OJSC Oil Company Rosneft Consolidated Financial Statements

OJSC Oil Company Rosneft
Notes to Consolidated Financial Statements (continued)
Supplementary Oil and Gas Disclosure (unaudited) (continued)
Results of Operations for Oil & Gas Producing Activities
2008 2007 2006
Revenues:
External sales 18,712 15,896 11,246
Transfers to other operations 16,308 11,006 5,216
Total revenues 35,020 26,902 16,462
Production costs (excluding production taxes) 1,976 2,638 1,632
Selling, general and administrative expenses 771 729 480
Exploration expenses 248 162 193
Accretion expense 120 78 34
Depreciation, depletion and amortization 3,060 2,828 1,420
Taxes other than income tax 13,261 9,772 6,636
Income tax 1,779 2,173 1,384
Results of operation for producing
activities 13,805 8,522 4,683
Revenues are based on the market prices determined at the point of delivery from production units.
The Company’s share in the operating results generated from oil and gas production of equity
investees in 2008, 2007 and 2006 was US$ 437 million, US$ 256 million and US$ 59 million,
respectively.
Reserve Quantity Information
The recording and reporting of proved reserves is governed by criteria established by regulations of
the United States Securities and Exchange Commission. The Company’s reserves as of December 31,
2008, 2007 and 2006 were appraised by an outside unrelated third-party petroleum engineering
consulting firm. Proved reserves are those estimated quantities of crude oil and gas which, by analysis
of geological and engineering data, demonstrate with reasonable certainty to be recoverable in the
future from existing reservoirs under the existing economic and operating conditions. In certain cases,
recovery of such reserves may require considerable investments in wells and related equipment.
Proved reserves also include additional oil and gas reserves that will be extracted after the expiry date
of licence agreements or may be discovered as a result of secondary and tertiary extraction which have
been successfully tested and checked for commercial benefit. Proved developed reserves are the
quantities of crude oil and gas expected to be recovered from existing wells using existing equipment
and operating methods.
Proved undeveloped oil and gas reserves are reserves that are expected to be recovered from new wells
on undrilled acreage, or from existing wells where a relatively major expenditure is required for
recompletion. Reserves on undrilled acreage are limited to those drilling units offsetting productive
units that are reasonably certain of production when drilled. Proved reserves for other undrilled units
can be claimed only where it can be demonstrated with certainty that there is continuity of production
from the existing productive formation. Under no circumstances are estimates of proved undeveloped
reserves attributable to any acreage for which an application of fluid injection or other improved
recovery technique is contemplated, unless those techniques have been proved effective by actual tests
in the area and in the same reservoir. Due to inherent industry uncertainties and the limited nature of
deposit data, estimates of reserves are subject to change as additional information becomes available.
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