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Sibneft Unveils Record Profits As Investment Accelerates

Moscow, 27 June 2000; Sibneft achieved record net profits of $315.1 million in 1999, according to US GAAP results released today. Profits were almost nine times higher than the $36.1 million net profit recorded in 1998.

Sibneft’s strong financial performance came on the back of a rise in crude oil and refined product prices on global markets. While the devaluation of the rouble had a significant impact on the company’s cost base, Sibneft also benefited from its drive to improve efficiency in its upstream operations. Direct production costs were cut by two thirds to just $0.89 per barrel.

Sibneft’s radical overhaul of its upstream operations, carried out in the first half of 1999, has laid the groundwork for long-term growth in oil production, and has also ensured that the company will continue to set a new benchmark for productivity in its upstream operations.

Other highlights of the company’s 1999 annual results include:

  • EBITDA up by 159% to $547.1 million (1998 - $211.4 million)
  • Total revenues of $1.75 billion (1998 - $1.78 billion)
  • Operating expenditure cut by 24% to $1.20 billion (1998 - $1.57 billion)
  • Short-term liabilities reduced by $258.6 million in 1999 to $61.7 million by year-end

Sibneft is building on its strong performance in 1999 with an aggressive investment programme in 2000. Capital expenditure in the upstream is set to more than triple to $226 million, while investment in refining and marketing will be hiked to $35 million.

Sibneft today unveiled an ambitious programme to develop new oilfields in Western Siberia. The company also plans to deepen its alliance with international oilfield service company Schlumberger and build on its achievements in spinning off service divisions and outsourcing support functions.

Sibneft also plans to accelerate investment in adding new secondary processing capacity at its Omsk refinery, and will speed up the expansion of its retail network in order to capture larger downstream margins.

Sibneft president Eugene Shvidler welcomed the company’s strong financial performance. “While external factors certainly played an important role in our strong performance last year, I am pleased to report that Sibneft’s success in improving efficiency and productivity made a crucial contribution to our results. The challenge for us now is to build on our accomplishments to achieve long-term sustainable growth.”

Notes to editors:

Sibneft last year produced 322,000 b/d from its fields in Noyabrsk in Western Siberia. Refinery runs at the company’s Omsk refinery totaled 246,000 b/d. This is Sibneft’s fourth year of US GAAP accounts, which are audited by Arthur Andersen. In July 1998 Sibneft became the first Russian company to publish an international standard corporate governance charter.