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US GAAP Half Results to June 30th 1999

Moscow, Monday 4th October 1999: Sibneft has announced a profit of $63.8 million dollars for the half year to June 30th 1999 compared to a loss of $60 million for the same period in 1998. Buoyed by the rising international oil price, the company also announced a substantial increase in its drilling programme and a series of new projects to boost production in 2000. The key highlights are:

  • Net Income $63.8 million (-$60.3m)
  • EBITDA $191 million ($150.4m)
  • Crude production costs cut by 70.6% per barrel
  • Refinery production costs cut by 66.8%
  • Drilling programme increased by 115% in H2
  • Hydro Frac programme doubled in H2
  • New Crude production programme initiated
  • Commitment to open up shareholder register

Sibneft President Eugene Shvidler said, "I am very pleased to see a solid operating performance in thefirst half. Although the oil price only really started to rally in the second quarter, the combination of cost cutting, devaluation gains and efficiency improvements means Sibneft has a sound base from which to grow."

He continued, "With US GAAP we have a much higher depreciation charge than our Russian peer group which uses RAS. However were you to take our depreciation back to Russian levels, we would be reporting Net Income closer to $200 million and a net profit margin of 33%!

"We are continuing to restructure our business and cut costs but we are now entering a phase of new growth. New plans to enhance production and increase the quality and volume of our refined products are beginning to impact our financial results."

"We have consistently stated that we are interested in profit not production for its own sake, value, not volume. Nevertheless, I hope the result of our efforts will be such that next year we will be able to announce both strong profits and, for the first time in a decade, increased production at NNG."

"In June this year Sibneft became the first Russian company to successfully offer shares to international investors after the August '98 crisis. It increased our 'free float' to approximately 11% of our share capital. Our Level 1 ADR launched in April has become one of the most actively traded Russian ADR's and we shall be looking to increase the size of our programme in due course."

"Finally, Sibneft has consistently been at the forefront of corporate reform in Russia. We are now in our fifth year of US GAAP accounts; we were the first Russian Company to adopt a corporate governance charter to international standards and have restructured our board to include three non-executive directors. Greater shareholder disclosure is the next logical step. Accordingly, I have set up an internal group to look at this whole issue and report back with specific recommendations to bring Sibneft shareholder register disclosure into line with international best practice."

"Russia continues to face considerable uncertainty but as a company, we face the future with confidence."