OJSC Rosneft (Rosneft or «the Company») today, May 15, reported its audited consolidated financial results in accordance with US GAAP for the full year of 2006.

Financial review

In 2006, Rosneft's total revenues increased by 38.7% to USD 33,099 million from USD 23,863 million in 2005. EBITDA grew by 3.5% to USD 7,276 million from USD 7,029 million. Net income over the twelve months of 2006 adjusted for the sale of CJSC Sevmorneftegaz and minority interest in the income of subsidiaries increased by 0.3% to USD 3,625 million from USD 3,615 million over the same period in 2005. The slowdown in net income growth in 2006 was largely due to an increased tax burden as taxes other than income tax increased by 31.2% and export duties increased by 77.8%.

Net cash provided by operating activities in 2006 increased by 32% to USD 3,878 million from USD 2,941 million in 2005 excluding the effect of an advance tax payment on Yukos receivables awarded in 2006. Rosneft expects the claims to be settled in the second half of 2007 following the completion of Yukos bankruptcy process.

Capital expenditures increased by 78% to USD 3,462 million from USD 1,944 million. This increase can primarily be attributed to the expansion of operations at Yuganskneftegaz and the commencement of full-scale development at the Vankor field.

In 2006, Rosneft continued to demonstrate industry leading organic crude oil production growth, substantially outpacing its Russian peers. Crude oil production of consolidated subsidiaries, including equity affiliates, increased by 7.8% to 582.7 million barrels from 540.4 million barrels in 2005. Primary growth drivers were Yuganksneftegaz and Severnaya Neft. Production increased at Yuganksneftegaz by 9% in 2006 to 409.6 million barrels from 374.6 million barrels in 2005. Severnaya Neft increased production by 15% to 41 million barrels from 35.7 million barrels. Production growth was also fuelled by increased well flow rates from 101.7 barrels per day in 2005 to 109 barrels per day in 2006, which was driven by the increase in well flows at new wells from 662.7 barrels per day to 715.4 barrels per day.

Natural and associated gas production increased by 4.2% to 13.58 billion cubic meters (bcm) in 2006 from 13.03 bcm in 2005. The increase is primarily attributed to production growth at Krasnodarneftegaz and Purneftegaz.

In 2006 Rosneft maintained its status as the most efficient Russian oil company in terms of cost control. Upstream operating expenses were USD 2.83 per barrel of crude oil produced and USD 2.49 per barrel of oil equivalent produced, an increase of just 13.7% and 14.2% respectively, which was well below real ruble appreciation versus the US dollar of 16.7% for the same period. Excluding the effect of Sakhalin-1, where significant operating expenses were incurred before production commenced, upstream operating expenses were USD2.78 per barrel of crude oil produced and USD 2.44 per barrel of oil equivalent produced, representing an increase of just 11.6% and 11.9% respectively.

In 2006, production of refined products, including at third-party refineries, amounted to 22.66 million tonnes, an increase of 6.6% over the 21.26 million tonnes produced in 2005. Output of oil products at proprietary refineries increased by 1.3% to 10.49 million tonnes from 10.38 million tonnes in 2005.

In October 2006, the Company consolidated 12 of its main subsidiaries. The consolidation created a vertically-integrated company with a single profit center and management structure. The completion of this process simplified the Company's operating structure, thereby increasing the effectiveness of capital investments and Rosneft's performance in general. After converting their shares into Rosneft shares, minority shareholders became shareholders in Russia's largest oil company and will now be benefit from the success of united, integrated Company with improved share liquidity following the Company's IPO in July, 2006.

In 2006, Rosneft acquired a number of licenses to new oilfields, which significantly increased its position in Eastern Siberia and the Timano-Pechora oil province. In February 2006, the Company obtained geological exploration licenses to the Tukolandsky, Vadinsky and Pendomayakhsky oil and gas blocks in the Krasnoyarsk Territory. In March 2006, an exploration and production license to the East Sugdinsky block was obtained. In April 2006, the Company received licenses to develop and produce oil and gas at the Mogdinsky and Sanarsky oil and gas-bearing blocks in the Irkutsk Region. In June 2006, the Company won an auction for a development and production license to the Danilovsky oil and gas block in the Irkutsk Region. In July 2006, Rosneft won a license to develop and produce oil at the North Charsky oil and gas block, which borders the Taimyrsky region and the Yamalo-Nenets Autonomous District. In July 2006, the Company also acquired an exploration and production license to the Osoveisky block in the Nenets Autonomous District, and in August 2006, it received a license to develop and produce oil and gas at the prospective Kulindinsky oil and gas block in Evenkia.

In December 2006, Rosneft finalized the acquisition of its stake in OJSC Udmurtneft. Previously, in April 2006, Rosneft and the China Petrochemical Corporation («Sinopec») signed an option agreement, entitling Rosneft to buy an interest in Udmurtneft if Sinopec were to win the tender to purchase Udmurtneft from TNK-BP. In June 2006, TNK-BP announced the sale of a 96.86% stake in Udmurtneft to Sinopec. To manage Udmurtneft, a joint venture was created with 51% and 49% stakes, respectively, going to Rosneft and Sinopec. The financing of the Company's acquisition of Udmurtneft was organized by Sinopec as per the option agreement, and this financing will be repaid from the cash flows of Udmurtneft directly, without recourse to Rosneft. The Company does not to consolidate Udmurtneft in its US GAAP statements.

Sergey Bogdanchikov, president of Rosneft, said, «Despite industry leading production growth and successful cost control, in 2006 our earnings and cash flow growth slowed due to a shortage of downstream capacity compounded by substantially higher taxes and strong real ruble appreciation. We have since vastly improved our downstream capabilities through the recent acquisition of five refineries in Russia and a network of retail stations. We are now focused on integrating these assets with recently acquired production assets to improve our trading performance and complement our continued leading volume growth with earnings and cash flow growth. We look forward to providing a comprehensive update on performance and strategic priorities to our shareholders in July».;

Rosneft's US GAAP financial statements and management discussion and analysis (MD&A) for the twelve months of 2006 and previous periods are made available for download on Rosneft's website at www.rosneft.com.