ENERGY FOR PEOPLE - JSC Gazprom Neft

PERFORMANCE ANDFINANCIAL INDICATORSEnergy for lifeENERGY FOR PEOPLEManagement’s Discussion andAnalysis of Financial Conditionand Results of Operations for2009, 2008 and 2007Forward-Looking StatementsThis discussion contains forward-looking statements concerning the financialcondition, results of operations and businesses of Gazprom Neft and itsconsolidated subsidiaries. All statements other than statements of historical factare, or may be deemed to be, forward-looking statements. Forward-lookingstatements are statements of future expectations that are based on management’scurrent expectations and assumptions and involve known and unknown risks anduncertainties that could cause actual results, performance or events to differmaterially from those expressed or implied in these statements.Forward-looking statements include,among other things, statementsconcerning the potential exposureof Gazprom Neft to market risksand statements expressingmanagement’s expectations, beliefs,estimates, forecasts, projectionsand assumptions. These forwardlookingstatements are identified bytheir use of terms and phrases suchas ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’,‘‘estimate’’, ‘‘expect’’, ‘‘intend’’, ‘‘may’’,‘‘plan’’, ‘‘objectives’’, ‘‘outlook’’,‘‘probably’’, ‘‘project’’, ‘‘will’’, ‘‘seek’’,‘‘target’’, ‘‘risks’’, ‘‘goals’’, ‘‘should’’ andsimilar terms and phrases. There area number of factors that could affectthe future operations of Gazprom Neftand could cause those results to differmaterially from those expressed in theforward-looking statements includedin this Report, inclusively (withoutlimitation): (a) price fluctuations incrude oil and gas; (b) changes indemand for the Company’s products;(c) currency fluctuations; (d) drillingand production results; (e) reserveestimates; (f) loss of market andindustry competition; (g) environmentaland physical risks; (h) risks associatedwith the identification of suitablepotential acquisition properties andtargets, and successful negotiationand completion of such transactions;(i) economic and financial marketconditions in various countries andregions; (j) political risks, project delayor advancement, approvals and costestimates; and (k) changes in tradingconditions.All forward-looking statementscontained in this discussion areexpressly qualified in their entirety bythe cautionary statements containedor referred to in this section. Readersshould not place undue reliance onthese forward-looking statements. Eachforward-looking statement speaks onlyas of the date of this discussion. NeitherGazprom Neft nor any of its subsidiariesundertake any obligation to publiclyupdate or revise any forward-lookingstatement as a result of new information,future events or other information.The following discussion is intendedto assist you in understanding of JSCGazprom Neft’s financial position asof December 31, 2009 and resultsof operations for the years endedDecember 31, 2009, 2008 and 2007and should be read in conjunction withthe Consolidated Financial Statementsand notes thereto, which were preparedin accordance with accountingprinciples generally accepted in theUnited States of America.Such terms as “Gazprom Neft”,“Company” and “Group” in theirdifferent forms in this report representJSC Gazprom Neft and its consolidatedsubsidiaries and affiliated companies.This report represents JSC GazpromNeft’s financial condition and results ofoperations on a consolidated basis.Tonnes of crude oil produced aretranslated into barrels using conversionrates reflecting oil density from eachof our oil fields. Crude oil purchasedas well as other operational indicatorsexpressed in barrels are translated fromtonnes using a conversion rate of 7.33barrels per tonne. Translations of cubicmeters to cubic feet were made at therate of 35.31 cubic feet per cubic meter.Translations of barrels of crude oil intobarrels of oil equivalent (“BOE”) weremade at the rate of 1 barrel per BOEand of cubic feet into BOE at the rate of6 thousand cubic feet per BOE.70