Vagit Alekperov presented Company's plans for international activity development. He talked, in particular about future acquisition plans for international assets, plans for oil products export increase aimed to strengthen positions of the Russian oil industry on international markets for oil and oil products.

As an example, Vagit Alekperov mentioned that in accordance with the agreements made during Vladimir Putin's visit to Greece, LUKOIL has become an exclusive participant on a stake for 23.17% of Hellenic Petroleum (Greece) share capital. It is the first time that Russian company participates in such a big project on the territory of the country that joined the EU and NATO.

Vagit Alekperov informed Russian President about the actions that will be taken on the sale of 50 million State-owned LUKOIL shares (5.9% of share capital with 13.5% owned by the State) on the international stock exchange. In accordance with the estimates made by the Company, the State will receive 700-800 million dollars for the shares to be sold. 
 

OAO LUKOIL Board of Directors meeting was held today in Moscow. The meeting agenda included topics covering the next AGM issues. The AGM agenda was also approved. 

The Board of Directors has set June 27th, 2002 as the AGM date. The AGM will be held in Moscow in the headquarters of the Company. It has been agreed that the list of shareholders having the right of participation will be as for May, 8th. The Board will recommend AGM to approve dividends for 2001 at the rate of 15 rubles per common share with the face value of 0,025 rubles (dividends for 2000 were 8 rubles per common share). The pay off period is set from July to December 2002. 

The AGM will also elect Board of Directors (11 members) and Auditing Committee (3 auditors). The list of candidates was approved by OAO LUKOIL Board of Directors on February 4th, 2002.

In accordance with the amendments made to the State Law on Joint-Stock companies, the AGM will have to approve new wording for documents regulating AGM preparatory and conducting procedures, and documents regulating Board of Directors, Audit Committee and Managing Committee actions. 

The Board of Directors advises AGM to elect ZAO "KPMG" as an independent auditor of the Company ("KPMG" conducts OAO LUKOIL audits since 1995).

In accordance with the State Law on Joint-Stock companies, AGM will also approve rewarding fee and expenses of the Board of Directors and Auditing Committee.

                  MOSCOW, Nov 1 (Reuters) - Top Russian oil firm LUKOIL is
                  likely to use its own resources to redeem two convertible bonds
                  totalling $580 million, the first of which matures next year, Vice
                  President Leonid Fedun said on Thursday. 

                  "Next year we will redeem the bonds out of our own resources," he told a briefing. 

                  LUKOIL made a $230 million convertible bond issue in May 1997 - to be
                  redeemed next May - and followed it up with a $350 million issue in November of
                  the same year that will be redeemed in 2003. 

                  The company had intended to make a $300-400 million convertible bond issue by
                  the end of this year to replace the May 1997 bond, but in October announced it
                  was delaying the issue until 2002 due to unfavourable market conditions. 

                  "It would really make no sense to carry out a convertible bond issue just to redeem
                  an issue already made," Fedun said. "Both that and the fact that the market trends
                  are not very good for that now." 
 

LUKoil, Russia’s leading oil producer, has bought out  foreign stakes in three oil-producing joint ventures in northwestern Russia in  the past six weeks, adding 3 million tons ($77 million) annually to the company’s current production and 80 million tons ($12 billion) to company reserves.

The LUKoil purchases, which company documents indicate cost the firm $168.5 million, have been interpreted by some industry observers as a campaign to drive foreign investors out of jointly owned or operated Russian projects. "But nobody can be pushed out  if he doesn’t want to move," said Konstantin Reznikov, oil analyst at Alfa Equities in Moscow.
"Formally, LUKoil is pushing the foreign companies out. In reality, it is offering a premium to encourage them to sell. None of the foreign investors is willing to invest enough to raise production. LUKoil won’t invest to raise output if it has to share the profits. So, these deals are beneficial for all sides."

Aminex deal
Late last month, the chief executive of LUKoil-Perm, a LUKoil subsidiary, announced his company had paid $38.5 million to Aminex for its 55 percent stake in AmKomi. The main shareholders of Aminex, a Cyprus-based company trading on the Dublin and London exchanges, are  the International Finance Corporation, Credit Suisse First Boston and the Bank of  England’s pension fund.
Before the deal, LUKoil held a 10 percent stake in AmKomi through Komineft, another Komi region oil venture in which LUKoil has built up a 75 percent stake since 1998.
The new deal gives LUKoil 65 percent of AmKomi. The balance of the shares is owned by the state property fund of the region.

Also in August, Soco International Plc, a U.K.-based oil and gas exploration and production company, agreed to sell its half-share in the Urals oil producing  venture Permtex to another LUKoil subsidiary. The price was $50 million. 

A month earlier, on July 17, LUKoil announced a deal with Bitech Petroleum Corp. of Montreal to buy its production venture in Komi, plus exploration rights Bitech holds in Egypt, Tunisia, Morocco and Colombia. The offer, which Bitech accepted, was worth $80 million. The IFC  is also a major shareholder in Bitech.

A year ago, Bitech executives fought off a raid on their Russian oilfield operationsby a former Russian partner, who was paid off. Subsequently, a senior Bitech executive said, the company would have to build a partnership with a Russian oil major if it was to have any chance to survive. According to Jim Henderson, head of research at Renaissance Capital in Moscow, LUKoil’s buyout offer represented a 99 percent premium over Bitech’s share price. 
Canadian government officials supported the company in discussions with the Kremlin during the earlier raid, endorsed the terms of sale as fair and reasonable.

Unable to develop
Another Canadian company has not been so fortunate with LUKoil.
Archangel Diamond Corp. (ADC) of Vancouver, which found a major diamond deposit in the Arkhangelsk region, has been unable to develop the project because its regional Russian partner Arkhangelskgeoldobycha, will not transfer the mining license to their  joint-venture company. Arkhangelskgeoldobycha is controlled by LUKoil. 

The oil company has kept the diamond project fight at arm’s length until a few days ago, when it filed suit in the Arkhangelsk arbitration court to annul the joint venture and push the Canadian investorsout.
ADC fought back, with support from Canada’s Prime Minister Jean Chretien, who discussed the dispute with President Vladimir  Putin in July. ADC has also taken its Russian partner to international arbitration in Stockholm, seeking the diamond-mine license or $500    million in loss and damages.
Court action
LUKoil’s move in the arbitration court is intended also to cancel the international arbitration provisions already agreed by Arkhangelskgeoldobycha, preventing the Swedish tribunal from ruling in ADC’s favor.
A letter delivered last week to ADC from Arkhangelskgeoldobycha told the Canadian company that if it did not voluntarily terminate its investment within 20 days, the Russians would take "legal measures" to force the outcome.
ADC says LUKoil and Arkhangelskgeoldobycha are seeking to take from the company all rights, titles and interests earned inRussia over the last eight years. The firm also claims LUKoil is afraid of international arbitration.
By JOHN HELMER / The Russia Journal http://www.russiajournal.com/weekly/article.shtml?ad=5131
 

The meeting of LUKOIL Board of Directors has taken place today in Moscow where the results of the Company's performance in the 1st half 2001 were summarized. 

Over the first six months of 2001 LUKOIL including affiliates, joint ventures and projects on PSA terms produced 38.7 mln tons of oil, which represents a 1.6% increase over the 1st half 2000. Implementation of the up-to-date enhanced recovery technologies allowed the Company to produce an additional 7.7 mln tons of oil. LUKOIL accounted for 22.4% of the overall oil production in Russia in the first half 2001. 

Gas production increased by 3.2% (as compared to the 1st half 2000) and amounted to 2.6 bn cubic meters.

As compared to the 1st half 2000, the volume of hydrocarbons added to the reserves grew by more than four times and amounted to 47.6 tons of conventional fuel. Six new oil fields and five deposits at existing fields were discovered.

The Company's refineries in Russia processed 10.9 mln tons of oil. The total amount of oil supplied to domestic refineries increased by 1.3%. Refining depth at the Company's refineries in Russia achieved 76.3% whereas Russian average was 70.7%. LUKOIL's share in the overall refinery throughput in Russia amounted to 12.9%.

In the 1st half 2001 the Company's refineries outside Russia (Odessa refinery, Petrotel-LUKOIL refinery in Romania and LUKOIL-Neftokhim-Bourgas in Bulgaria) processed 4.5 mln tons of oil.

Overall volume of oil product deliveries as compared to the 1st half 2000 increased by 2% and amounted to 17.4 mln tons, including 12.9 mln tons supplied to the domestic consumers.

Oil exports in the 1st half 2001 amounted to 16.24 mln tons, oil product exports amounted to 4.5 mln tons which represents an increase of 10.4% and 9.9% respectively (as compared to the 1st half 2000).

It was stressed at the meeting of LUKOIL Board of Directors that the Company had to retain its positions on the oil product markets under complicated market conditions - an oversupply of oil products, unprecedented high level of oil product inventories at refineries and oil terminals. Under such conditions, LUKOIL price policy was aimed at gradually decreasing domestic prices. Thus, prices for light oil products in the 1st half 2001 were decreased by 5-18%, for fuel oil - by 40-50% as compared to January 2001. Moreover, in the 1st half 2001 the profitability of export sales decreased due to a considerable increase in export duties for oil and oil products.

The Board of Directors also discussed the matter of improving the personnel management system. In this connection, a system for personnel certification based on the professional standards conforming to the highest global requirements for the employee qualification on the labour market will be implemented by the end of this year. There will also be an improvement in the process of continuous employee training. 
 

Ten reservoirs are designed to receive and distribute five types of oil products, including AI-95, AI-93 and AI-76 brands of gasoline, diesel fuel and burning kerosene.

LUKOIL President Vagit Alekperov and Head of Astrakhan region administration Anatoly Guzhvin have signed today in Moscow a protocol of co-operation between the Company and the region for 2001. The document was signed in the development of the agreement of mutual co-operation dated July 4, 1996. 

In accordance with the protocol, LUKOIL-Astrakhanmorneft will take part in carrying out the program for the gasification of Enotaevsky district in Astrakhan region. In particular, in 2001, LUKOIL-Astrakhanmorneft will carry out drilling and service facilities construction for a gas producing well on North-Shadzhinskoye gas field. LUKOIL-Astrakhanmorneft also intends to drill an appraisal well for a more thorough study of hydrocarbon reserves on Poldnevsky bank.

Moreover, LUKOIL will consider the possibility of financing the construction of modern facilities for processing sea-drilling waste, will build two new and upgrade two existing filling stations in the region, as well as provide charity aid in restoration of Astrakhan Kremlin and other historical monuments.

On their part, the region administration will allocate land properties within the precincts of the town for the Company to construct 4 filling stations.

"We are confident that the signed Protocol will contribute to industrial potential growth and improvement of the well-being of people in Astrakhan region where our Company has enjoyed years of productive and mutually beneficial co-operation", - stressed LUKOIL President Vagit Alekperov. 
 

The meeting of LUKOIL Board of Directors has taken place today in Moscow   where in accordance with Joint Stock  Companies Law and the charter of   the Company the annual report was preliminarily approved for subsequent   submission  for approval by the General Stockholders' Meeting on June 28,   2001. In 2000, oil production by LUKOIL subsidiaries,  affiliates and joint   ventures increased by 2.8% compared to last year and amounted to 77.7   mln tons.

Oil production in new regions grew at accelerated rates: on   KomiTEK oil fields - by 9% and amounted to 3.9 mln tons, in  overseas   projects on Caspian and in Kazakhstan - by 18% reaching 2.1 mln tons.

  Every sixth ton of oil was produced using progressive enhanced recovery

  technologies
.  In 2000, big volume of carried out exploratory activities - 2.7-fold   increase (8.3 bn rubles) compared to 1999 -  resulted in significant   additions to the reserve base: about 70 mln tons of conventional fuel.   According to the independent  reserve audit, Company's reserves reached   14.2 bn bbl of oil and 3.6 trln cubic feet of gas. A new oil and gas   province in  Russian part of Caspian was discovered.  Refinery throughput at Company's refineries increased by 10% and   amounted  to 32 mln tons, including 72% in Russia and 28% - at refineries

  abroad.
LUKOIL's share in the total refining volume in Russia increased   to 14.4% compared to 12.2% in 1999. Refining depth  exceeded 76%, whereas   the sector average is 71%. In 2000, the reconstruction of refineries in   Russia and abroad  continued, including Ukhta refinery where the refinery   throughput increased by 70% (to 3.6 mln tons). 20 The active  development of the service stations network and oil product   sales continued. At the end of 2000 the Company's network of  service  stations exceeded 2500 outlets. Oil product sales in Russia increased by   35%, packaged lubricants sales -  1.6-fold. The volume of sales by a   Company's single fuel card increased by 47%. 20 In 2000, the Company achieved  record financial results. Income before   taxation amounted to 112.6 bn rubles, which in current prices represents   a 2.7-fold  increase compared to 1999. Operating profit in 2000 increased   up to 119 bn rubles compared to 48.9 bn rubles a year  before.

LUKOIL
Group share in net income of affiliates - earnings from affiliated   equity interests - amounted to 3.0 bn  rubles in 2000 (increase of 61%).   Income taxes increased to 16.2 bn rubles compared to 9.5 bn rubles in   1999.  Consolidated net profit of LUKOIL Group amounted to 102.5 bn rubles, or   96.4 bn rubles excluding income applicable to  minority shareholders in   Company's subsidiaries. Earnings per 1 common share (before suggested   dividends on preferred  shares) amounted to 124 rubles - 3-fold increase   under comparable conditions. Group assets as of December 31, 2000  amounted to 338.1 bn rubles (227. 4   bn rubles a year before), shareholders' equity - 156.2 bn rubles (75.7   bn  rubles). 20
 

In 2000, oil production by LUKOIL subsidiaries,   affiliates and  joint ventures increased by 2.8% compared to last year  and amounted to   77.7 mln tons. Oil production in new regions grew at accelerated rates: on   KomiTEK oil 20 fields -  by 9% and amounted to 3.9 mln tons, in overseas projects on   Caspian and 20 in Kazakhstan - by 18% reaching 2.1 mln  tons. Every sixth ton of oil was   produced using progressive enhanced recovery technologies.

In 2000, big volume of carried out exploratory   activities -  2.7-fold increase (8.3 bn rubles) compared to 1999 - resulted  in   significant  additions to the reserve base: about 70 mln tons of conventional fuel.   According 20 to the independent  reserve audit, Company's reserves reached 14.2 bn bbl   of oil 20 and 3.6 trln cubic feet of gas. A new oil and gas province  in Russian   part of 20 Caspian was discovered.

Refinery throughput at Company's refineries increased   by 10% 20 and amounted to 32 mln tons, including 72% in Russia  and 28% - at   refineries 20 abroad. LUKOIL's share in the total refining volume in Russia increased   to 14.4%   compared to 12.2% in 1999. Refining depth exceeded 76%, whereas the   sector  average is 71%. In 2000, the  reconstruction of refineries in Russia and   abroad  continued, including Ukhta refinery where the refinery throughput    increased by  70% (to 3.6 mln tons).

The active development of the service stations   network and oil  product sales continued. At the end of 2000 the  Company's network of   service  stations exceeded 2500 outlets. Oil product sales in Russia increased by   35%,   packaged lubricants sales - 1.6-fold. The volume of sales by a Company's   single  fuel card increased by 47%.

In 2000, the Company achieved record financial   results. Income  before taxation amounted to 112.6 bn rubles, which in  current prices   represents  a 2.7-fold increase compared to 1999. Operating profit in 2000 increased   up to  119 bn  rubles compared to 48.9 bn rubles a year before. LUKOIL Group   share in  net income of affiliates - earnings from  affiliated equity interests -   amounted  to 3.0 bn rubles in 2000 (increase of 61%). Income taxes increased to   16.2  bn  rubles compared to 9.5 bn rubles in 1999.

Consolidated net profit of LUKOIL Group amounted to   102.5 bn  rubles, or 96.4 bn rubles excluding income applicable  to minority   shareholders  in Company's subsidiaries. Earnings per 1 common share (before suggested   dividends on  preferred shares) amounted to 124 rubles - 3-fold increase   under  comparable conditions.

Group assets as of December 31, 2000 amounted to   338.1 bn  rubles (227. 4 bn rubles a year before), shareholders'  equity - 156.2 bn   rubles  (75.7 bn rubles).

In accounting period there was a significant   improvement in  practically all profitability and liquidity ratios (compared to  the data   as of  December 31, 1999):
- quick ratio - 51% (37%)
- current ratio - 155% (133%)
- operating margin - 29% (18%)
- net return on invested capital - 44% (22%)
- leverage ratio (net debt/{net debt + equity}) - 16%   (36%)

In 2001, a whole range of production facilities and   capacities  will be put into operation, in particular the second stage of    reconstruction at Volgograd refinery, Caspian pipeline. The development of oil fields in  Timan-Pechora oil & gas  province will continue, as well as   exploration  activities in license areas in Caspian, the construction of the pipeline   Ural  - Central Russia and others.

Carrying out these and other projects gives the   Company 20 additional stability and secures competitive returns and  profitability   of  business not only in high-oil-price environment, but also under less   favourable market conditions.

OAO LUKOIL and subsidiaries
CONSOLIDATED STATEMENT OF INCOME

In million rubles
 

For the year, ended December 31		1999	2000
Net operating revenues		268,207	405,936
Cost of sales		(202,076)	(247,206)
Gross profit		66,131	158,730
Selling expenses		(11,777)	(27,155)
Administrative expenses		(5,467)	(12,610)
Operating profit		48,887	118,965
Interest income		762	2,856
Interest expense		(2,336)	(5,367)
Dividend income		1,692	2,522
Non-operating revenues and  expenses, net		(6,560)	(581)
Non-recurring gains and losses, net		(3,993)	(8,818)
Earnings from affiliated equity interests		1,884	3,036
Income before taxation		40,336	112,613
Income taxes		(9,541)	(16,181)
Extraordinary revenues and expenses, net		-	2
Net profit excluding minority interest			30,795	96,434
For information:
Net profit of the Group		31,653	102,540
Minority interest in net profit of the Group		858	6,106

Consolidated financial statements for LUKOIL Group have been prepared in accordance with Order N112 of the Russian FederationMinistry of Finance "On the Methodological Recommendations for the Preparation and Presentation of Consolidated Financial Statements".

Consolidated financial statements for 2000 include the results of activities of OAO LUKOIL, 65 subsidiaries (including holding companies) and 18 affiliated companies.

The Audit Opinion of ZAO KPMG on the conformity of  the consolidated financial statements with the standard regulatory documents governing accounting and reporting in the Russian Federation was received on May 18, 2001.
 

EFE1EF LUKOIL and subsidiaries

CONSOLIDATED BALANCE SHEET

In million rubles
 

As of December 31		1999	2000
Current assets
Cash and cash equivalents		9,937	17,998
Marketable securities		18,644	32,214
Accounts and notes receivable		59,439	79,989
Inventories		15,188	19,293
Deferred charges and other current assets		960	2,138
Total current assets		104,168	151,632
Non-current assets
Property, plant and equipment, net		69,301	90,763
Intangible assets, net		5,637	10,929
Construction in progress		18,253	38,401
Long-term investments and other fixed assets		30,042	46,414
Total non-current assets		123,233	186,507
TOTAL ASSETS		227,401	338,139
Current liabilities
Short-term borrowings		7,616	14,517
Accounts and notes payable		68,889	71,922
Deferred income and other current liabilities		1,743	11,082
Total current liabilities		78,248	97,521
Long-term liabilities
Long-term credits and loans		64,872	67,381
Other long-term and accrued liabilities		3,681	7,376
Total long-term liabilities		68,553	74,757
Goodwill		993	872
Minority interest in shareholders’ equity		3,924	8,775
Shareholders’ equity
Stock capital		20	20
Additional capital		57,338	70,382
Retained earnings and reserves		18,325	85,812
Total shareholders’ equity		75,683	156,214
TOTAL LIABILITIES AND EQUITY		227,401	338,139