Rosneft's Q1 Income Falls

Rosneft announced that its total revenues increased from U.S.$7,327 million in the first quarter of 2006 to U.S.$8,220 million in the first quarter of 2007, primarily as a result of increased sales volumes.

Rosneft's net income was U.S.$ 802 million in the first quarter of 2006 and U.S.$ 358 million in the first quarter of 2007. The decline was mainly due to the impact of higher export customs duty, accrual of interest related to OJSC Yuganskneftegaz' ("Yuganskneftegaz") tax liabilities for the years 1999-2004, which are in the process of being restructured, higher depreciation, depletion and amortisation and the appreciation of the rouble.

During the first quarter of 2007, Rosneft produced 1,643.60 thousand barrels of crude oil per day (20.22 million tonnes per quarter). In the first quarter of 2007, Rosneft sold approximately 68% of the crude oil it produced or purchased from third parties to customers outside Russia, comprising both sales to CIS countries and exports to international markets other than the CIS. Most of the remainder was refined in Russia at Rosneft's two main refineries, Tuapse and Komsomolsk, and at the Angarsk, Achinsk, Kuibyshev, Novokuibyshev and Syzran refineries formerly controlled by Yukos and then sold in the form of petroleum products in international and domestic markets.

Rosneft has an integrated production, transportation, refining and marketing strategy and seeks to maximise netbacks by optimising its product mix, sales destinations and available transport routes. In May 2007, Rosneft purchased the Angarsk and Achinsk refineries in Eastern Siberia and the Kuibyshev, Novokuibyshev and Syzran refineries in the Samara region as a result of auctions for the sale of certain refining assets formerly controlled by Yukos, which were won by Rosneft (by the Company's subsidiary - Neft-Aktiv LLC).

Rosneft is a vertically integrated oil and gas company with upstream and downstream operations located principally in Russia. It is one of the world's largest publicly traded oil companies in terms of proved crude oil reserves and among the top ten in terms of crude oil production. According to DeGolyer and MacNaughton ("D&M"), Rosneft's independent reservoir engineers, as of 31 December 2006, on the basis of the standards set forth by the Society of Petroleum Engineers ("SPE"), Rosneft had proved reserves of 20.09 billion boe, including proved crude oil reserves of approximately 15.96 billion barrels (2.20 billion tonnes) and proved gas reserves of approximately 701.07 bcm. Also according to D&M, as of 31 December 2006, Rosneft had SPE proved and probable crude oil reserves of approximately 24.72 billion barrels (3.40 billion tonnes) and SPE proved and probable gas reserves of approximately 1,133.86 bcm.

Rosneft's reserves are located in Western Siberia, Timano-Pechora, the Russian Far East, Southern and Central Russia and Eastern Siberia. Rosneft also has significant prospective crude oil and gas resources in Western Siberia, the Russian Far East, which includes Sakhalin Island and the Kamchatka Peninsula, Southern Russia and Eastern Siberia. Rosneft recently purchased additional reserves in Western and Eastern Siberia and in the Samara region as a result of auctions for the sale of certain exploration and production assets of OJSC Yukos ("Yukos") won by Rosneft's subsidiary (Neft-Aktiv LLC) in May 2007.

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