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NOVATEK to report second quarter 2009 IFRS results

Moscow, 12 August 2009. OAO NOVATEK today announced that it will release its unaudited consolidated interim condensed financial information as of and for the three and six months ended 30 June 2009, prepared in accordance with International Financial Reporting Standards (“IFRS”), on 18 August.

The Company would like to draw the attention of investors and analysts to certain events that occurred during the three months ended 30 June 2009 (2Q 2009) that had a direct impact on our revenues and expenses during the period.

1. In April 2009, NOVATEK renegotiated the sales terms for natural gas volumes sold to one of its largest traders. Under the new terms, natural gas sales volumes are purchased by the trader on a delivered basis to the regions where the gas is to be consumed. These volumes are now classified as volumes sold to end-customers.

Due to the change in sales terms, volumes of natural gas sold to end-customers in the 2Q 2009 increased by 68.3% and 25.6% as compared to the 2Q 2008 and 1Q 2009, respectively, and in the 2Q 2009 end-customer sales volumes accounted for 75% of total natural gas sales volumes. The increase in natural gas volumes delivered and delivery distance in the 2Q 2009, as well as a 5% and 7% increase in the transportation tariff as of 1 January and 1 April 2009, respectively, resulted in additional natural gas transportation expense of RR 3.1 billion and RR 2.4 billion as compared to total natural gas transportation expense in the 2Q 2008 and the 1Q 2009, respectively.

Our average natural gas sales price to end-customers in the 2Q 2009 increased by 2.4% and 4.8% as compared to the 2Q 2008 and 1Q 2009, respectively, while our average natural gas net-back on end-customer sales in the 2Q 2009 decreased by 17.2% and 16.9% compared to the same periods, respectively.

In an environment of uncertain natural gas demand the change in the terms of sale for natural gas has allowed NOVATEK to maintain natural gas production volumes at 2008 levels while at the same time increasing stable gas condensate and LPG sales volumes which has had a positive effect on the Company’s financial results.

2. During the 2Q 2009, we sold 658 thousand tons of stable gas condensate representing an increase of 71.8% and 67.4% over 2Q 2008 and 1Q 2009 volumes, respectively.

3. As a result of the Federal Tariff Service’s reduction in the rail transportation tariffs related to export deliveries of stable gas condensate and LPG shipped from the Limbey station, effective April 2009, our cost per ton for delivering stable gas condensate and LPG by rail to the export markets in 2Q 2009 decreased by 7.6% and 21.6%, respectively, compared to 2Q 2008 and 11.1% and 31.2%, respectively compared to 1Q 2009.

The Company will provide more information regarding these and other matters pertaining to the financial results during its upcoming earnings conference call. Specific details on the earnings conference call will be provided next week.

Certain statements in this press release are not historical facts and are “forward looking” within the meaning of Section 27A of the Securities Act and Section 21E of the US Securities Exchange Act of 1934 (hereinafter, the Exchange Act). Forward looking statements include statements concerning our plans, expectations, projections, objectives, targets, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, our competitive strengths and weaknesses, plans or goals relating to forecasted production, reserves, financial position and future operations and development, our business strategy and the trends we anticipate in the industries and the political and legal environment in which we operate and other information that is not historical information. By their very nature, forward looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that the predictions, forecasts, projections and other forward looking statements will not be achieved.


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.