OJSC Oil Company Rosneft Consolidated Financial Statements

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OJSC Oil Company Rosneft Notes to Consolidated Financial Statements (continued) 11. Property, Plant and Equipment, Net (continued) Sakhalin-5 (continued) The Shareholders and Operating Agreement was signed between the participants and the operator in June 2004. In accordance with the terms of the agreement, during the exploration stage project funding will be fully provided by BP p.l.c., while during the development stage BP p.l.c. will carry a portion of payments due from the Company and will provide credit support to obtain project funding. The Company recognizes this investment using the equity method of accounting. Other Projects The Company is a party to project associated with the exploration and development of the Sakhalin shelf (Vostochno-Shmidtovsky block). Under this arrangement, the other participant (BP p.l.c.) carries the costs associated with the exploration of this offshore block. Exploration and development of this project is still at an early stage. The Company's costs (currently insignificant) associated with this project were capitalized. In July 2005, the Company entered into a PSA agreement with the Kazakhstan Government for the joint development of the Kurmangazy oil and gas prospect. The participants of the project are a subsidiary of the Company, RN Kazakhstan LLC, and a subsidiary of Kazakhstan State JSC "NK KazMunaiGaz – KazMunaiTeniz" ("KazMunaiTeniz"), with equal shares of 50%. The agreement provided for a signing bonus in the amount of US$ 50 million. The Company’s share of US$ 25 million is recognized within mineral rights. In accordance with the terms of the agreement, upon a commercial discovery the Russian Federation has an option to buy a 25% share in the project at a future market price, by reducing the share of RN-Kazakhstan LLC in the project. If the Russian Federation does not exercise its option, this share shall be sold to third parties at a market price or redistributed between the participants in equal parts. If the share is sold, the proceeds from the sale shall be used to cover the expenses already incurred, including those borne by RN Kazakhstan LLC which are attributable to the disposed share. Any excess of the proceeds from the sale of the share over the expenses shall be equally distributed between RN Kazakhstan LLC and KazMunaiTeniz. Cash Flows Details Capital expenditures in the consolidated statements of cash flows comprise the following: 2008 2007 2006 Acquisition and construction of property, plant and equipment 8,154 5,931 3,293 Construction materials 578 309 169 Total capital expenditures 8,732 6,240 3,462 32
OJSC Oil Company Rosneft Notes to Consolidated Financial Statements (continued) 12. Leased Property, Plant and Equipment, Net The following is the analysis of the property, plant and equipment under capital leases as of December 31: 2008 2007 Oil and gas properties 32 42 Less: accumulated depletion (4) (6) Oil and gas properties, net 28 36 Other property, plant and equipment Buildings and constructions 1 5 Plant and machinery 31 39 Vehicles 352 174 Total 384 218 Less: accumulated depreciation (63) (24) Property, plant and equipment, net 321 194 Total net book value of leased property 349 230 Below is the analysis of the repayment of capital lease obligations as of December 31: 2008 2009 51 2010 46 2011 36 2012 7 2013 and after 4 Imputed interest (13) Present value of capital lease payments 131 Operating Lease The total amount of operating lease expenses was as follows: 2008 2007 2006 Total lease expenses 210 156 116 Total sublease revenues 5 4 8 13. Goodwill and Intangible Assets Goodwill represents the excess of the purchase price of additional shares and interests in various entities, acquired during 2007, in the refining, marketing and distribution (R&M) segment and the exploration and production (E&P) segment in the amounts of US$ 3,632 million and US$ 714 million, respectively, over the fair value of the corresponding share in net assets (see Notes 3 and 4) and US$ 161 million related to the refining, marketing and distribution segment acquisitions before 2007. In accordance with SFAS 142, the Company performed its annual impairment test of goodwill as of October 1, 2008. Consistent with prior years, the review for impairment was carried out during the beginning of the fourth quarter of 2008 using data that was appropriate at that time. As a result of this annual test, no impairment of goodwill was identified. Following a significant adverse economic downturn in the fourth quarter of 2008, the Company estimated that the fair value of its reporting units could potentially be reduced below their carrying amounts and performed an additional impairment test of goodwill as of December 31, 2008. This testing was carried out using macroeconomic and other assumptions that were appropriate as of December 31, 2008. As a result of this additional test, no impairment of goodwill was identified. 33
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OJSC Oil Company Rosneft Consolidated Financial Statements

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