Hereby, we inform that due to a numerous requests received from a substantial number of shareholders the transfer of funds to the Bank of New York was delayed partially by LUKOIL per request of aforementioned ADR owners to let them to use Russian-US Double Taxation Avoidance Treaty in their favour.
As soon as these shareholders completed all the necessary procedures with Russian Tax Office, which appeared to be time-consuming, the relevant account with the Bank of New York was fully credited with a final disbursement to allow the nominee – BoNY – to pay the dividends for 2000.
According to Bank of New York, dividend is paid for ADR holders in the following amounts:
For Ordinary Shares:
The Gross Dividend Rate ($ per ADR): 1.0432
Withholding Tax: 0.1565 @ 15% per ADR
Dividend Fee: 0.02
Net Dividend Rate: 0.8667
For Preferred Shares:
The Gross Dividend Rate ($ per ADR): 3.8574
Withholding Tax: 0.5786 @ 15% per ADR
Dividend Fee: 0.02
Net Dividend Rate: 3.2588
The payable date for LUKOIL ADR holders: February 15, 2002.
In accordance with our announcement BoNY transferred the money to the Depositary Trust Company (DTC), which is the central clearing house in the US, on February 15, 2002. DTC is distributing the dividend to all DR holders of LUKOIL as per the record date May 14, 2001.
The company and its agents are working on establishing procedures that would prevent delays in dividend payment. With that in mind, deadlines will be established for the shareholders to submit all relevant documents for dividend payment in the future.
The new pilot project of oil products pipeline (OPP) «Perm–Andreevka» was launched today in Perm. The pipeline connected Perm refinery OOO «LUKOIL-Permnefteorgsintez» and the AK «Transnefteproduct» pipeline system. The representative of the President of Russian Federation in Povolzhsky federal district, Sergey Kirienko took part in the launching ceremony.
The length of a first non-government owned oil products pipeline connected to the monopolistic pipeline system is 335.3 km, its volume productivity is 2,4 mln tons of oil products per year. The cost of the pilot project is more than 3 billion rubles (USD 97.2 mln), its payback period is 7 years.
The new complex includes major piping station «Perm», linear part, underwater passages, oil products registration units, motor vehicles filling units. The emergency-repair posts that carry facilities of oil product leaks localization are also installed along the pipeline. The pipeline is equipped with remote control units supplied by «Honeywell» (Germany). The remote control units allow one to set up the connection with a central dispatching unit of a major pumping station at any spot of the OPP within the area of 500–600 meters; the transform signals to open and close valves and establish control over the security posts. Pipeline monitoring and service is to be carried out by helicopters and employees monitoring the status of the system. All of the above ensures highest levels of environmental safety.
The newly launched OPP «Perm-Andreevka» will provide OOO «LUKOIL–Permnefteorgsintez» with a transportation facility to supply its products directly to southern parts of Perm region, Udmurtia, Bashkiria, surrounding regions and further on to the west - to export markets. It will also add new employment opportunities for the countryside. The new OPP will significantly improve the ecological situation in the regions surrounding the oil refinery - the product feed will be carried out in a closed manner which fully excludes the possibility of harmful vapours and leaks. LUKOIL will also be able to control its products pricing at customer-favorable levels due to the decrease in transportation costs.
In the cause of the OPP exploitation some 44 thousand tank trucks per year will not be used by the company and so the savings on railroad tariffs could amount to 60 mln. (USD 1.9 mln) p.a.
«The launch of a new oil products pipeline is a next step in a Company’s marketing network development aimed to supply quality products to the Russian consumers» – LUKOIL’s President Vagit Alekperov noted.
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38 mln. tons of oil were refined by the Company’s own refineries in 2001, including 29 mln. by the Russian refineries (10.7 mln tons refined by OOO «LUKOIL-Permnefteorgsintez») and 9 mln tons by foreign refineries. The sales volumes for the internal market amounted to 25.6 mln tons while export sales were at the level of 10.7 mln tons.
OAO LUKOIL has prepared interim consolidated financial statements in accordance with US GAAP for the 9 months ended September 30, 2001.
The 3rd quarter of 2001 was marked by a certain deterioration of the market conditions on global oil and oil product markets. As compared to the corresponding period of 2000, Brent crude price for the first nine months 2001 decreased by 6.5%. Average product prices decreased by 10%. As compared to the 2nd quarter 2001, crude prices declined by 5%, while product prices decreased by 10%. Refining margins narrowed considerably. Inflationary pressure in Russian economy persisted. An excess supply of oil and oil products to the domestic market resulted in increased competition and lower profitability of domestic deliveries. Export duties and royalty taxes increased considerably.
Nevertheless, the Company managed to maintain good financial and operating results. Net income for the first 9 months 2001 amounted to $1,937 mln ($2.47 per share of common stock). Total revenues amounted to $10,641 mln. Group’s assets as of September 30, 2001 increased by 15% (as compared to December 31, 2000) and amounted to $19,699 mln, stockholders’ equity reached $12,194 mln (an increase of 16%). Earnings before interest, income tax, depreciation and amortization (EBITDA) amounted to $3,411 mln.
Total capital expenditures and investments of the Group’s companies in the reporting period increased almost two-fold and amounted to $2,397 mln. To a considerable extent, these capital expenditures were made to the new, promising regions of the Company’s operations (Timan-Pechora, Northern Caspian and others), which should ensure stable growth of the Company in the future. Capital expenditures and investments were, mainly, financed out of own funds. However, the considerable increase in the investing activities of the Group called for debt financing, which resulted in the increase in the Company’s net debt by $427 mln.
Improvement in LUKOIL’s operating performance continued in the reporting period. Organic growth in oil and gas production of the Group’s subsidiaries and affiliates (excluding effect of additions and divestments) amounted to 1.5% for oil (58.3 mln tons) and 5.5% for gas (3.8 bn cu m). Domestic and foreign refineries of the Company processed approximately 24 mln tons of crude.
LUKOIL Board of Directors held on January 12, 2002 viewed the level of the Company’s net income in 2001 as lowest-acceptable and defined measures to cut operating costs and non-operating expense. The fulfillment of these measures will increase the profitability of the Company’s operations.
SELECTED ITEMS FROM THE CONSOLIDATED FINANCIAL STATEMENTS
unaudited In million US dollars
Selected items from the consolidated balance sheet | As of Sept 30, 2001 | As of Dec 31, 2000 |
Total current assets | 6,975 | 6,094 |
Total assets | 19,699 | 17,109 |
Total current liabilities | 4,711 | 3,692 |
Total liabilities | 7,505 | 6,590 |
Total stockholders’ equity | 12,194 | 10,519 |
Total liabilities and stockholders’ equity | 19,699 | 17,109 |
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Selected items from the consolidated | For the nine months ended September 30, 2001 | For the nine months ended September 30, 2000 |
Total revenues | 10,641 | 9,767 |
Income from operating activity | 2,685 | 3,036 |
Income before income taxes | 2,576 | 2,891 |
Net income | 1,937 | 2,458 |
Basic earnings per share of common stock (US dollars) | 2.47 | 3.56 |
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Selected items from the consolidated |
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Net cash provided by operating activities | 1,770 | 2,135 |
Net cash used in investing activities | (2,210) | (1,150) |
Net cash provided by financing activities | 719 | (66) |
Full interim consolidated financial statements of OAO LUKOIL as of and for the nine months ended September 30, 2001 prepared in accordance with US GAAP are published on the Company’s web-site.
OAO LUKOIL Board of Directors has approved by correspondence the list of candidates for the Board of Directors and Audit Committee for voting at AGM
The following persons are included in the list of candidates for the Board of Directors:
| 1. | Alekperov Vagit Yusufovich | President, OAO LUKOIL |
| 2. | Berezhnoi Mikhail Pavlovich | General Director, “LUKOIL-Garant” Pension Fund |
| 3. | Greifer Valery Isaakovich | General Director, OAO RITEK |
| 4. | Kauk Viktor Vasilievich | Deputy director, Central Directorate for missile and other fuels, Russian Ministry of Defense |
| 5. | Kirillov Vladimir Ivanovich | Head of the Department, Russian Ministry of Energy |
| 6. | Kutafin Oleg Emelianovich | Principal of Moscow State Law Academy |
| 7. | Maganov Ravil Ulfatovich | First Vice-President, OAO LUKOIL |
| 8. | Malin Vladimir Vladimirovich | Chairman, Russian Federal Property Fund |
| 9. | Maliukov Sergey Nikolaevich | General Director, OAO “Oil fund for industrial reconstruction and development” |
| 10. | Mark Mobius | Managing Director, Templeton Investment Management |
| 11. | Medvedev Yuri Mitrofanovich | First Deputy-Minister of property relations of Russia |
| 12. | Richard H Matzke | Vice-Chairman of the Board of Directors, Chevron Texaco Corp. |
| 13. | Sadovnik Piotr Vasilievich | Deputy-Minister of natural resources of Russia |
| 14. | Tsvetkov Nikolai Aleksandrovich | President, NIKOIL Investment Banking Group |
| 15. | Sherkunov Igor Vladimirovich | General Director, OOO LUKOIL-Reserve-Invest |
| The list of candidates for the Audit committee is as follows: | ||
| 1. | Glebov Viktor Petrovich | Chief accountant, OOO LUKOIL-Permneft |
| 2. | Guliukina Svetlana Alekseevna | Deputy Director of Department, Russian Ministry of Energy |
| 3. | Nikitenko Vladimir Nikolaevich | President, “Petrocommerce” Commercial Bank |
| 4. | Skliarova Tatiana Sergeevna | Chief accountant, OOO LUKOIL-Kaliningradmorneft |
| 5. | Tumanova Ekaterina Vladimirovna | Deputy Director of Department, Russian Ministry of Energy |
The President of Russian Olympic Committee, Leonid Tiagachev and LUKOIL’s President Vagit Alekperov signed an agreement of cooperation in Moscow today.
The parties agreed, in particular, to implement joint investment projects, and to assist in the Russian Olympic team and its Reserve team training for Olympics.
In accordance with the agreement which expires on December 31st, 2004, the Olympic Committee of Russia grants the Company a right to be called an “Official partner of the Russian Olympic Committee” and also, on the basis of license agreement, a right to place a Committee’ logo on the Company’s products. The Committee will also assist in attracting Russia’s leading sportsmen to a participation in LUKOIL’s advertising projects.
“LUKOIL is actively sponsoring Russian sport for a number of years already, and I am sure in the new capacity of an “Official partner of Russian Olympic Committee” the Company will contribute greatly to strengthening the positions and enhancing the prestige of Russian sports internationally” — LUKOIL’s President Vagit Alekperov said.
* * *
In 1998 the Company’s sport club “LUKOIL” was founded. In its efforts in three major fields — physical training and health improvement for the Company’s employees and members of their families; professional sports organisations support; assistance to the development of the children’s sports in Russia.
The Company sponsors the auto racing team “LUKOIL Racing Team”, the speedway on a cinder path team “LUKOIL-Bashkortostan”, water polo team “LUKOIL-Spartak” (Volgograd), hand ball team “LUKOIL-Dynamo” (Astrakhan), and Russia’s national women ski-racing team.
In 2000 LUKOIL became a general sponsor of “Spartak-Moscow” football club.
On April 19th, 2001 LUKOIL signed a cooperation agreement with a regional nonprofit organisation “Children’s football league” to aid to the renaissance of youth football in Russia.
The meeting between the Bulgarian Deputy Prime Minister, economics minister Nikolai Vasiliev and LUKOIL’s President Vagit Alekperov was held today in Moscow.
The parties discussed current Company’s activities in Bulgaria and future cooperation projects.
Bulgarian Deputy Prime Minister positively assessed Company’s activity in Bulgaria and underlined that LUKOIL-Neftochim Bourgas refinery makes visible contribution to the country’s economy providing significant tax payments and working places for thousands of employees.
The possible Company’s involvement in Bulgarian power generation and gas business was discussed on the meeting as well as Company’s role in the Bourgas-Alexandropoulos pipeline construction project.
The implementation of this project would require closer cooperation between Bulgaria, Russia, Greece and fuel suppliers and consumers, - Vagit Alekperov stressed.
The parties agreed to keep on further cooperation in order to develop the markets of the Balkan region.
Press service reports that a number of LUKOIL’s shareholders proposed a nomination of Richard Matzke and Mark Mobius to a Company’s Board of Directors.
Richard Matzke is vice chairman of the board of directors for ChevronTexaco Corp. He holds positions of a vice president of Chevron Corporation and president of Chevron Overseas Petroleum Inc., responsible for supervising Chevron Corporation's oil exploration and production activities outside North America.
Richard Matzke is well known in the world oil community. He is a member of the Board of Directors of the Business Council for International Understanding, Advisory Board of the Center for Strategic and International Studies (CSIS), and Chairman of the Board of Directors of the United States-Kazakhstan Council. He is also a member of the American Institute of Professional Geologists, American Association of Petroleum Geologists, World Trade Club, and other international organizations.
Dr. Mark Mobius manages the operations of the Templeton funds in Hong Kong, Singapore, Japan, Vietnam, Brazil, India, South Africa, Argentina, Poland and Russia. The group of funds managed by Mark Mobius is one of the largest players on the emerging markets with a total capitalization of $6.5 billion. The group holds significant investments in Russia exceeding quarter billion dollars.
In 1992, Dr. Mobius was named "Investment Trust Manager of the Year" by The Sunday Telegraph weekly in the United Kingdom. Morning Star in the U.S. awarded Mark Mobius the "Closed-End Fund Manager of the Year" for 1993. CNBC named him "1994 First in Business Money Manager of the Year". For two years in a row (1997-1998) Dr. Mobius was named the number one global emerging market fund manager in the Reuters Survey. Dr. Mobius is the author of the books The Investors's Guide to Emerging Markets, Passport to Profits and Mobius on Emerging Markets.
LUKOIL’s Board of Directors believes that if the Company’s shareholders support the nominees it would undoubtedly help to further improve corporate governance and increase investment appeal of the Company.
The Board of Directors already has an independent member: Ph.D, professor, Oleg Kutafin, a university principal of the Moscow State Law Academy, was appointed by the AGM in 2001.
The Board of Directors believes that the presence of new well known independent directors along with the development of corporate code and regular presentation of US GAAP financials would lead to dramatic improvement in corporate governance.
Some mass media reports recently informed the OAO RITEK share buyout by LUKOIL will result in OAO RITEK liquidation.
Taking into the account the extremely negative consequences of such publications, the management of OAO LUKOIL and OAO RITEK officially inform about the absence of plans to liquidate RITEK.
LUKOIL and RITEK have a long history of strategic partnership in a number of projects. The role of RITEK as a LUKOIL’s partner is to develop LUKOIL oil fields with residual and hard-recoverable oil reserves using its own innovation potential.
The development of new oil fields by RITEK in Zapoliarie (North polar territories) provides the parent company not only with the valuable experience, but also with the new technologies for development of the oil fields in the prospective region.
The production flow rate enhancement chemicals produced by RITEK are widely used by LUKOIL in its oil fields. RITEK uses its machinery facilities to develop and produce new effective oil-field equipment that is of a great interest for the parent company.
The two companies develop cooperation and integration deeply. LUKOIL is actively assisting RITEK in funds borrowing and investments attraction to finance RITEK projects.
LUKOIL's Board of Directors meeting was held today in Moscow. The Board discussed the results of Company’s activity in 2001.
In his report, LUKOIL’s President Vagit Alekperov stressed that in 2001 the Company kept its operations stable and increased its investment activity.
In 2001 the Company has significantly broadened its reserves base with an increase of 128.9 mln tons in oil and gas reserves (942 mln barrels). The major increase in reserves base was achieved in the new area of Company’s operations — the Caspian sea and Timan-Pechora province, which proves high potential of these new fields. All the increase in gas reserves was made thanks to the discoveries in the Caspian sea. In particular, the drilling of three exploratory wells at “Severni” field was completed, and drilling at “Rakushechnaya” area showed commercial reserves of another large block of “Severni” licensed territory. Seismic exploration of previously discovered oil fields Hvalinskoe and U. Korchagin is underway.
The total number of hydrocarbon fields discovered is 10 in 2001. In Saratov region, in particular, 3 high productive oil deposits were discovered for the first time in 10 years period.
The 2001 total volume of oil production by the LUKOIL group of companies has reached 78.3 mln tons (comparing with 77.7 mln tons in 2000). 2.2 mln tons were produced outside of Russia. More than 14 mln tons of oil was produced using enhanced recovery improving methods. The Company’s share in Russia’s oil production is 22%. The volume of drilling if compared with 2000 increased by 26%. 850 new development wells are built. The share of company’s non-producing wells in total number of 28 thousand is 15%, which is 10% less than in 2000.
The Company produced 5.2 billion cubic meters of gas which is almost 4% higher than in 2000.
The preliminary data shows that in 2001 the Company has exported 33 mln tons of oil (with 28.4 mln tons in 2000).
The Company’s own refineries processed 38 mln tons of oil (32.2 in 2000), with 29 mln tons processed at Russian refineries (including 7 mln tons refined by OAO NORSI) and 9 mln tons —abroad. Total volume of petroleum products exported is 10.7 mln tons, domestic sales is on the level of 25.6 mln.
Sales of petroleum products through the petrol stations network (including franchising) exceeded 5 mln tons. The volume of packed products (lubricating oil) sold increased by 20% and amounted to approximately 90,000 tons due to intensive development of the dealers chain which at present includes more than 200 dealers and over 1700 outlets in nearly all of Russia’s regions. The quantity of petrol stations accepting fuel cards as a payment instrument almost doubled. In 2001 over 170,000 tons of petroleum products were paid with more than 73,000 fuel cards distributed.
By estimate, more than 1.5 mln tons of petrochemical products were produced at the Company’s domestic and foreign plants in 2001 (1.1 mln tons in 2000). The volume of gas processed by the Company’s enterprises exceeded 1 bln cubic metres.
In 2001 Company’s capex reached 92.6 bln roubles which is 44% higher than the 2000 figure. This growth made it possible to intensify the development of new projects almost in all sectors of Company’s business. Among them the main are programmes of Timan-Pechora and Caspian provinces development, acquisition of OAO Norsi Oil, creating the infrastructure for oil and natural gas exploration and production, and expansion of exports geography for fuels and petrochemical products.
In 2001 a new reinforced ice class tanker was launched and a new oil terminal was put into operation in Kaliningrad region. The terminal’s project capacity exceeds 1.5 mln tons of oil and petroleum products per year; tank stock capacity is 80,000 cubic metres.
The Board of Directors affirmed changes to the OAO LUKOIL Charter due to placement of 77,211,864 non-documentary nominal common shares which were issued to replace by conversion the nominal preferred shares. Consequently, now OAO LUKOIL charter capital divides into 850,563,255 nominal common shares with face value of 2.5 kopecks each which are all aggregated to 100% of charter capital.
The Board of Directors decided to issue the “Principal goals of OAO LUKOIL financial and investment policy” report annually. This report is to be approved by the Board of Directors and will be published for investors and shareholders. It is also decided to organize meetings of the members of the Management Committee with the groups of investors and shareholders on the regular basis. A project of the Corporate Governance Code will be prepared in the first half of 2002.
The principal objective for 2002 and the next few years as determinded by the Board of Directors is an increase of effectiveness of Company’s business and, first of all, shorter payout period and increase of internal rate of return, more carefull preparation of business plans and new investment projects, increase of profitability and returns on a per unit basis. It was also planned to cut all kinds of costs and to complete the organisational restructuring in order to increase the quality of financial and investment decisions.
The ceremony of descending to waters the newly built reinforced ice class tanker “Saratov” was held today at Saint Petersburg’ ship-building factory “The Admiralty Shipyards”. The final stage is running and mooring tests, that are to be carried out within five months.
“The Admiralty Shipyards” has a record of successful cooperation with LUKOIL: three tankers – “Astrakhan”, “Magas” and “Kaliningrad” – are already working on lines of Northern sea way. The total number of LUKOIL’s tankers built at the shipyards will amount to five.
Tankers are constructed to work under complex conditions of Arctic region. They can transport up to four types of various cargoes simultaneously, including crude oil and a gas condensate. They are equipped with the automated systems of navigation and other state of the art ship systems. The vessel’s double hull can overcome continuous ice thickness of 0.5 meters at a speed of 1.5–2 hitches. Tanker’s length is 155, width – 24, a draft – 9 meters. Speed – 15.4 hitches. Deadweight – 20 thousand tons, crew – 24 persons. Range of navigation – 8 thousand miles, area of navigation is not limited.
LUKOIL’s fleet consists of 5 more tankers built in Germany at MTW shipyard in Wiesmar.
The primary purpose of these vessels is transportation of refined oil products to the Far North regions and shipping of crude from Timan-Pechora province.
