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August 10, 2004, Moscow. OAO «NOVATEK (the «Company») today reported strong earnings growth in its full year 2003 consolidated financial results prepared in accordance with International Financial Reporting Standards (IFRS) and audited by PricewaterhouseCoopers. The major contributors to the earnings increase were significant growth in natural gas and hydrocarbon liquids production, with the commissioning of the Yurkharovskoye and Khancheyskoye fields, and strong commodity prices throughout the year.

«The operational growth levels achieved by the Company in recent years are unprecedented in the Russian oil and gas industry, allowing NOVATEK to report extremely solid financial results in fiscal year 2003» said Leonid v. Mikhelson, Chairman and Chief Executive Officer.

Total revenues and other income totaled RUR 17,177 million for the full year 2003, resulting in net profit of RUR 3,281 million.

Gross natural gas production for the NOVATEK group rose more than 43.6% from 14.2 billion cubic meters in 2002 to 20.33 billion cubic meters in 2003. NOVATEK’s net natural gas supplied to consumers was 13.26 billion cubic meters, whereas gross liquids production (crude oil and gas condensate) rose 35.4%, from 1.73 to 2.34 million tons.

The strong growth in natural gas and liquids production was made possible by the addition of new wells at existing field operations and commencement of commercial production at the Yurkharovskoye and Khancheyskoye fields. In January 2003, the first phase of development at the Yurkharovskoye field was launched enabling commercial operation at the field to begin. In October 2003, the Company also started supplying natural gas to industrial consumers from the Khancheyskoye field.

«The strong sustained growth in our production base throughout the year contributed to very strong earnings and operational cash flows for the period» reported Mark Gyetvay, Chief Financial Officer. «We also made substantial progress in improving the Company’s financial and operational transparency through internal restructuring and by maintaining an open dialogue with the investment community».

During 2003, NOVATEK continued to make strong investments in upstream development projects and downstream facilities. For the full year 2003, net capital expenditures totaled approximately USD 178 million. Capital expenditures for 2004 are projected to be approximately USD 260 million.

«During 2003, we began construction of our 2 million ton per annum Purovskiy Gas Condensate Processing Plant and related field infrastructure, which we project to be completed in the first quarter 2005» said Mr. Mikhelson. «One of our key strategic priorities is to maximize our netback margins from planned increases in liquids production. With the commissioning of the Purovskiy Plant in 2005, NOVATEK expects to achieve this goal by increasing export earnings from liquids sales and by better managing our downstream processing costs. We have budgeted approximately USD 120 million of capital expenditures toward construction of the processing plant, which is our single largest capital program in 2004.»

The full set of consolidated IFRS financial statements and notes thereto are available in the Investor Relations section

Cautionary statement relevant to Forward-looking information

Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of NOVATEK. We caution you that these statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that we cannot predict with certainty. Words such as «anticipates», «expects», «intends», «plans», «targets», «projects», «believes», «seeks», «estimates», and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control and are difficult to predict. Accordingly, our actual outcomes and results may differ materially from what we have expressed or forecasted in the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

PAO NOVATEK is one of the largest independent natural gas producers in Russia, and in 2017, entered the global LNG market by successfully launching the Yamal LNG project. Founded in 1994, the Company is engaged in the exploration, production, processing and marketing of natural gas and liquid hydrocarbons. Upstream activities of the Company’s subsidiaries and joint ventures are concentrated mainly in the prolific Yamal-Nenets Autonomous Area, which is the world’s largest natural gas producing area and accounts for approximately 80% of Russia’s natural gas production and approximately 15% of the world’s gas production. NOVATEK is a public joint stock company established under the laws of the Russian Federation.