Yukos Oil's production results for January-September 1999 and investment policy

Nov 02, 1999 01:00 AM

Yukos Oil Company announced details of an expanded board meeting that recently was held in Sochi, Russia. At the meeting, the Board discussed the following: oil production results for the period of January-September 1999 planned investment spending for 1999's fourth quarter and the year 2000, and anticipated spending on social programs.

Oil Production
Based on preliminary data from January through September 1999, Yukos said it produced more than 33 mm metric tons of oil, about 1,395,000 tons, or 4.5 % more than planned.
For the period, the largest recovery was achieved by the Yuganskneftegaz unit, which produced 19.4 mm tons. Tomskneft produced 7.7 mm tons, and Samarneftegaz produced 5.8 mm tons. The remainder was produced by joint ventures and licensed operators.
Noting that recovery volumes remain at the 1998 level, Yukos said it does not plan any significant increase in these indicators in 1999. It added, however, that by early 2000 it plans to increase the daily recovery volume by 2.6 % compared with indicators for early October 1999.
"Our primary objective in oil recovery is to intensify development of the existing fields while meeting the terms of the license agreements," stated Mikhail Khodorkovsky, Chairman of the Board. "Growth in production efficiency and decrease in expenses remain our priorities."

Investment Policy
Yukos also announced its investment policy for the fourth quarter and full-year 2000.
The main goal of the company for oil recovery is to maintain recovery at a rate of 45 mm tons per year, for five years, while preserving the current net cost of oil. To achieve this goal, the company has created a plan for comprehensive development of new fields, including Priobskoye, Zapadno-Malobalykskoye, the Entel'skaya section of the Mamontovskoye field, Krapivinskoy and the Igol'sko-Talovoye fields.
Expansion of the raw material base, as well as increases in reserves in Russia, will be achieved in two main areas. The first includes traditional Yukos regions of activity, such as KhMAO, Tomsk and Samara provinces. The second area includes development of new regions, including the Uvat region in the Tyumen province and licensing units in the Saratov province. Total investment in oil recovery in the year 2000 will exceed 5 bn rubles.
Yukos said its investments in oil refining primarily would be aimed at rebuilding facilities at its oil refineries. The company said it would introduce the soft hydrocracking process into production at the Achinsk, Kuybyshev and Syzran oil refineries, and rebuild the catalytic cracking units at the Novokuybyshev oil refinery. As a result of these initiatives, Yukos plans to increase output of heavy refining and, by the end of 2000, reach output of 56.5 % light petroleum products.
The company said its planning assumes the restoration of co-operation between the Kuybyshev and Novokuybyshev oil refineries. Implementation of the project will increase the operational and production flexibility of the plants by linking their facilities for primary refining and all secondary processes, including heavy refining.
The primary projects also include a plan to update the reforming units at the Achinsk oil refinery, which will increase the annual output of automobile gasoline Ai-95 by 158,000 tons, Ai-92 by more than 25,000 tons, with a corresponding decrease in output of A-80. The total investments for oil refining in 2000 will be 660.2 mm rubles.
Investments in Yukos' service business will be aimed at strengthening the various enterprises by merging them into holding structures comprising main activities such as drilling, construction, geophysics, repair service and transportation services. Prior to the end of 1999, with reorganisation of the material support service, Yukos plans to combine the functions of specialised leasing companies, service enterprises for supply and subdivisions for repair and equipment supply.

Yukos also said that a significant portion of its investments would be made in environmental protection projects. The company plans to use environmental protection measures to reduce the total amount of hazardous emissions into the atmosphere by 2001 by 15 %; the volume of discharged polluted effluent into environmental objects by 30 %, and increases the volume of reusable water by 18 %.
It is planned that the level of formation of industrial wastes be reduced by 49 % and their recovery increased by 15 %. The company's investments would be concentrated on technological re-equipping of the most efficient sectors. The company's primary plans include investing about 1 bn rubles into the recovery and refining sector.

Retail Activities
Yukos also announced its plans to expand existing networks for retail sales and develop new ones over the coming year. The program will focus on the structural reorganisation of the Yukos marketing sector, specifically in the regions where the company's primary marketing networks have already been formed, as well as in Moscow and the Moscow region.
In addressing these tasks, Yukos will restructure and upgrade its regional filling station networks, including closing stations with sales of less than 1,000 tpy and staged enlargement and updating of promising stations. Additionally, Yukos plans to actively implement its franchising program.

Yukos' investment policy for 2000 in Moscow and the Moscow region assumes a significant expansion of the retail network in the following areas: start-up of major complexes, construction of new filling stations with sales over 10,000 tpy in direct proximity to large markets, and on major routes of the Moscow region.
"We want Yukos to become the No. 1 company in Russia in supplying fuel to the domestic market," Mr. Khodorkovsky stated. "We must work in this area, concentrating on the quality of oil refining, the marketing network and the operation of our marketing subdivisions."

Social Programs
Yukos said it plans to spend more than 420 mm rubles next year alone for its social projects.
The investments will be aimed primarily at improving the general conditions of production, health and recreation of the company workers and their family members, as well as material support for veterans. Yukos said it plans to spend more than 240 mm rubles on these specific areas.
In addition, the company plans to spend more than 60 mm rubles on social projects developed to support children and youth. The "New Civilisation" project will be continued, and will benefit no fewer than 50,000 schoolchildren in regions where the company is active. No less than 8 mm rubles will be allocated for social support of the company's young specialists.
Regarding the company's "Siberian Internet Company" social project -- launched in June 1999 -- 100 computer classes will be organised in the cities of Nefteyugansk, Pyt'-Yakh, Boykovo, Strezhevoy, Kedrovyy, Pokhvistnevo, Tomsk and Voronezh for training in Internet technologies. More than 2,000 additional workplaces will also be created for residents in areas where Yukos operates where workers havebeen affected by staff reductions.
Remaining social program funds will be used for equipment acquisition for medical institutions in the cities of Nefteyugansk, Strezhevoy and Kedrovyy. "Finding solutions to social problems is still one of the important objectives of the company," said Mr. Khodorkovsky. "The company leadership is trying to set up a social partnership between Yukos, trade unions and local government agencies."

Source: Yukos Oil Company
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