On Tuesday, October 15, 2002, OAO LUKOIL and OAO Arkhangelskgeoldobycha won an expected victory in the courts of Colorado. The District Court of the City and County of Denver granted OAO LUKOIL’s and OAO Arkhangelskgeoldobycha’s motions to dismiss in a case filed by Archangel Diamond Corporation (“Archangel”). This marks the third time that a legal body has ruled that it lacked jurisdiction to hear Archangel’s claims against OAO LUKOIL and OAO Arkhangelskgeoldobycha. Previously the Stockholm arbitration tribunal and the United States Court for the District of Colorado held that they lacked jurisdiction over Archangel’s claims.
Archangel had alleged among other things breach of contract and breach of certain common law duties, claiming that AGD failed to honor a series of agreements providing for the transfer of a diamond field development license to Archangel. Archangel sought to recover approximately $4.8 billion comprised of $1.2 billion of actual and $3.6 billion of punitive damages. Archangel argued in circumvention of Colorado law and the Due Process Clause of the United States Constitution, despite the parties’ negotiations having taken place outside of the United States, the diamond field being located in the Russian Federation, and all required contractual performance occurring in the Russian Federation. Thus, ADC brought what was clearly a Russian claim in a Colorado court. Recognizing this, the Colorado court denied this attempt, noting that it had “no personal jurisdiction over ADG [sic] or LUKOIL in this matter, either pursuant to [Colorado law] or the Due Process Clause [of the United States Constitution].”
The result of the court’s decision is to completely dismiss OAO LUKOIL and OAO Arkhangelskgeoldobycha from the Colorado proceeding. The decision confirms what OAO LUKOIL has consistently argued – that this case should be decided by the courts of the Russian Federation. OAO LUKOIL has already publicly stated that it will submit to the jurisdiction of the courts of the Russian Federation, and will abide by whatever ruling the Russian court reaches with regard to the contested diamond license.
LUKOIL held BoD meeting reviewing the results of the first stage of its restructuring program and define objectives for off-shore projects in Russia’s sector of the Caspian Sea.
LUKOIL’s BoD reviewed the results of the first stage of the restructuring program and ordered to work out further measures to increase operating efficiency of the company for 2003-2004.
The first stage of LUKOIL restructuring program aimed at simplifying its corporate structure through consolidation of its core assets and divesting non-core assets. Between February 2001 and April 2002 LUKOIL liquidated (through mergers and sale) 183 legal entities.
Through the first stage of restructuring LUKOIL also merged 37 marketing companies into 13, which operate in 50 regions of Russia.
In Volga region LUKOIL merged oil-producing companies LUKOIL-Nizhnevolzhskneft Ltd., LUKOIL-Astrakhanmorneft Ltd., LUKOIL-Saratovneftedobycha Ltd., LUKOIL-Astrakhanmorneftegas Ltd., Geo-as Ltd. into LUKOIL-Nizhnevolzhskneft Ltd.
In Perm region LUKOIL increased its stake to 100% in the following oil producing companies: LUKOIL-Perm Ltd., Kama-Neft Ltd., Permtex Ltd., Visherskaya oil & gas producing company Ltd., “Russkaya Toplivnaya Kompaniya” Ltd., Maikorskaya company Ltd. In Komi republic LUKOIL secured control in the following oil producing companies: Amkomi Ltd., Biteck-Silur Ltd., Parma-Oil Ltd. BoD recognized that upstream projects in Sakhalin and Morocco are not attractive and took decision to leave them.
LUKOIL streamlined its overseas downstream operations. The company authorized LUKOIL Overseas Holding Ltd. to run all overseas exploration and production projects and jvs in Russia. LUKOIL International Gmbh was empowered to operate overseas refining and marketing assets.
In April 2002 LUKOIL launched the second stage of restructuring program targeting to increase efficiency of LUKOIL operating activities. Within the second stage LUKOIL plans to continue merging and spinning of non-core assets. LUKOIL also aims to divest servicing company LUKOIL-Bureniye and to outsource drilling services. LUKOIL plans to complete divesting its drilling company in 1H 2003.
LUKOIL BoD ordered to develop restructuring program for 2003-2004 within the next three months. Over 2003-2004 LUKOIL will restructure its transport, engineering and financial companies.
LUKOIL BoD ordered to shape an integrated financial model under US GAAP standards for medium- and long-term planning. Using this tool the company will be better able to manage risks under various scenarios.
BoD reviewed results of exploratory drilling in the Northern sector of the Caspian Sea and development program for its off-shore upstream projects in the region.
LUKOIL has drilled 6 exploratory wells on Khvalynskaya, “170 km”, Shyrotnay and Rakushechnaya structures (all part of Severny block) since 1995. The company discovered 4 oil, gas and gas condensate fields which contain cumulative recoverable reserves of 3,3 bn boe. The company is now carrying out exploratory drilling at Sarmatskaya structure.
LUKOIL BoD plans to approve in 1H03 its exploratory drilling program for the Northern sector of the Caspian Sea (2004-2010). The company also plans to approve development program for Yuri Korchagin and Khvalynskoye structures (all part of Severny block) aiming to produce the first commercial crude oil in 2006, commercial natural gas in 2007. LUKOIL BoD hired US engineering company ABB Lummus Global to work out development program for Severny block.
LUKOIL and Kasakhstan Government are working out PSA terms for joint development of Khvalynskaya structure.
LUKOIL carries out its drilling operations using “zero pollution” technology. According to continuous environmental monitoring data, ecosystems in LUKOIL operating area have not been deteriorated for the past six years.
LUKOIL proudly announces that Richard Karplus joined LUKOIL as the Director of Strategic Planning department. Richard Karplus has over 20 years experience in oil & gas industry. Prior to joining LUKOIL, Richard Karplus was Vice President for ConocoPhillips responsible for formulating new business development strategy in Russia. His extensive experience includes increasingly responsible positions in Strategic Planning, Energy Market Analysis, Financial Planning, Capital Budgeting, Analysis of Investment Projects, Commercial Negotiations and Business Development
Richard Karplus received an MBA in Finance and International Business from the University of Chicago, Graduate School of Business.
“We believe that Richard Karplus will strengthen our strategic planning team and brings new understanding of LUKOIL’s perspectives to the investment community.” – said LUKOIL’s President Vagit Alekperov.
Moscow – 3 October 2002 – OAO LUKOIL today reported its unaudited consolidated financial results under U.S. GAAP for the six months ended 30 June 2002 reviewed by KPMG, our independent auditors. The following table sets forth summary unaudited consolidated income statement data for the six months ended 30 June 2002 compared with the same period in 2001.
| Six months ended June 30, | ||||
| In mln USD except per share data | 2001 | 2002 | ||
| Revenues | ||||
| Sales (including excise and export tariffs) | 6,818 | 99.0% | 6,641 | 99.5% |
| Equity share in income of affiliates | 66 | 1.0% | 35 | 0.5% |
| Total revenues | 6,884 | 100.0% | 6,676 | 100.0% |
| Costs and other deductions | ||||
| Operating expenses | (2,145) | -31.2% | (2,151) | -32.2% |
| Selling, general and administrative expenses | (934) | -13.6% | (1,216) | -18.2% |
| Depreciation, depletion and amortization | (447) | -6.5% | (478) | -7.2% |
| Taxes other than income taxes | (492) | -7.1% | (808) | -12.1% |
| Excise and export tariffs | (808) | -11.7% | (785) | -11.8% |
| Exploration expense | (44) | -0.6% | (50) | -0.7% |
| Loss on disposal and impairment of assets | (12) | -0.2% | (26) | -0.4% |
| Income from operating activities | 2,002 | 29.1% | 1,162 | 17.4% |
| Interest expense | (129) | -1.9% | (126) | -1.9% |
| Interest and dividend income | 82 | 1.2% | 68 | 1.0% |
| Currency translation loss | (17) | -0.2% | (16) | -0.2% |
| Other non-operating income | 12 | 0.1% | 70 | 1.0% |
| Minority interest | (51) | -0.7% | (31) | -0.4% |
| Income before income taxes | 1,899 | 27.6% | 1,127 | 16.9% |
| Current income taxes | (487) | -7.1% | (356) | -5.3% |
| Deferred income tax benefit | 21 | 0.3% | 69 | 1.0% |
| Net income | 1,433 | 20.80% | 840 | 12.6% |
| Basic earnings per share of common stock | 1.77 | 1.04 | ||
| Diluted earnings per share of common stock | 1.75 | 1.04 |
In the six months ended 30 June 2002 compared to the same period in 2001:
Our sales decreased mainly due to the reduction of export and domestic prices on crude oil and refined products, which reached the prior year average levels only by the end of the second quarter.
Our operating expenses increased by $6 million, or less than 1%, in comparison with the prior period. Of those, our extraction expenses decreased by $3 million, or less than 1%. At the same time average extraction costs per barrel decreased from $3.02 per barrel during first half 2001 to $2.98 per barrel during first half 2002. The decrease in the average extraction costs per barrel resulted from our cost reduction policy, which in the first half of 2002 included shutting-in unproductive wells and increasing oil flows by using artificial stimulation and other technologies.
Our refining expenses on our refineries decreased by $36 million, or 15%, from first half 2001 to first half 2002. This was primarily caused by the closure of the Petrotel SA refinery in July 2001.
Our processing costs on the affiliated refinery (Nizhegorodnefteorgsintez) increased by $61 million, or 109%, in comparison with the first half 2001. The increase of processing costs was caused by an increase in volumes processed by 2.5 million tonnes, or 116%. During the first half 2002 processing volumes on Nizhegorodnefteorgsintez increased to 4.6 million tonnes.
An increase in selling, general and administrative expenses by $282 million was principally caused by an increase of all transport tariffs of about 30%, the increase in sales volumes and a general increase in expenses due to the real appreciation of the Russian rouble against the dollar.
Our taxes other than income taxes increased, primarily due to changes in tax legislation that replaced royalty, mineral replacement and oil excise taxes with one unified tax. This increase was partially offset by a decrease of expenses on excise and export duties (see below).
Our excise and export duties decreased by $23 million, or 3%, compared to the prior period. This resulted mainly from cancellation of excise on crude oil sales and establishing of the unified extraction tax.
Exploration expenses changed insignificantly in comparison with prior period. An increase was $6 million, or 14%.
The following table sets forth sales volumes for the three and six months periods ended respectively on 31 March 2002 and 30 June 2002.
| Period: | Three months ended | Six months ended 30 June 2002 |
| 31 March 2002 | ||
| Sales of crude oil (mln tonnes) | ||
| International sales | 7.098 | 13.744 |
| Domestic sales | 2.990 | 5.088 |
| Sales of refined products (mln tonnes) | ||
| International sales | 5.450 | 12,264 |
| Domestic sales | 4.555 | 9,326 |
Since the beginning of 2002, we have been implementing a restructuring plan to improve our operations and maximize shareholder value. The plan contemplates that we will undertake the following measures in the near term: (i) increase exports of crude oil and refined products; (ii) accelerate the development of our most productive fields; (iii) shut-in low-producing wells; (iv) apply enhanced oil recovery technologies; (v) seek competitive bids for oilfield services; (vi) divest non-core businesses and reduce headcount; (vii) strengthen performance-related pay; and (viii) streamline our administration. A specific manifestation of the results of this restructuring program is the above-mentioned decrease in the extraction costs to $2.98 per barrel. We believe that these steps should help us to meet our strategic goals of sustainable growth and value creation.
OAO LUKOIL is Russia’s largest oil and gas company in terms of reserves and production. Our full financial results for the six months ended 30 June 2002 as well as other information about the company can be found on our website at www.lukoil.com.
Today LUKOIL, the Export-Import Bank of the United States (“Ex-Im Bank”) and Commerzbank AG (New York branch) have agreed to the terms of an agreement which will provide the Company with up to USD 26.4 million in medium-term financing, guaranteed by Ex-Im Bank.
The facility, which will cover repayment terms ranging from three to five years, will be extended by Commerzbank AG (New York branch), as Guaranteed Lender, to finance the purchase of oil-field drilling equipment by a subsidiary of the Company.
“We attach a special significance to this transaction as we believe we are the first Russian production company to have obtained an unsecured medium-term corporate loan. This loan, which is not secured by oil supplies, will be provided thanks to our impeccable credit history, our financial transparency and the sustained development of our business”, said Alexander Matytsyn, Vice-President, Head of the Company’s Treasury and Corporate Finance Division.
A Memorandum of Understanding, which will further underline the degree of co-operation achieved between the Company and Ex-Im Bank and will provide the Company with an opportunity to benefit from Ex-Im Bank guarantees up to USD 100 million, is expected to be signed early October during President Alekperov’s visit to the US-Russia Energy Summit to be held in Houston, USA.
* * *
LUKOIL is the largest Russian oil company that is ranked first in the world in terms of oil reserves and ranked fourth in terms of oil production.
Ex-Im Bank is the official export credit agency of the United States and provides loans, guarantees and export credit insurance. Ex-Im Bank was founded in 1934.
Today in Moscow LUKOIL Board of Directors held a meeting to summarize the Company operating results for the first half of 2002.
In January - June 2002 oil production by LUKOIL subsidiaries and affiliates, including their share in PSA projects, amounted to 39.4 million tons, 1.5% more compared to the same period of 2001. 8 million tons were extracted due to use of modern enhanced recovery techniques. The Company’s share in the total Russian oil production amounted to 21%. Two fields, namely Tadin and Toboy, were commissioned in the reporting period.
Unit costs in oil production for LUKOIL’s Russian subsidiaries (excluding taxes and depreciation) decreased by 2.8% compared to the same period of 2001 and reached RUR651.5 per ton of oil produced (according to RAS methodology).
Gas production by the Company subsidiaries and affiliates reached 2.6 billion cubic meters, which is in line with last year’s production.
Addition of hydrocarbon reserves went ahead of planned schedule. Over 6 months of 2002 the Company added 38.6 million tons of oil equivalent, including 20.2 million tons of oil and gas condensate and 18.4 billion cubic meters of gas. Costs for addition of reserves decreased by 10% to USD 0.53 per barrel compared to the same period of 2001.
Oil refining at LUKOIL Russian and international refineries reached 19.6 million tons, or 6.7% more compared to the same period of 2001. Refining throughput at Russian refineries increased by 15.4%. The Company’s share in the total Russian refining throughput increased from 12.9% in the first half of 2001 to 18.9% in the same period of 2002. Refining depth was 72.0% while industry average was 68.9%.
LUKOIL international refineries processed 3.6 million tons of oil in the first half of 2002.
LUKOIL Russian refineries shipped 17.5 million tons of oil products, 0.2% more compared to the same period of 2001. International affiliates sold 5.6 million tons of oil products. 10.6 million tons of oil products were shipped to consumers in the Russian Federation.
Sales through the Company retail network reached 2.66 million tons of oil products, including 1.53 million tons internationally and 1.13 million tons domestically.
In January-June 2002 the Company exported 14.5 million tons of oil and 6.9 million tons of oil products, 97% and 250% respectively compared to the first 6 months of 2001.
The Board of Directors stressed that in the 1Q02 the Company had to operate in complicated competitive environment due to oversupply of oil and oil products on the domestic market that resulted from a seasonal decline in oil product consumption and export supplies. Therefore it was decided to reduce operating costs and investments by 20% from the second quarter throughout the fourth quarter compared to the targeted figure.
Implementation of measures in the scope of the Restructuring Program aimed at reduction of operating costs, rationalization of capex and increase of LUKOIL subsidiaries’ operating efficiency as well as improvement of market conditions on the domestic and international oil markets in the 2Q02 resulted in resumption of positive trends in the Company development in all areas of its activity.
“Positive results achieved by LUKOIL in the first half of 2002 prove the right choice of our strategy aimed at reduction of all operating and selling costs, increase of sales efficiency, faster payback of investments, streamlining of the Company structure,” said LUKOIL President Vagit Alekperov at the meeting of the Board of Directors.
The Board of Directors made a decision to accelerate implementation of the LUKOIL Restructuring Program as a key way to maximize Company profitability, investment attractiveness and value.
LUKOIL has become the first Russian company to obtain a full listing on the London Stock Exchange via admission to the Official List of the UK Listing Authority (“UKLA”). LUKOIL has listed the whole of its ordinary shares (the “Shares”) and its Level 1 American depositary receipts (the “ADRs”). The shares of the Company will freely trade on the London Stock Exchange in the form of ADRs. The price at which the ADRs began trading on 6th August was US$55.00 per ADR. Morgan Stanley & Co. International Limited (“Morgan Stanley”) acted as LUKOIL’s sponsor in relation to this listing.
LUKOIL has recently announced a major corporate restructuring designed to leverage the quality of its assets to increase efficiency and returns. Some of the measures undertaken in this restructuring process include strides toward greater transparency and higher standards of corporate governance; admission to the UKLA’s official list will provide the framework for the implementation of these standards.
LUKOIL has already had listed securities, in the form of high yield and premium exchangeable bonds due 2003 and global depositary receipts; however, these securities were listed as specialist securities. As the first Russian company to receive a full secondary listing, LUKOIL will be subject to more onerous requirements than those which currently apply to it as an issuer of securities. The new requirements include fuller disclosure of information on the group’s activities and regular reporting thereof by LUKOIL to its securityholders.
This announcement has been prepared by, and is the sole responsibility of, LUKOIL and has been authorised by the UKLA without approval of its contents. This announcement is not for publication or distribution or release in the United States of America (including its territories and possessions, any State of the United States and the District of Columbia). This announcement does not constitute or form part of an offer or solicitation of an offer to purchase or subscribe for securities in the United States or any other jurisdiction. The securities referred to herein have not been and will not be registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States, except pursuant to an applicable exemption from registration. No public offering of securities is being made in the United States.
OAO LUKOIL (“LUKOIL”) has made application to the UK Financial Services Authority, in its capacity as UK Listing Authority (“UKLA”), to admit its ordinary shares and its Level 1 American depositary receipts (the “Securities”) to the UKLA’s Official List. The listing is expected to become effective on Tuesday, 6th August 2002. The UKLA has approved LUKOIL’s listing particulars dated 31st July 2002 regarding the introduction of its Securities into the Official List and its supplemental listing particulars dated 1st August 2002 regarding the same (together, the “Listing Particulars”).
LUKOIL has published the Listing Particulars, copies of which are available for inspection at the Document Viewing Facility of the UKLA, 25 North Colonnade, Canary Wharf, London E14 5HS, United Kingdom. In addition, listing particulars may be collected free of charge during normal business hours on any weekday (excluding Saturdays, Sundays and public holidays) from 1st August 2002 up to and including 14th August 2002 from The Bank of New York, One Canada Square, London E14 5AL, United Kingdom.
This announcement is not for publication or distribution or release in the United States of America (including its territories and possessions, any State of the United States and the District of Columbia). This announcement does not constitute or form part of an offer or solicitation of an offer to purchase or subscribe for securities in the United States or any other jurisdiction. The securities referred to herein have not been and will not be registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States, except pursuant to an applicable exemption from registration. No public offering of securities is being made in the United States.
London – 1 August 2002 – OAO LUKOIL (“LUKOIL”), Russia’s largest oil company, announces that it has made application for a secondary listing on the London Stock Exchange. The listing is expected to become effective on Tuesday, 6 August 2002. LUKOIL will be the first Russian company to obtain a full listing in the United Kingdom via admission to the Official List of the UK Listing Authority (“UKLA”). Morgan Stanley & Co. International Limited (“Morgan Stanley”) is acting as sponsor in relation to this listing.
LUKOIL
LUKOIL is one of the world’s largest oil and gas companies as measured by reserves. The company was created in 1991 and privatised during Russia’s mass privatisation programme in the 1990s. LUKOIL is Russia’s largest oil company by both reserves and production, with an average daily crude production of 1.6 million barrels. The company also has extensive refining and marketing operations in Russia. Internationally, LUKOIL has built a network of refineries and service stations in the United States, Ukraine, Bulgaria, Romania and Cyprus, as well as crude oil production in Kazakhstan, Azerbaijan and Egypt. Throughout the 1990s LUKOIL has been a leader both in the development of the Russian oil industry as well as in the international capital markets. LUKOIL completed the first major international offering of convertible bonds for a Russian company in 1995 and has been at the forefront of international development among its Russian peers.
LUKOIL has recently announced a major corporate restructuring designed to leverage the quality of its assets to increase efficiency and returns. Some of the measures undertaken in this restructuring process include strides toward greater transparency and higher standards of corporate governance; admission to the UKLA’s official list will provide the framework for the implementation of these standards.
SECONDARY LISTING
LUKOIL is applying to the UK Financial Services Authority, in its capacity as UKLA, for LUKOIL’s ordinary shares to be admitted to the UKLA’s Official List. In addition, LUKOIL is applying to list its Level 1 American depositary receipts on the Official List.
Although LUKOIL currently has listed securities, in the form of high yield and premium exchangeable bonds due 2003 and global depositary receipts, these securities were listed as specialist securities. As the first Russian company to receive a full secondary listing, LUKOIL will be subject to more onerous requirements than those which currently apply to its specialist securities.
In connection with the application for listing, LUKOIL has published listing particulars, copies of which are available for inspection from a Regulatory Information Service and the Document Viewing Facility of the UKLA, 25 North Colonnade, Canary Wharf, London E14 5HS, United Kingdom. In addition, listing particulars may be collected free of charge during normal business hours on any weekday (excluding Saturdays, Sundays and public holidays) from 1 August 2002 up to and including 14 August 2002 from The Bank of New York, One Canada Square, London E14 5AL, United Kingdom.
Morgan Stanley is advising LUKOIL and no one else in relation to the secondary listing and will not be responsible for providing to any other person the protections afforded to clients of Morgan Stanley or for providing advice in relation to the secondary listing. Morgan Stanley can be contacted at 25 Cabot Square, Canary Wharf, London E14 4QA, United Kingdom.
This announcement has been prepared by, and is the sole responsibility of, LUKOIL and has been authorised by the UKLA without approval of its contents. This announcement is not for publication or distribution or release in the United States of America (including its territories and possessions, any State of the United States and the District of Columbia). This announcement does not constitute or form part of an offer or solicitation of an offer to purchase or subscribe for securities in the United States or any other jurisdiction. The securities referred to herein have not been and will not be registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States, except pursuant to an applicable exemption from registration. No public offering of securities is being made in the United States.
NOT FOR DISTRIBUTION IN THE UNITED STATES, CANADA AND JAPAN
Moscow - 24 July 2002 - OAO LUKOIL today reported its unaudited consolidated financial results under U.S. GAAP for the three months ended 31 March 2002. The following table sets forth summary unaudited consolidated income statement data for the three months ended 31 March 2002 compared with the same period in 2001.
| Revenues | Three months ended 31 March | |||
| 2001 | 2002 | |||
| ($ millions, except per share amounts) | ||||
| Sales | $ 3 335 | 99.1% | $ 2 847 | 99.3% |
| Equity share in income of affiliates | 31 | 0.9% | 20 | 0.7% |
| Total revenues | $ 3 366 | 100.0% | $ 2 867 | 100.0% |
| Costs and other deductions | ||||
| Operating expenses | $ (1 067) | (31.7%) | $ (1 053) | (36.7%) |
| Selling, general and administrative expenses | (459) | (13.6%) | (575) | (20.1%) |
| Depreciation, depletion and amortization | (208) | (6.2%) | (237) | (8.3%) |
| Taxes other than income taxes | (275) | (8.2%) | (377) | (13.1%) |
| Excise and export tariffs | (446) | (13.3%) | (212) | (7.4%) |
| Exploration expense | (19) | (0.6%) | (20) | (0.7%) |
| Loss on disposal and impairment of assets | (1) | 0.0% | (22) | (0.8%) |
| Income from operating activities | $ 891 | 26.5% | $ 371 | 12.9% |
| Interest expense | (62) | (1.8%) | (67) | (2.3%) |
| Interest and dividend income | 53 | 1.6% | 32 | 1.1% |
| Currency translation gain (loss) | (44) | (1.3%) | (34) | (1.2%) |
| Other non-operating income | 84 | 2.5% | 21 | 0.8% |
| Minority interest | (22) | (0.7%) | (6) | (0.2%) |
| Income before income taxes | $ 900 | 26.7% | $ 317 | 11.1% |
| Current income taxes | (240) | (7.1%) | (108) | (3.8%) |
| Deferred income taxes | 20 | 0.6% | 34 | 1.2% |
| Net income | $ 680 | 20.2% | $ 243 | 8.5% |
| Basic earnings per share of common stock | $ 0.95 | $ 0.30 | ||
| Diluted earnings per share of common stock | 0.94 | 0.30 |
In the three months ended 31 March 2002 compared to the same period in 2001:
Our revenues decreased due to declines in revenues from the sale of both crude oil and refined products. The decline in revenues from sales of crude oil resulted from lower domestic and international prices. The decline in revenues from sales of refined products resulted from lower domestic and international prices offset in part by a significant increase in volumes sold, both internationally and domestically.
Our operating expenses decreased slightly, primarily due to a reduction in our costs of purchasing crude oil and refined products as a result of the decline in market prices. This decrease was partially offset by an increase in volumes purchased. In addition, our refining costs declined as a result of the closure of the Petrotel refinery in Romania in the second quarter of 2001.
Our average operating costs per barrel extracted increased to $3.01 per barrel in the three months ended 31 March 2002 from $2.90 in the three months ended 31 March 2001. Extraction costs in the first quarter of 2002 decreased, however, compared to average 2001 extraction costs of $3.14 per barrel and peak extraction costs of $3.35 per barrel in the third quarter of 2001.
Our selling, general and administrative costs increased, primarily due to increases in transportation costs and port costs as a result of higher volumes transported and higher tariffs and increases in staff costs, partly offset by a reduction in costs relating to achieving certain tax efficiencies.
Our taxes other than income taxes increased, primarily due to changes in tax legislation that replaced royalty, mineral replacement and oil excise taxes with one unified tax.
Our excise and export tariffs declined significantly due to a 70% decrease in the average export tariff per tonne.
Our effective income tax rate decreased slightly in the first quarter of 2002. The impact of the anticipated increase in our effective tax rate resulting from new tax legislation will not be felt until we report our year-end results.
Since the beginning of 2002, we have begun implementing a restructuring plan to improve our operations and maximize shareholder value. The plan contemplates that we will undertake the following measures in the near term: (i) increase exports of crude oil and refined products; (ii) accelerate the development of our most productive fields; (iii) shut-in low-producing wells; (iv) apply enhanced oil recovery technologies; (v) seek competitive bids for oilfield services; (vi) divest non-core businesses and reduce headcount; (vii) strengthen performance-related pay; and (viii) streamline our administration. We believe that these steps should help us to meet our strategic goals of sustainable growth and value creation.
OAO LUKOIL is Russia's largest oil and gas company in terms of reserves and production. Our full financial results for the three months ended 31 March 2002 as well as other information about the company can be found on our website at www.lukoil.com.
Some of the information in this press release may contain projections or other forward-looking statements regarding future events or our future financial performance. We caution you that these statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that we cannot predict with certainty. Accordingly, our actual outcomes and results may differ materially from what we have expressed or forecasted in the forward-looking statements. We do not intend to update these statements to make them conform to actual results. Stabilisation/FSA.
