCIAL ACCOUNTS The Company's ne
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FINANCIAL ACCOUNTS In January 2005,
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FINANCIAL ACCOUNTS Environmental li
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FINANCIAL ACCOUNTS NOTE 22. COMPENS
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FINANCIAL ACCOUNTS Geographical seg
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FINANCIAL ACCOUNTS OAO LUKOIL Suppl
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FINANCIAL ACCOUNTS III. Results of
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FINANCIAL ACCOUNTS Estimated net pr
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FINANCIAL ACCOUNTS develop and prod
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FINANCIAL ACCOUNTS Group's share in
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FINANCIAL ACCOUNTS and the Governme
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FINANCIAL ACCOUNTS A corporate hold
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ANNUAL REPORT, 2005 REFERENCE INFOR
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ANNUAL REPORT 2005 - Lukoil

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