ANNUAL REPORT 2005 - Lukoil

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.
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