NOVATEK Announces Second Quarter and First Half 2010 IFRS Results

OREANDA-NEWS. August 18, 2010. NOVATEK released its consolidated interim condensed financial information for the three and six months ending 30 June 2010 prepared in accordance with International Financial Reporting Standards (“IFRS”).

IFRS Financial and Operational Highlights

(in millions of Russian roubles)

In the second quarter 2010, total revenues grew by 11.1% to RR 25,706 million, as compared to the corresponding period in 2009, primarily due to higher natural gas and liquid hydrocarbons’ prices as well as increased sales volumes of natural gas and liquefied petroleum gas (LPG).

Profit from operations increased by RR 2,066 million, or by 26.0%, in the second quarter 2010 as compared to the corresponding reporting period. The increase in operating profits was mainly attributable to growth in revenues and our continued focus on controlling operating expenses. The Company’s profit for the period was adversely affected by the depreciation of the Russian rouble relative to the US dollar, and, as a result, profit attributable to NOVATEK shareholders in the second quarter 2010 decreased by 0.5% to RR 7,139 million, or RR 2.35 per share, due to a non-cash foreign exchange loss during the 2010 period compared to a non-cash foreign exchange gain in the 2009 period.

In the first half 2010, oil and gas sales grew by 35.1% to RR 52,288 million, as compared to the corresponding period in 2009, as a result of increased natural gas and LPG sales volumes and the overall increase in natural gas and liquid hydrocarbons’ prices.

Profit from operations increased by RR 9,780 million, or by 71.9%, in the first half 2010 as compared to the corresponding reporting period primarily due to strong revenue growth in our core oil and gas operations and the net gain on the disposal of our interest in ZAO Terneftegas in the first quarter 2010. As a result, profit attributable to NOVATEK shareholders in the first half 2010 increased by 96.7% to RR 18,321 million, or RR 6.03 per share.

“We are very pleased with the strong financial and operational results achieved by the Company in the second quarter and first half 2010, which was largely attributable to increasing natural gas and gas condensate production volumes, strengthening of fundamental commodity prices and our continued focus on cost control and field optimization” according to Leonid V. Mikhelson, CEO and Chairman of the Management Board.

Selected Operating Highlights

In the second quarter and first half 2010, our natural gas sales volumes increased by 2.7% and 10.7%, respectively, compared to the corresponding periods in 2009. The increases were primarily due to the optimization of our customer base, the cold winter weather in the first three months of 2010, and continued economic recovery on the Russian domestic market, which was partially offset by an increase of 357 million cubic meters in our natural gas inventory balance as of 30 June 2010.

During the second quarter 2010, our total liquids’ sales volumes decreased by 8.2% whereas our total liquids’ volumes in the first half of 2010 remained relatively unchanged compared to the corresponding periods in 2009. The decrease in liquids’ sales volumes in the second quarter 2010 was primarily due to an increase in stable gas condensate inventories which was offset by higher sales volumes of LPG as a result of increased throughput at the Purovsky Processing Plant. At 30 June 2010, we recorded 332 thousand tons of stable gas condensate in transit or storage and recognized as inventory until such time as it is delivered to the port of destination as compared to 172 thousand tons as of 30 June 2009.

Selected Balance Sheet Items

(in millions of Russian roubles)