$1 Bln for Mr. Gutseriev This is the profit RussNeft is to receive as soon as this year, the promoter of the company Aleksandr Tutushkin thinks

OAO Oil and Gas Company RussNeft comprises 30 producing entities that develop fields with total recoverable resources of over 600 mln tons, 2 oil refineries – Orsknefteorgsintez and Krasnodareconeft (total capacity – around 10 mln tons annually), 300 gasoline filling stations in 5 Russian regions, a lube oil plant in the Orenburg region and 2 transporting entities. Last year the company produced 16 mln tons of oil. Consolidated revenue for 2005 was 100 bln rubles according to RAS (Russian Accounting Standards), net profit – 6.49 bln rubles. 100% of RussNeft is controlled by its president Mikhail Gutseriev and his family.

RussNeft is a most dynamically developing oil company of Russia. Having started 3.5 years ago basically green field, Mr. Gutseriev has managed to make it a top ten in oil industry. He achieved it by acquisition of small producing entities in the Khanty-Mansisk region, Tomsk region and Volga region. According to the company it cost $2 bln. RussNeft has been financially boosted by the international trader Glencore, what it got shares in a number of acquired assets for from Mr. Gutseriev. In the end of last year he declared an ambitious target – to amount the production to 100 mln tons annually, from which only 25 mln fall within Russia.

Mr. Gutseriev has not got abroad yet but in Russia, as he told journalists yesterday, he is going to produce 20 mln as soon as next year. Furthermore, as Mr. Gutseriev said, in 2006 the company plans to get $1 bln net profit, according to RAS. Mr. Gutseriev also stated that RussNeft plans to allocate $1.5 bln to oil production development and geologic exploration from 2007 5 years on. As Mr. Gutseriev pointed it out, the programme of investment foresees, first of all, development of Shapshinskaya group fields, Novovaluninskoye and Novoaganskoye sections in Western Siberia.

Mikhail Zak, analyst from Gasprombank, views Mr. Gutseriev’s project as a considerably feasible one. He also points it out that the company summarizes consolidated financial outcome only for the year and now it has announced only RussNeft’s results for the first six months of 2006. The revenue for the corresponding period has reached the point of 53.768 bln rubles, net profit – 7.826 bln rubles. According to the expert, last year non-consolidated net profit was 57% away from the consolidated one. Suggesting the proportion is the same this year as well and the profit for the second half year will remain at the same point of the first one then the net profit for the year will be around $920 mln. If suggesting company’s production continues growing in the second half year as well, $1 bln seems to be feasible. As Mr. Zak puts it Mr. Gutseriev’s policy of small companies’ acquisition on the growing market is quite well-taken. It allows generating money flow both for production development and loan servicing.

Denis Borisov from Investment and Financial Company Solid agrees that RussNeft can get one billion profits. If with this amount of net profit the company produces 18-19 mln tons of oil, it will receive around $7.5 net profit per barrel of production, the expert says. It is not something extraordinary; it is an average index within the industry. For instance, Rosneft’s corresponding index is $6 per barrel, Surgutneftegas’s one is $7.2, Lukoil’s - $9.