LUKOIL Profit Rises by 143.5 Percent

LUKOIL publishes consolidated US GAAP financial accounts for the first quarter of 2008.LUKOIL net income reached $3,163 million in the first quarter of 2008, which is an increase of 143.5% y-o-y. EBITDA was $4,846 million, which is 99.3% higher y-o-y. Revenue from sales rose by 59.4%, to $24,955 million.The increase in net income was due to favorable market conditions, high refinery margin, increase in refinery throughputs as well as due to effective cost control. Growth of the net income was held back by appreciation of the ruble against the dollar, increase in transportation tariffs and growth of the tax burden. The Company’s tax expenses totaled $8.7 billion, up 54.9% y-o-y.Operating expenses rose by $465 million y-o-y, to $1.9 billion. This growth was mainly caused by real appreciation of the ruble against the dollar (which was 17.3% y-o-y); increase in refinery throughputs; increase in other sales. Lifting costs per boe of production in the first quarter of 2008 amounted to $3.86 per boe, which is 15.6% higher y-o-y. The growth is lower than the real appreciation of the ruble against the dollar. This means that lifting costs in real terms decreased in the first quarter of 2008 y-o-y. LUKOIL transportation expenses increased by 21.1%, to $1,195 million.  This was due to an increase in transportation tariffs in Russia, the increased volumes of refined products export from Russia and an overall increase in sales volumes. However, an increase in transportation expenses was partly compensated by decreased average freight rates. Capital expenditures including non-cash transactions were $2,412 million, which is an increase of 17.0% y-o-y. Upstream CAPEX rose by 15.4% while downstream CAPEX increased by 28.5%. New projects (fields in the North of Timan-Pechora, fields of the Bolshekhetskaya Depression, Northern Caspian fields) accounted for over 30% of upstream capital expenditures. These projects will have a favourable impact on LUKOIL financial and operating performance in the mid-term.Production of marketable hydrocarbons (including share in production by affiliates) decreased by 2.1% y-o-y, to 2,193 th. boe per day. Company maintains positive hydrocarbon production forecast for 2008 thanks to the launch of the Yuzhnaya Khylchuya field in Timan-Pechora in mid-July.

Refinery throughputs at the Group refineries grew by 9.8% to 13.32 million tons. Increase in refinery throughputs at the Company refineries in Russia was 8.9%, at foreign refineries – 14.2%. Volgograd refinery accounted for most of the growth. Thanks to an increase in capacity load and optimization of the operations, production of petroleum products at LUKOIL owned refineries increased by 9.1% y-o-y and totaled 12,460 thousand tons.

LUKOIL sold 32.6 million tons of crude oil and petroleum products in the first quarter of 2008, representing an increase of 4.0% y-o-y. The Company decreased oil sales and considerably increased sales of petroleum products. Retail sales of petroleum products increased by 21.2% y-o-y, to 3.2 million tons.  CONSOLIDATED STATEMENT OF INCOME(Millions of US dollars, unless otherwise noted)

	For the three months ended March 31, 2008(unaudited)	For the three months ended March 31, 2007(unaudited)
Revenues
Sales (including excise and export tariffs)	24,955	15,652
Equity share in income of affiliates	129	84
Total revenues	25,084	15,736
Costs and other deductions
Operating expenses	(1,908)	(1,443)
Cost of purchased crude oil, gas and products	(8,608)	(5,050)
Transportation expenses	(1,195)	(987)
Selling, general and administrative expenses	(796)	(663)
Depreciation, depletion and amortization	(624)	(547)
Taxes other than income taxes	(3,129)	(1,829)
Excise and export tariffs	(4,585)	(3,268)
Exploration expenses	(34)	(75)
Net (loss) gain on disposals and impairments of assets	(5)	2
Income from operating activities	4,200	1,876
Interest expense	(72)	(77)
Interest and dividend income	25	29
Currency translation gain	110	42
Other non-operating expense	(48)	(19)
Minority interest	(40)	(14)
Income before income taxes	4,175	1,837
Current income taxes	(1,064)	(630)
Deferred income taxes	52	92
Total income tax expense	(1,012)	(538)
Net income	3,163	1,299
Basic earning per share of common stock (US dollars):	3.83	1.56

Source: Lukoil