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LKOH Pjsc Lukoil

56.2184
0.00 (0.00%)
28 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Pjsc Lukoil LSE:LKOH London Ordinary Share RU0009024277 ORD RUB0.025
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.00% 56.2184 0.00 00:00:00
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
0 0 N/A 0

PJSC LukOil Half-year Report Part 1 (3569I)

30/08/2016 7:00am

UK Regulatory


Pjsc Lukoil (LSE:LKOH)
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TIDMLKOD

RNS Number : 3569I

PJSC LukOil

29 August 2016

PJSC LUKOIL

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(prepared in accordance with IFRS)

As of and for the three and six-month periods ended 30 June 2016

(unaudited)

These condensed interim consolidated financial statements were prepared by PJSC LUKOIL in accordance with IFRS and have not been audited by our independent auditor. If these condensed interim consolidated financial statements are audited in the future, the audit could reveal differences in our consolidated financial results and we can not assure that any such differences would not be material.

 
Auditors' Report on Review of Condensed Interim Consolidated Financial Statements 
To the Shareholders and Board of Directors 
PJSC LUKOIL 
 

Introduction

We have reviewed the accompanying consolidated statement of financial position of PJSC LUKOIL (the "Company") and its subsidiaries (the "Group") as at 30 June 2016, and the related consolidated statements of profit or loss and other comprehensive income for the three- and six-month periods ended 30 June 2016 and the related consolidated statements of changes in equity and cash flows for the six - month period ended 30 June 2016, and notes to the condensed interim consolidated financial statements (the "condensed interim consolidated financial statements"). Management is responsible for the preparation and presentation of these condensed interim consolidated financial statements in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting. Our responsibility is to express a conclusion on these condensed interim consolidated financial statements based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of condensed interim consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed interim consolidated financial statements as at 30 June 2016, and for the three -and six-month periods ended 30 June 2016 are not prepared, in all material respects, in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting.

 
 
 Oussov A.I. 
 Director, power of attorney dated 16 
  March 2015 No. 18/15 
 JSC "KPMG" 
 29 August 2016 
 Moscow, Russian Federation 
 

PJSC LUKOIL

Consolidated Statement of Financial Position

(Millions of Russian rubles)

 
 
                                                        31 December 
                                        ------------ 
                                             30 June 
                                                2016 
                                  Note   (unaudited)           2015 
--------------------------------  ----  ------------  ------------- 
Assets 
Current assets 
Cash and cash equivalents          6         346,703        257,263 
Accounts receivable, net           7         388,706        440,489 
Other current financial 
 assets                                       16,970         23,768 
Inventories                        8         388,783        340,196 
Income tax prepaid                            15,668          7,413 
Other taxes receivable             9          67,009         81,692 
Other current assets               10         61,063         62,826 
Total current assets                       1,284,902      1,213,647 
Property, plant and equipment      12      3,380,811      3,411,153 
Investments in associates 
 and joint ventures                11        169,047        181,744 
Other non-current financial 
 assets                            13        106,424        102,067 
Deferred income tax assets                    27,018         28,735 
Goodwill and other intangible 
 assets                                       47,416         51,749 
Other non-current assets                      30,853         31,512 
--------------------------------  ----  ------------  ------------- 
Total non-current assets                   3,761,569      3,806,960 
--------------------------------  ----  ------------  ------------- 
Total assets                               5,046,471      5,020,607 
--------------------------------  ----  ------------  ------------- 
Liabilities and equity 
Current liabilities 
Accounts payable                   14        424,715        394,339 
Short-term borrowings and 
 current portion of long-term 
 debt                              15        132,097         60,506 
Income tax payable                             6,990         11,640 
Other taxes payable                17         93,545         73,277 
Provisions                         19         27,168         25,553 
Other current liabilities          18        114,141        129,853 
Total current liabilities                    798,656        695,168 
Long-term debt                     16        732,582        799,207 
Deferred income tax liabilities              234,943        234,107 
Provisions                         19         55,019         51,115 
Other non-current liabilities                  8,027          9,636 
Total non-current liabilities              1,030,571      1,094,065 
--------------------------------  ----  ------------  ------------- 
Total liabilities                          1,829,227      1,789,233 
--------------------------------  ----  ------------  ------------- 
Equity                             20 
Share capital                                  1,151          1,151 
Treasury shares                            (241,615)      (241,615) 
Additional paid-in capital                   129,508        129,403 
Other reserves                                66,791        104,150 
Retained earnings                          3,254,923      3,229,379 
--------------------------------  ----  ------------  ------------- 
Total equity attributable 
 to PJSC LUKOIL shareholders               3,210,758      3,222,468 
--------------------------------  ----  ------------  ------------- 
Non-controlling interests                      6,486          8,906 
--------------------------------  ----  ------------  ------------- 
Total equity                               3,217,244      3,231,374 
--------------------------------  ----  ------------  ------------- 
Total liabilities and equity               5,046,471      5,020,607 
--------------------------------  ----  ------------  ------------- 
 
 
                       Acting Vice-president 
 Vice-president of      - Chief accountant of 
  PJSC LUKOIL           PJSC LUKOIL 
 Fedotov G.S.          Kozyrev I.A. 
 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

PJSC LUKOIL

Consolidated Statement of Profit or Loss and Other Comprehensive Income

(Millions of Russian rubles, unless otherwise noted)

 
                                              For the       For the       For the 
                                                three         three    six months       For the 
                                               months        months         ended    six months 
                                                ended         ended       30 June         ended 
                                              30 June       30 June          2016       30 June 
                                                 2016          2015   (unaudited)          2015 
                                   Note   (unaudited)   (unaudited)                 (unaudited) 
---------------------------------  ----  ------------  ------------  ------------  ------------ 
Revenues 
Sales (including 
 excise and export 
 tariffs)                           28      1,338,959     1,476,966     2,516,633     2,917,271 
Costs and other deductions 
Operating expenses                          (113,709)     (105,828)     (226,953)     (211,509) 
Cost of purchased 
 crude oil, gas and 
 products                                   (677,297)     (777,640)   (1,215,030)   (1,477,705) 
Transportation expenses                      (77,665)      (68,377)     (164,364)     (147,162) 
Selling, general 
 and administrative 
 expenses                                    (45,302)      (40,028)      (93,125)      (81,213) 
Depreciation, depletion 
 and amortization                            (71,608)      (87,058)     (155,956)     (165,521) 
Taxes other than 
 income taxes                               (118,724)     (141,219)     (202,277)     (271,054) 
Excise and export 
 tariffs                                    (113,820)     (123,609)     (228,769)     (296,458) 
Exploration expenses                          (2,871)      (13,586)       (4,552)      (14,783) 
---------------------------------  ----  ------------  ------------  ------------  ------------ 
Profit from operating 
 activities                                   117,963       119,621       225,607       251,866 
Finance income                      22          3,511         4,036         7,342         8,567 
Finance costs                       22       (11,098)      (11,026)      (21,469)      (22,486) 
Equity share in income 
 of affiliates                                  3,425         2,382         5,778         6,475 
Foreign exchange 
 loss                                        (28,945)      (29,154)      (74,323)      (23,479) 
Other expenses                      23        (4,205)       (2,784)       (7,548)       (8,556) 
Profit before income 
 taxes                                         80,651        83,075       135,387       212,387 
Current income taxes                         (17,183)      (19,394)      (27,659)      (42,334) 
Deferred income taxes                           (774)           575       (2,064)       (1,358) 
---------------------------------  ----  ------------  ------------  ------------  ------------ 
Total income tax 
 expense                                     (17,957)      (18,819)      (29,723)      (43,692) 
---------------------------------  ----  ------------  ------------  ------------  ------------ 
Profit for the period                          62,694        64,256       105,664       168,695 
Profit for the period 
 attributable to non-controlling 
 interests                                      (127)         (508)         (272)         (916) 
---------------------------------  ----  ------------  ------------  ------------  ------------ 
Profit for the period 
 attributable to 
 PJSC LUKOIL shareholders                      62,567        63,748       105,392       167,779 
---------------------------------  ----  ------------  ------------  ------------  ------------ 
 
Other comprehensive 
 income (loss), net 
 of income taxes 
Items that may be 
 reclassified to profit 
 or loss: 
Foreign currency 
 translation differences 
 for foreign operations                      (21,923)       (8,045)      (37,314)      (35,641) 
Items that will never 
 be reclassified to 
 profit or loss: 
Remeasurements of 
 defined benefit liability 
 / asset of pension 
 plan                                              13           336            33           652 
---------------------------------  ----  ------------  ------------  ------------  ------------ 
Other comprehensive 
 loss                                        (21,910)       (7,709)      (37,281)      (34,989) 
---------------------------------  ----  ------------  ------------  ------------  ------------ 
Total comprehensive 
 income for the period                         40,784        56,547        68,383       133,706 
Total comprehensive 
 income for the period 
 attributable to non-controlling 
 interests                                      (119)         (511)         (298)         (967) 
---------------------------------  ----  ------------  ------------  ------------  ------------ 
Total comprehensive 
 income for the period 
 attributable to PJSC 
 LUKOIL shareholders                           40,665        56,036        68,085       132,739 
---------------------------------  ----  ------------  ------------  ------------  ------------ 
 
 
Earnings per share 
 of common stock attributable 
 to PJSC LUKOIL shareholders 
 (in Russian rubles): 
  Basic                             20          87.76         89.42        147.83        235.34 
  Diluted                           20          87.76         88.13        147.83        231.28 
 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

PJSC LUKOIL

Consolidated Statement of Changes in Equity (unaudited)

(Millions of Russian rubles)

 
                                                                                             Total 
                                                                                            equity 
                                                                                      attributable 
                                                     Additional                            to PJSC 
                    Share   Treasury  Equity-linked     paid-in     Other   Retained        LUKOIL  Non-controlling      Total 
                  capital     shares          notes     capital  reserves   earnings  shareholders        interests     equity 
----------------  -------  ---------  -------------  ----------  --------  ---------  ------------  ---------------  --------- 
31 December 
 2015               1,151  (241,615)              -     129,403   104,150  3,229,379     3,222,468            8,906  3,231,374 
Profit 
 for the 
 period                 -          -              -           -         -    105,392       105,392              272    105,664 
Other 
comprehensive 
income: 
Foreign 
 currency 
 translation 
 differences            -          -              -              (37,340)          -      (37,340)               26   (37,314) 
Remeasurements 
 of defined 
 benefit 
 liability 
 / asset 
 of pension 
 plan                   -          -              -           -        33          -            33                -         33 
                                                                 --------  ---------  ------------  ---------------  --------- 
Total 
 comprehensive 
 income 
 (loss)                                                          (37,307)    105,392        68,085              298     68,383 
Dividends 
 on common 
 stock                  -          -              -           -         -   (79,848)      (79,848)                -   (79,848) 
Changes 
 in 
 non-controlling 
 interests              -          -              -         105      (52)          -            53          (2,718)    (2,665) 
----------------  -------  ---------  -------------  ----------  --------  ---------  ------------  ---------------  --------- 
30 June 
 2016               1,151  (241,615)              -     129,508    66,791  3,254,923     3,210,758            6,486  3,217,244 
----------------  -------  ---------  -------------  ----------  --------  ---------  ------------  ---------------  --------- 
 
 
 
31 December 
 2014                 1,151  (158,615)  (83,000)  128,846    93,454  3,055,542  3,037,378   12,164  3,049,542 
Profit 
 for the 
 period                   -          -         -        -         -    167,779    167,779      916    168,695 
Other comprehensive 
 income: 
Foreign 
 currency 
 translation 
 differences              -          -         -        -  (35,692)          -   (35,692)       51   (35,641) 
Remeasurements 
 of defined 
 benefit 
 liability 
 / asset 
 of pension 
 plan                     -          -         -        -       652          -        652        -        652 
                                                           --------  ---------  ---------  -------  --------- 
Total comprehensive 
 income 
 (loss)                                                    (35,040)    167,779    132,739      967    133,706 
Dividends 
 on common 
 stock                    -          -         -        -         -   (70,957)   (70,957)        -   (70,957) 
Changes 
 in non-controlling 
 interests                -          -         -    2,339         -          -      2,339  (3,717)    (1,378) 
--------------------  -----  ---------  --------  -------  --------  ---------  ---------  -------  --------- 
30 June 
 2015                 1,151  (158,615)  (83,000)  131,185    58,414  3,152,364  3,101,499    9,414  3,110,913 
--------------------  -----  ---------  --------  -------  --------  ---------  ---------  -------  --------- 
 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

PJSC LUKOIL

Consolidated Statement of Cash Flows

(Millions of Russian rubles)

 
                                                    For the       For the 
                                                        six           six 
                                                     months        months 
                                                      ended         ended 
                                                    30 June       30 June 
                                                       2016          2015 
                                         Note   (unaudited)   (unaudited) 
-----------------------------------      ----  ------------  ------------ 
Cash flows from operating 
 activities 
Profit for the period attributable 
 to PJSC LUKOIL shareholders                        105,392       167,779 
Adjustments for non-cash 
 items: 
 Depreciation, depletion 
  and amortization                                  155,956       165,521 
 Equity share in income 
  of affiliates, net of dividends 
  received                                          (3,839)            65 
 Dry hole write-offs                                    522        13,668 
 Loss on disposals and impairments 
  of assets                                           4,718         8,251 
 Income tax expense                                  29,723        43,692 
 Non-cash foreign exchange 
  loss                                               70,506        21,211 
 Non-cash investing activities                         (69)         (161) 
 Finance income                                     (7,342)       (8,567) 
 Finance costs                                       21,469        22,486 
 Bad debt provision                                   2,913           821 
 All other items - net                                6,374         8,510 
Changes in operating assets 
 and liabilities: 
 Trade accounts receivable                            2,458        69,459 
 Inventories                                       (87,849)      (54,162) 
 Accounts payable                                    85,588      (24,766) 
 Other taxes                                         37,183        57,356 
 Other current assets and 
  liabilities                                      (49,754)      (75,076) 
Income tax paid                                    (35,788)      (38,373) 
Dividends received                                    2,102             - 
Interests received                                    4,215         5,389 
---------------------------------------  ----  ------------  ------------ 
Net cash provided by operating 
 activities                                         344,478       383,103 
---------------------------------------  ----  ------------  ------------ 
Cash flows from investing 
 activities 
Acquisition of licenses                             (2,408)         (371) 
Capital expenditures                              (248,664)     (302,853) 
Proceeds from sale of property, 
 plant and equipment                                    624         1,219 
Purchases of financial 
 assets                                            (13,299)       (2,924) 
Proceeds from sale of financial 
 assets                                               5,651         5,504 
Sale of subsidiaries, net 
 of cash disposed                                     1,414         2,718 
Sale of equity method affiliates                          -         9,410 
Acquisitions of subsidiaries, 
 net of cash acquired                                     -         (272) 
Acquisitions of equity 
 method affiliates                                  (1,833)       (3,299) 
Net cash used in investing 
 activities                                       (258,515)     (290,868) 
---------------------------------------  ----  ------------  ------------ 
Cash flows from financing 
 activities 
Proceeds from issuance 
 of short-term borrowings                            46,941        71,559 
Principal repayments of 
 short-term borrowings                             (12,178)      (26,447) 
Proceeds from issuance 
 of long-term debt                                   89,276        19,402 
Principal repayments of 
 long-term debt                                    (14,050)      (94,255) 
Interest paid                                      (23,574)      (18,190) 
Dividends paid on Company 
 common shares                                     (46,324)      (40,934) 
Dividends paid to non-controlling 
 interest shareholders                              (1,587)         (767) 
Financing received from 
 non-controlling interest 
 shareholders                                            48            61 
Sale of non-controlling 
 interests                                                -             9 
Purchases of non-controlling 
 interests                                          (1,285)             - 
Net cash provided by (used 
 in) financing activities                            37,267      (89,562) 
---------------------------------------  ----  ------------  ------------ 
Effect of exchange rate 
 changes on cash and cash 
 equivalents                                       (33,790)      (19,429) 
Net increase (decrease) 
 in cash and cash equivalents                        89,440      (16,756) 
Cash and cash equivalents 
 at beginning of period                             257,263       169,023 
---------------------------------------  ----  ------------  ------------ 
Cash and cash equivalents 
 at end of period                           6       346,703       152,267 
---------------------------------------  ----  ------------  ------------ 
 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

PJSC LUKOIL

Notes to Condensed Interim Consolidated Financial Statements (unaudited)

(Millions of Russian rubles, unless otherwise noted)

Note 1. Organization and environment

The primary activities of PJSC LUKOIL (the "Company") and its subsidiaries (together, the "Group") are oil exploration, production, refining, marketing and distribution. The Company is the ultimate parent entity of this vertically integrated group of companies.

The Group was established in accordance with Presidential Decree No. 1403, issued on 17 November 1992. Under this decree, on 5 April 1993, the Government of the Russian Federation transferred to the Company 51% of the voting shares of fifteen enterprises. Under Government Resolution No. 861 issued on 1 September 1995, a further nine enterprises were transferred to the Group during 1995. Since 1995, the Group has carried out a share exchange program to increase its shareholding in each of the twenty-four founding subsidiaries to 100%.

From formation, the Group has expanded substantially through consolidation of its interests, acquisition of new companies and establishment of new businesses.

In July 2015, the Company changed its legal form to Public Joint Stock Company ("PJSC") following the requirements of the amended Russian Civil Code.

Business and economic environment

The accompanying condensed interim consolidated financial statements reflect management's assessment of the impact of the business environment in the countries in which the Group operates on the operations and the financial position of the Group. The future business environments may differ from management's assessment.

Note 2. Basis of preparation

Statement of compliance

The condensed interim consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. These condensed interim consolidated financial statements should be read in conjunction with the Group's consolidated financial statements for 2015 prepared in accordance with International Financial Reporting Standards ("IFRS").

Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the last consolidated financial statements for 2015.

The accompanying condensed interim consolidated financial statements and notes thereto have not been audited by independent auditors, except for the consolidated statement of financial position at 31 December 2015.

The condensed interim consolidated financial statements were authorised by the Vice-president of the Company on 29 August 2016.

Functional and presentation currency

The functional currency of each of the Group's consolidated companies is the currency of the primary economic environment in which the company operates. Management has analysed factors that influence the choice of functional currency and has determined the functional currency for each Group company. For the majority of them the functional currency is the local currency. The functional currency of the Company is the Russian ruble ("RUB").

The presentation currency of the consolidated financial statements of the Group is the RUB. All financial information presented in the RUB has been rounded to the nearest million, except when otherwise indicated.

The results and financial position of Group companies whose functional currency is different from the presentation currency of the Group are translated into presentation currency using the following procedures. Assets and liabilities are translated at period-end exchange rates, income and expenses are translated at rates which approximate actual rates at the date of the transaction. Resulting exchange differences are recognised in other comprehensive income.

Note 3. Summary of significant accounting policies

The accounting policies adopted in the preparation of these condensed interim consolidated financial statements are consistent with those applied and disclosed in the consolidated financial statements for 2015.

Note 4. Use of estimates and judgments

Preparation of the consolidated financial statements in accordance with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from those estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements are the following:

   --     Estimation of oil and gas reserves; 
   --     Estimation of useful lives of property, plant and equipment; 
   --     Impairment of non-current assets; 
   --     Assessment of asset retirement obligations; 
   --     Assessment and recognition of provisions and contingent liabilities; 
   --     Assessment of deferred income tax assets and liabilities; 
   --     Determination of whether a joint arrangement is a joint venture or a joint operation. 

Note 5. Income taxes

Operations in the Russian Federation are subject to a Federal income tax rate of 2.0% and a regional income tax rate that varies from 13.5% to 18.0% at the discretion of the individual regional administration. The Group's foreign operations are subject to taxes at the tax rates applicable to the jurisdictions in which they operate.

The Group's effective income tax rate for the periods presented differs from the statutory income tax rate primarily due to domestic and foreign tax rate differences and the incurrence of costs that are either not tax deductible or only deductible to a certain limit. Tax expense is recognised based on the management's best estimate of the weighted-average annual income tax rate expected for the full financial year multiplied by the pre-tax income of the interim reporting period.

The Company and its Russian subsidiaries file income tax returns in Russia. A number of Group companies in Russia are paying income tax as a consolidated taxpayers' group ("CTG"). This allows taxpayers to offset taxable losses generated by certain participants of a CTG against taxable profits of other participants of the CTG.

Note 6. Cash and cash equivalents

 
                                   30 June  31 December 
                                      2016         2015 
--------------------------------   -------  ----------- 
Cash held in RUB                    34,135       98,253 
Cash held in US dollars            283,745      141,863 
Cash held in other currencies       28,823       17,147 
Total cash and cash equivalents    346,703      257,263 
---------------------------------  -------  ----------- 
 

Note 7. Accounts receivable, net

 
                                     30 June  31 December 
                                        2016         2015 
----------------------------------   -------  ----------- 
Trade accounts receivable 
 (net of allowances of 17,967 
 million RUB and 
 17,322 million RUB at 30 
 June 2016 and 31 December 
 2015, respectively)                 356,223      375,531 
Other current accounts receivable 
 (net of allowances of 1,929 
 million RUB and 1,599 million 
 RUB at 30 June 2016 and 31 
 December 2015, respectively)         32,483       64,958 
Total accounts receivable, 
 net                                 388,706      440,489 
-----------------------------------  -------  ----------- 
 

Note 8. Inventories

 
                                    30 June  31 December 
                                       2016         2015 
---------------------------------   -------  ----------- 
Crude oil and petroleum products    323,763      275,941 
Materials for extraction and 
 drilling                            21,327       21,345 
Materials and supplies for 
 refining                             3,237        3,732 
Other goods, materials and 
 supplies                            40,456       39,178 
Total inventories                   388,783      340,196 
----------------------------------  -------  ----------- 
 

Note 9. Other taxes receivable

 
                                  30 June  31 December 
                                     2016         2015 
-------------------------------   -------  ----------- 
VAT and excise tax recoverable     36,936       39,171 
Export duties prepaid              10,108       21,824 
Other taxes prepaid                19,965       20,697 
Total other taxes receivable       67,009       81,692 
--------------------------------  -------  ----------- 
 

Note 10. Other current assets

 
                              30 June  31 December 
                                 2016         2015 
---------------------------   -------  ----------- 
Advance payments               25,681       16,341 
Prepaid expenses               25,910       31,960 
Other assets                    9,472       14,525 
Total other current assets     61,063       62,826 
----------------------------  -------  ----------- 
 

Note 11. Investments in associates and joint ventures

Carrying value of investments in associates and joint ventures:

 
                                         Ownership, % 
                                     -------------------- 
                                     30 June  31 December  30 June  31 December 
Name of the company         Country     2016         2015     2016         2015 
----------------------  -----------  -------  -----------  -------  ----------- 
Joint Ventures: 
Tengizchevroil           Kazakhstan       5%           5%   90,752       99,843 
Caspian Pipeline 
 Consortium              Kazakhstan    12.5%        12.5%   25,590       27,574 
Turgai Petroleum         Kazakhstan      50%          50%    1,763        1,675 
Shakh-Deniz Midstream    Azerbaijan      10%          10%   22,246       22,284 
Associates: 
Other associates                                            28,696       30,368 
Total                                                      169,047      181,744 
-----------------------------------  -------  -----------  -------  ----------- 
 

Note 12. Property, plant and equipment

 
                                                       Refining, 
                                 Exploration           marketing 
                              and production    and distribution      Other         Total 
--------------------------  ----------------  ------------------  ---------  ------------ 
 Cost 
 1 January 2016                    3,232,673           1,206,252    103,587     4,542,512 
 Additions                           203,974              28,882      1,041       233,897 
 Capitalised borrowing 
  costs                                4,694                 211          -         4,905 
 Disposals                           (5,845)            (17,437)      (516)      (23,798) 
 Foreign currency 
  translation differences          (138,021)            (48,226)    (1,825)     (188,072) 
 Other                               (4,215)               6,171        338         2,294 
--------------------------  ----------------  ------------------  ---------  ------------ 
 30 June 2016                      3,293,260           1,175,853    102,625     4,571,738 
--------------------------  ----------------  ------------------  ---------  ------------ 
 Depreciation and 
  impairment 
 1 January 2016                    (953,254)           (259,515)   (14,627)   (1,227,396) 
 Depreciation for 
  the period                       (106,474)            (43,491)    (3,058)     (153,023) 
 Impairment loss                           -                (78)          -          (78) 
 Disposals                             1,209               9,486        268        10,963 
 Foreign currency 
  translation differences             77,554              16,444        404        94,402 
 Other                                  (83)             (1,893)       (11)       (1,987) 
--------------------------  ----------------  ------------------  ---------  ------------ 
 30 June 2016                      (981,048)           (279,047)   (17,024)   (1,277,119) 
--------------------------  ----------------  ------------------  ---------  ------------ 
 Advance payments 
  for property, 
  plant and equipment 
 1 January 2016                       94,619               1,280        138        96,037 
--------------------------  ----------------  ------------------  ---------  ------------ 
 30 June 2016                         85,300                 776        116        86,192 
--------------------------  ----------------  ------------------  ---------  ------------ 
 Carrying amounts 
 1 January 2016                    2,374,038             948,017     89,098     3,411,153 
--------------------------  ----------------  ------------------  ---------  ------------ 
 30 June 2016                      2,397,512             897,582     85,717     3,380,811 
--------------------------  ----------------  ------------------  ---------  ------------ 
 
 
 
                                                       Refining, 
                                 Exploration           marketing 
                              and production    and distribution      Other       Total 
--------------------------  ----------------  ------------------  ---------  ---------- 
 Cost 
 1 January 2015                    2,556,173           1,030,097     95,392   3,681,662 
 Additions                           225,859              63,104      1,646     290,609 
 Acquisitions through 
  business combinations                  305                 149          -         454 
 Capitalised borrowing 
  costs                                  171                 503          -         674 
 Disposals                          (18,740)             (1,459)      (535)    (20,734) 
 Foreign currency 
  translation differences           (12,907)            (39,808)      (228)    (52,943) 
 Other                                 3,465             (3,765)       (63)       (363) 
--------------------------  ----------------  ------------------  ---------  ---------- 
 30 June 2015                      2,754,326           1,048,821     96,212   3,899,359 
--------------------------  ----------------  ------------------  ---------  ---------- 
 Depreciation and 
  impairment 
 1 January 2015                    (444,128)           (142,713)    (8,525)   (595,366) 
 Depreciation for 
  the period                       (131,721)            (30,136)    (2,960)   (164,817) 
 Disposals                               707               3,473        116       4,296 
 Foreign currency 
  translation differences              4,465               8,951        196      13,612 
 Other                               (1,597)               (489)       (42)     (2,128) 
--------------------------  ----------------  ------------------  ---------  ---------- 
 30 June 2015                      (572,274)           (160,914)   (11,215)   (744,403) 
--------------------------  ----------------  ------------------  ---------  ---------- 
 Advance payments 
  for property, 
  plant and equipment 
 1 January 2015                       58,558               8,258        467      67,283 
--------------------------  ----------------  ------------------  ---------  ---------- 
 30 June 2015                         74,812               2,397        510      77,719 
--------------------------  ----------------  ------------------  ---------  ---------- 
 Carrying amounts 
 1 January 2015                    2,170,603             895,642     87,334   3,153,579 
--------------------------  ----------------  ------------------  ---------  ---------- 
 30 June 2015                      2,256,864             890,304     85,507   3,232,675 
--------------------------  ----------------  ------------------  ---------  ---------- 
 
 

The cost of assets under construction included in Property, plant and equipment was 615,890 million RUB and 676,908 million RUB at 30 June 2016 and 31 December 2015, respectively.

Exploration and evaluation assets:

 
                                                 For the       For the 
                                              six months    six months 
                                                   ended         ended 
                                                 30 June       30 June 
                                                    2016          2015 
------------------------------------------  ------------  ------------ 
 1 January                                        52,302        46,906 
 Capitalized expenditures                         15,317        11,567 
 Reclassified to development assets              (3,633)       (8,036) 
 Charged to expenses                               (483)          (69) 
 Foreign currency translation differences        (1,160)             - 
 Other movements                                   (127)            18 
------------------------------------------  ------------  ------------ 
 30 June                                          62,216        50,386 
------------------------------------------  ------------  ------------ 
 

Note 13. Other non-current financial assets

 
                                     30 June  31 December 
                                        2016         2015 
----------------------------------   -------  ----------- 
Long-term loans                       94,188       89,770 
Non-current accounts and notes 
 receivable                            8,326        8,148 
Other non-current financial 
 assets                                3,910        4,149 
Total other non-current financial 
 assets                              106,424      102,067 
-----------------------------------  -------  ----------- 
 

Note 14. Accounts payable

 
                          30 June  31 December 
                             2016         2015 
-----------------------   -------  ----------- 
Trade accounts payable    374,177      339,091 
Other accounts payable     50,538       55,248 
Total accounts payable    424,715      394,339 
------------------------  -------  ----------- 
 

Note 15. Short-term borrowings and current portion of long-term debt

 
                                     30 June  31 December 
                                        2016         2015 
----------------------------------   -------  ----------- 
Short-term borrowings from 
 third parties                        60,096       33,611 
Short-term borrowings from 
 related parties                       5,063        5,609 
Current portion of long-term 
 debt                                 66,938       21,286 
Total short-term borrowings 
 and current portion of long-term 
 debt                                132,097       60,506 
-----------------------------------  -------  ----------- 
 

Short-term borrowings from third parties include amounts repayable in US dollars of 46,960 million RUB and 22,951 million RUB and amounts repayable in other currencies of 13,136 million RUB and 10,660 million RUB at 30 June 2016 and 31 December 2015, respectively. The weighted-average interest rate on short-term borrowings from third parties was 4.36% and 5.43% per annum at 30 June 2016 and 31 December 2015, respectively. Approximately 78% of total short-term borrowings from third parties at 30 June 2016 are secured by inventories.

Note 16. Long-term debt

 
                                   30 June  31 December 
                                      2016         2015 
-------------------------------   --------  ----------- 
Long-term loans and borrowings 
 from third parties                436,448      408,781 
Long-term borrowings from 
 related parties                         -          138 
6.356% non-convertible US 
 dollar bonds, maturing 2017        32,129       36,441 
3.416% non-convertible US 
 dollar bonds, maturing 2018        96,124      108,983 
7.250% non-convertible US 
 dollar bonds, maturing 2019        38,442       43,583 
6.125% non-convertible US 
 dollar bonds, maturing 2020        64,173       72,778 
6.656% non-convertible US 
 dollar bonds, maturing 2022        32,129       36,441 
4.563% non-convertible US 
 dollar bonds, maturing 2023        96,124      108,983 
Capital lease obligations            3,951        4,365 
--------------------------------  --------  ----------- 
Total long-term debt               799,520      820,493 
Current portion of long-term 
 debt                             (66,938)     (21,286) 
Total non-current portion 
 of long-term debt                 732,582      799,207 
--------------------------------  --------  ----------- 
 

Long-term loans and borrowings

Long-term loans and borrowings from third parties include amounts repayable in US dollars of 303,751 million RUB and 336,842 million RUB, amounts repayable in euros of 61,379 million RUB and 70,447 million RUB, amounts repayable in other currencies of 1,318 million RUB and 1,492 million RUB at 30 June 2016 and 31 December 2015, respectively, and amounts repayable in RUB of 70,000 million RUB at 30 June 2016. This debt has maturity dates from 2016 through 2028. The weighted-average interest rate on long-term loans and borrowings from third parties was 5.32% and 3.77% per annum at 30 June 2016 and 31 December 2015, respectively. A number of long-term loan agreements contain certain financial covenants which are being met by the Group. Approximately 15% of total long-term loans and borrowings from third parties at 30 June 2016 are secured by shares of an associated company, export sales and property, plant and equipment.

Note 17. Other taxes payable

 
                             30 June  31 December 
                                2016         2015 
--------------------------   -------  ----------- 
Mineral extraction tax        37,069       24,566 
VAT                           26,173       21,532 
Excise tax                    18,996       15,553 
Property tax                   4,400        4,583 
Other taxes                    6,907        7,043 
Total other taxes payable     93,545       73,277 
---------------------------  -------  ----------- 
 

Note 18. Other current liabilities

 
                                  30 June   31 December 
                                      2016         2015 
--------------------------------   -------  ----------- 
Advances received                   28,906       79,424 
Dividends payable                   81,907       47,615 
Other                                3,328        2,814 
Total other current liabilities    114,141      129,853 
---------------------------------  -------  ----------- 
 

Note 19. Provisions

 
                            Asset                       Provision                     Provision 
                       retirement       Provision             for                           for 
                       obligation    for employee   environmental       Pension     compensated         Other 
                                    compensations     liabilities    provisions        absences    provisions    Total 
-------------------  ------------  --------------  --------------  ------------  --------------  ------------  ------- 
 30 June 
  2016                     33,466          24,279           5,244         7,630           4,944         6,624   82,187 
 Incl.: 
  Non-current              31,707          12,679           3,057         6,132              66         1,378   55,019 
           Current          1,759          11,600           2,187         1,498           4,878         5,246   27,168 
 31 December 
  2015                     32,919          19,837           5,455         7,913           3,591         6,953   76,668 
-------------------  ------------  --------------  --------------  ------------  --------------  ------------  ------- 
 Incl.: 
  Non-current              32,632           6,733           3,575         6,392             134         1,649   51,115 
           Current            287          13,104           1,880         1,521           3,457         5,304   25,553 
 

Assets retirement obligation:

 
                                                 For the       For the 
                                              six months    six months 
                                                   ended         ended 
                                                 30 June       30 June 
                                                    2016          2015 
------------------------------------------  ------------  ------------ 
 1 January                                        32,919        19,604 
 Provisions made during the period                 1,816           255 
 Reversal of provisions                             (38)         (172) 
 Provisions used during the period                  (44)          (47) 
 Accretion expense                                 1,117           430 
 Changes in estimates                                 40         (370) 
 Foreign currency translation differences        (2,157)         (266) 
 Other                                             (187)            78 
------------------------------------------  ------------  ------------ 
 30 June                                          33,466        19,512 
------------------------------------------  ------------  ------------ 
 

Note 20. Equity

Common shares

 
                                    30 June  31 December 
                                       2016         2015 
                                 (thousands   (thousands 
                                 of shares)   of shares) 
Authorized common shares, 
 par value of 0.025 RUB each        850,563      850,563 
Issued common shares, par 
 value of 0.025 RUB each            850,563      850,563 
Treasury shares                   (137,630)    (137,630) 
Outstanding common shares           712,933      712,933 
------------------------------  -----------  ----------- 
 

Dividends

At the annual shareholders' meeting on 23 June 2016, dividends for 2015 were approved in the amount of 112.00 RUB per common share. At the extraordinary shareholders' meeting on 16 December 2015, interim dividends for 2015 were approved in the amount of 65.00 RUB per common share. Total dividends for 2015 were approved in the amount of 177.00 RUB per common share. At the annual shareholders' meeting on 25 June 2015, dividends for 2014 were approved in the amount of 94.00 RUB per common share. At the extraordinary shareholders' meeting on 12 December 2014, interim dividends for 2014 were approved in the amount of 60.00 RUB per common share. Total dividends for 2014 were approved in the amount of 154.00 RUB per common share.

Dividends on the Company's shares payable of 80,114 million RUB and 46,609 million RUB are included in "Other current liabilities" in the consolidated statement of financial position at 30 June 2016 and 31 December 2015, respectively.

Earnings per share

The calculation of basic and diluted earnings per share was as follows.

 
                                    For the   For the 
                                      three     three      For the      For the 
                                     months    months   six months   six months 
                                      ended     ended        ended        ended 
                                    30 June   30 June      30 June      30 June 
                                       2016      2015         2016         2015 
---------------------------------  --------  --------  -----------  ----------- 
Profit for the period 
 attributable to PJSC 
 LUKOIL shareholders                 62,567    63,748      105,392      167,779 
---------------------------------  --------  --------  -----------  ----------- 
Add back interest and 
 accretion on 2.625% convertible 
 US dollar bonds, maturing 
 2015 (net of tax at effective 
 rate)                                    -       697            -        1,718 
---------------------------------  --------  --------  -----------  ----------- 
Total diluted profit 
 for the period attributable 
 to 
 PJSC LUKOIL shareholders            62,567    64,445      105,392      169,497 
---------------------------------  --------  --------  -----------  ----------- 
Weighted average number 
 of outstanding common 
 shares (thousands of 
 shares)                            712,933   754,866      712,933      754,866 
Equity-linked notes                       -  (41,933)            -     (41,933) 
---------------------------------  --------  --------  -----------  ----------- 
Weighted average number 
 of common shares 
 (thousands of shares)              712,933   712,933      712,933      712,933 
Add back treasury shares 
 held in respect of convertible 
 debt (thousands of shares)               -    18,291            -       19,945 
---------------------------------  --------  --------  -----------  ----------- 
Weighted average number 
 of common shares, 
 assuming dilution (thousands 
 of shares)                         712,933   731,224      712,933      732,878 
---------------------------------  --------  --------  -----------  ----------- 
Earnings per share of 
 common stock attributable 
 to 
 PJSC LUKOIL shareholders 
 (RUB): 
 Basic                                87.76     89.42       147.83       235.34 
 Diluted                              87.76     88.13       147.83       231.28 
---------------------------------  --------  --------  -----------  ----------- 
 

Note 21. Personnel expenses

Personnel expenses were as follows.

 
                             For the three   For the three     For the six     For the six 
                              months ended    months ended    months ended    months ended 
                              30 June 2016    30 June 2015    30 June 2016    30 June 2015 
--------------------------  --------------  --------------  --------------  -------------- 
 Salary                             35,137          31,718          69,852          60,582 
 Statutory insurance 
  contributions                      7,394           6,825          14,994          13,644 
 Share-based payments                2,400           (557)           6,344           3,585 
 Total personnel expenses           44,931          37,986          91,190          77,811 
--------------------------  --------------  --------------  --------------  -------------- 
 

Note 22. Finance income and costs

Finance income was as follows.

 
                         For the three   For the three     For the six     For the six 
                          months ended    months ended    months ended    months ended 
                          30 June 2016    30 June 2015    30 June 2016    30 June 2015 
----------------------  --------------  --------------  --------------  -------------- 
 Interest income from 
  deposits                       1,354           2,494           2,849           4,914 
 Interest income from 
  loans                          1,819           1,363           3,697           2,915 
 Other finance income              338             179             796             738 
----------------------  --------------  --------------  --------------  -------------- 
 Total finance income            3,511           4,036           7,342           8,567 
----------------------  --------------  --------------  --------------  -------------- 
 

Finance costs were as follows.

 
                           For the three   For the three     For the six     For the six 
                            months ended    months ended    months ended    months ended 
                            30 June 2016    30 June 2015    30 June 2016    30 June 2015 
------------------------  --------------  --------------  --------------  -------------- 
 Interest expenses                10,259           9,576          20,184          20,567 
 Accretion expenses                  751             123           1,124             442 
 Other finance expenses               88           1,327             161           1,477 
------------------------  --------------  --------------  --------------  -------------- 
 Total finance costs              11,098          11,026          21,469          22,486 
------------------------  --------------  --------------  --------------  -------------- 
 

Note 23. Other income and expenses

Other income was as follows.

 
                           For the three   For the three     For the six     For the six 
                            months ended    months ended    months ended    months ended 
                            30 June 2016    30 June 2015    30 June 2016    30 June 2015 
------------------------  --------------  --------------  --------------  -------------- 
 Gain on disposal of 
  assets                             176           1,761             916           2,750 
 Changes in estimates 
  of asset retirement 
  obligation                           9             156              29             258 
 Reversal on impairment 
  of assets                            -               3               -             296 
 Other income                      3,939           3,790           7,779           6,573 
------------------------  --------------  --------------  --------------  -------------- 
 Total other income                4,124           5,710           8,724           9,877 
------------------------  --------------  --------------  --------------  -------------- 
 

Other expenses were as follows.

 
                         For the three   For the three     For the six     For the six 
                          months ended    months ended    months ended    months ended 
                          30 June 2016    30 June 2015    30 June 2016    30 June 2015 
----------------------  --------------  --------------  --------------  -------------- 
 Loss on disposal of 
  assets                         2,825           4,688           5,170           6,127 
 Impairment loss                   356             189             464           5,170 
 Charity expenses                3,926           2,299           6,343           3,705 
 Other expenses                  1,222           1,318           4,295           3,431 
----------------------  --------------  --------------  --------------  -------------- 
 Total other expenses            8,329           8,494          16,272          18,433 
----------------------  --------------  --------------  --------------  -------------- 
 

Note 24. Operating lease

At 30 June 2016 and 31 December 2015, Group companies had commitments primarily related to the lease of vessels and petroleum distribution outlets. Commitments for minimum rentals under these leases are payable as follows.

 
                     30 June  31 December 
                        2016         2015 
------------------   -------  ----------- 
Less than a year      31,215       35,858 
1-5 years             49,069       46,589 
More than 5 years     87,845       80,924 
Total                168,129      163,371 
-------------------  -------  ----------- 
 

Note 25. Commitments and contingencies

Capital commitments

At 30 June 2016, capital commitments of the Group relating to construction and acquisition of property, plant and equipment are evaluated as 471,866 million RUB.

Taxation environment

The taxation systems in the Russian Federation and other emerging markets where Group companies operate are relatively new and are characterised by numerous taxes and frequently changing legislation, which is often unclear, contradictory, and subject to interpretation. Often, differing interpretations exist among different tax authorities within the same jurisdictions and among taxing authorities in different jurisdictions. Taxes are subject to review and investigation by a number of authorities, who are enabled by law to impose severe fines, penalties and interest charges. In the Russian Federation a tax year remains open for review by the tax authorities during the three subsequent calendar years. However, under certain circumstances a tax year may remain open longer. Recent events within the Russian Federation suggest that the tax authorities are taking a more assertive position in their interpretation and enforcement of tax legislation. Such factors may create substantially more significant taxation risks in the Russian Federation and other emerging markets where Group companies operate, than those in other countries where taxation regimes have been subject to development and clarification over long periods.

The tax authorities in each region may have a different interpretation of similar taxation issues which may result in taxation issues successfully defended by the Group in one region being unsuccessful in another region. There is some direction provided from the central authority based in Moscow on particular taxation issues. The Group has implemented tax planning and management strategies based on existing legislation at the time of implementation. The Group is subject to tax authority audits on an ongoing basis, as is normal in the Russian environment and other republics of the former Soviet Union, and, at times, the authorities have attempted to impose additional significant taxes on the Group. Management believes that it has adequately met and provided for tax liabilities based on its interpretation of existing tax legislation. However, the relevant tax authorities may have differing interpretations and the effects on the consolidated financial statements, if the authorities were successful in enforcing their interpretations, could be significant.

Litigation and claims

On 27 November 2001, Archangel Diamond Corporation ("ADC"), a Canadian diamond development company, filed a lawsuit in the Denver District Court, Colorado against AO Arkhangelskgeoldobycha ("AGD"), a Group company, and the Company (together the "Defendants"). ADC alleged that the Defendants interfered with the transfer of a diamond exploration license to Almazny Bereg, a joint venture between ADC and AGD. ADC claimed compensatory damages of $1.2 billion (77.1 billion RUB) and punitive damages of $3.6 billion (231.3 billion RUB). On 15 October 2002, the District Court dismissed the lawsuit for lack of personal jurisdiction. This ruling was upheld by the Colorado Court of Appeals on 25 March 2004. However, on 21 November 2005, due to a procedural error, the Colorado Supreme Court remanded the case to the Colorado Court of Appeals and the Colorado Court of Appeals remanded the case to the District Court. On 20 October 2011, the Denver District Court dismissed all claims against the Company for lack of jurisdiction. On 23 August 2012, the Colorado Court of Appeals affirmed this decision. On 1 July 2013, the Colorado Supreme Court denied ADC's Petition for Writ of Certiorari. The case in the state court is therefore over.

On 6 January 2012, ADC filed a lawsuit in the US District Court for the District of Colorado (federal court) reasserting almost identical claims asserted in the aforementioned lawsuit and dismissed by the Denver District Court (state court). In the federal Court case, the Company has filed a Motion to Dismiss. On 18 December 2014, the federal court granted the motion based on lack of personal jurisdiction over the Company and the doctrine of "forum non conveniens". ADC filed a notice of appeal in the US Court of Appeals for the Tenth Circuit. On 9 February 2016, the US Court of Appeals for the Tenth Circuit affirmed the dismissal of the case on "forum non conveniens" grounds. On 23 February 2016, ADC filed a Petition for rehearing and for "rehearing en banc". On 1 April 2016, the US Court of Appeals for the Tenth Circuit denied both ADC'c Petition for rehearing and for "rehearing en banc". On 28 July 2016, ADC filed a Petition for Writ of Certiorari. The Company plans to seek dismissal of the case and vigorously defend the matter. Management does not believe that the ultimate resolution of this matter will have a material adverse effect on the Group's financial position.

In June 2014, the prosecutors with the Ploesti Court of Appeals (hereinafter the "Prosecutor's Office") issued an order on initiation of criminal proceedings and brought charges against PETROTEL-LUKOIL S.A. refinery, a Group company, and its general director based on alleged tax evasion and money laundering. Later the Prosecutor's Office added bad faith use of the company's credit and money laundering charges for 2008-2010 against LUKOIL Europe Holdings B.V., a Group company. The amount of the claim is not finalised. LUKOIL LUBRICANTS EAST EUROPE S.R.L., LUKOIL ENERGY & GAS ROMANIA S.R.L., Group companies, and a number of Romanian legal entities not affiliated with the Group are also considered to be suspects in this criminal case. At the moment a preliminary investigation of the criminal case is being conducted. Tax audits of PETROTEL-LUKOIL S.A. have not revealed any material violations so far. In July 2015, a new charge in respect of bad faith use of the company's credit and money laundering was brought against the general director and several officers of PETROTEL-LUKOIL S.A. A similar charge was brought against LUKOIL Europe Holdings B.V. and PETROTEL-LUKOIL S.A. for 2011-2014. On 3 August 2015, the Prosecutor's Office issued the final indictment on the new charges and submitted the case to the Prahova Tribunal for further consideration by the preliminary chamber judge. The allegations of bad faith use of the company's credit in respect of PETROTEL-LUKOIL S.A. were excluded from the final indictment. Following the preliminary hearing the Prosecutor's Office revised the amount of damage claimed from $2.2 billion (141.4 billion RUB) to $1.5 billion (96.4 billion RUB). This amount is not final. During the entire trial it may be revised by the Tribunal on the basis of evidence produced. On 15 December 2015, the Prahova Tribunal ascertained that there are numerous irregularities in the indictment act and returned the criminal file to the Prosecutor's Office. The solution was confirmed by the Ploesti Court of Appeal on 19 January 2016. However, the Prosecutor has prepared a new indictment act based on the same accusations which were submitted to the Prahova Tribunal on 22 January 2016. On 18 April 2016, the preliminary hearing chamber of the Prahova Tribunal decided on the hearing of the case on the merits. Moreover, on 10 May 2016, the Prahova Tribunal lifted all preventive measures that were in effect against the accused individuals. At the current stage of the hearings the defendants are making oral statements. Next hearing on the merits will take place on 22 September 2016. Management of PETROTEL-LUKOIL S.A. and its tax and legal counsel are actively defending the lawful rights and interests of the refinery, provide all required opinions, clarifications and comments, and prepare an exhaustive set of evidence to fully rebut the charges brought by the Prosecutor's Office. Management does not believe that the outcome of this matter will have a material adverse effect on the Group's financial position.

LUKOIL Overseas Karachaganak B.V., a Group company, among other contractors, is involved in the dispute related to cost recovery and calculation of the "fairness index" in accordance with the Final Production Sharing Agreement in respect of the Karachaganak field in Kazakhstan. An estimated total of claims filed by the Republic of Kazakhstan is about $1.8 billion (115.7 billion RUB), a share of LUKOIL Overseas Karachaganak B.V. is about $243 million (15.6 billion RUB). At the moment the parties are negotiating an amicable settlement of this dispute. Management does not believe that the ultimate resolution of this matter will have a material adverse effect on the Group's financial position.

The Group is involved in various other claims and legal proceedings arising in the normal course of business. While these claims may seek substantial damages against the Group and are subject to uncertainty inherent in any litigation, management does not believe that the ultimate resolution of such matters will have a material adverse impact on the Group's operating results or financial condition.

Political situation

Political and economic situation in Ukraine remained unstable during 2015-2016. Though the Group's assets and operations in Ukraine are not material, the Group monitors the situation and assesses the risks associated with its operations in Ukraine.

In July-September 2014, the United States ("US"), the European Union ("EU") and other countries imposed a set of economic sanctions on Russia, including certain sectoral sanctions which affect Russian oil and gas companies. Such sectoral sanctions prohibit US and the EU companies and individuals from providing, exporting, or reexporting directly or indirectly, goods, services (except for financial services), or technology in support of exploration or production for deepwater, Arctic offshore or shale projects on the territory of the Russian Federation. The Company considers these sanctions in its activities, continuously monitors them and analyses the effect of the sanctions on the Company's financial position and results of operations.

The Group is exposed to political, economic and legal risks due to its operations in Iraq. Management monitors the risks associated with the projects in Iraq and believes that there is no adverse effect on the Group's financial position that can be reasonably estimated at present.

Note 26. Related party transactions

In the rapidly developing business environment in the Russian Federation, companies and individuals have frequently used nominees and other forms of intermediary companies in transactions. The senior management of the Company believes that the Group has appropriate procedures in place to identify and properly disclose transactions with related parties in this environment and has disclosed all of the relationships identified which it deemed to be significant. Related party sales and purchases of oil and oil products were primarily to and from associated companies.

Outstanding balances with related parties were as follows.

 
                          30 June  31 December 
                             2016         2015 
-----------------------   -------  ----------- 
Accounts receivable         9,097       10,925 
Other financial assets    100,069       98,538 
------------------------  -------  ----------- 
Total assets              109,166      109,463 
------------------------  -------  ----------- 
Accounts payable            8,538        8,458 
Loans and borrowings        5,063        5,747 
------------------------  -------  ----------- 
Total liabilities          13,601       14,205 
------------------------  -------  ----------- 
 

Related party transactions were as follows.

 
                         For the three   For the three     For the six     For the six 
                          months ended    months ended    months ended    months ended 
                          30 June 2016    30 June 2015    30 June 2016    30 June 2015 
----------------------  --------------  --------------  --------------  -------------- 
 Sales of oil and oil 
  products                       5,453           8,452           9,834          16,035 
 Other sales                       452             382             846             741 
 Purchases of oil and 
  oil products                  22,297          16,335          35,442          33,513 
 Other purchases                   461           1,392           2,685           3,435 
 Loans given                     4,105           1,350          12,529           1,869 
 Loans received                  1,548           8,537           2,238          11,333 
----------------------  --------------  --------------  --------------  -------------- 
 

Note 27. Compensation plan

In December 2012, the Company introduced a compensation plan available to certain members of management for the period from 2013 to 2017, which is based on assigned shares and provides compensation consisting of two parts. The first part represents annual bonuses that are based on the number of assigned shares and amount of dividend per share. The payment of these bonuses is contingent on the Group meeting certain financial KPIs in each financial year. The second part is based upon the Company's common shares appreciation from 2013 to 2017, with rights vesting after the date of the compensation plan's termination. The number of assigned shares is approximately 19 million shares.

For the first part of the share plan the Group recognised a liability based on expected dividends and number of assigned shares. The second part of the share plan was also classified as liability settled. The reporting date fair value of this part of the plan was estimated at 15,711 million RUB, using the Black-Scholes-Merton option-pricing model. The fair value was estimated assuming a risk-free interest rate of 9.53% per annum, an expected dividend yield of 7.08% per annum, an expected time to maturity of two years and a volatility factor of 14.99%. The expected volatility factor for the annual weighted average share price was estimated based on the historical volatility of the Company's shares for the previous ten years from 2006 till 2015.

Related to this share plan the Group recognised 2,400 million RUB of compensation expenses during the three months ended 30 June 2016, 557 million RUB of income during the three months ended 30 June 2015, 6,344 million RUB and 3,585 million RUB of compensation expenses during the six months ended 30 June 2016 and 2015, respectively. At 30 June 2016 and 31 December 2015, amounts of 16,042 million RUB and 9,698 million RUB related to this plan are included in "Provisions" of the consolidated statement of financial position, respectively.

At 30 June 2016, there was 4,713 million RUB of total unrecognized compensation cost related to unvested benefits. This cost is expected to be recognized periodically by the Group up to December 2017.

Note 28. Segment information

The Group has the following operating segments - exploration and production; refining, marketing and distribution; corporate and other business segments. These segments have been determined based on the nature of their operations. Management on a regular basis assesses the performance of these operating segments. The exploration and production segment explores for, develops and produces primarily crude oil. The refining, marketing and distribution segment processes crude oil into refined products, purchases, sells and transports crude oil and refined petroleum products, refines and sells chemical products, produces steam and electricity, distributes them and provides related services. The corporate and other business operating segment includes activities of the Company and businesses beyond the Group's traditional operations.

Geographical segments are based on the area of operations and include two segments: Russia and International.

EBITDA is a supplemental non-IFRS financial measure used by management to evaluate segments performance. EBITDA is defined as profit before interest, income taxes, depreciation and amortisation.

Operating segments

For the three months ended 30 June 2016

 
                                               Refining, 
                          Exploration          marketing   Corporate 
                       and production   and distribution   and other  Elimination  Consolidated 
--------------------  ---------------  -----------------  ----------  -----------  ------------ 
Sales and other 
 operating revenues 
  Third parties                42,485          1,288,758       7,716            -     1,338,959 
  Inter-segment               382,814             15,782      12,457    (411,053)             - 
--------------------  ---------------  -----------------  ----------  -----------  ------------ 
Total revenues                425,299          1,304,540      20,173    (411,053)     1,338,959 
--------------------  ---------------  -----------------  ----------  -----------  ------------ 
Operating expenses             67,355             59,393       5,063     (18,102)       113,709 
Selling, general 
 and administrative 
 expenses                       9,957             30,866      12,858      (8,379)        45,302 
Profit (loss) 
 for the period 
 attributable 
 to PJSC LUKOIL 
 shareholders                  67,519             24,299    (28,071)      (1,180)        62,567 
EBITDA                        134,701             50,192    (26,532)        1,358       159,719 
  Income tax 
   expense                                                                             (17,957) 
  Finance income                                                                          3,511 
  Finance costs                                                                        (11,098) 
  Depreciation, 
   depletion and 
   amortisation                                                                        (71,608) 
Profit for 
 the period 
 attributable 
 to PJSC LUKOIL 
 shareholders                                                                            62,567 
--------------------  ---------------  -----------------  ----------  -----------  ------------ 
 

For the three months ended 30 June 2015

 
                                               Refining, 
                          Exploration          marketing   Corporate 
                       and production   and distribution   and other  Elimination  Consolidated 
--------------------  ---------------  -----------------  ----------  -----------  ------------ 
Sales and other 
 operating revenues 
  Third parties                64,659          1,405,223       7,084            -     1,476,966 
  Inter-segment               444,413             13,120      16,758    (474,291)             - 
--------------------  ---------------  -----------------  ----------  -----------  ------------ 
Total revenues                509,072          1,418,343      23,842    (474,291)     1,476,966 
--------------------  ---------------  -----------------  ----------  -----------  ------------ 
Operating expenses             63,017             44,414       5,424      (7,027)       105,828 
Selling, general 
 and administrative 
 expenses                       9,841             30,251       9,034      (9,098)        40,028 
Profit (loss) 
 for the period 
 attributable 
 to PJSC LUKOIL 
 shareholders                  63,312             22,766    (21,885)        (445)        63,748 
EBITDA                        159,295             44,460    (23,595)      (3,545)       176,615 
  Income tax 
   expense                                                                             (18,819) 
  Finance income                                                                          4,036 
  Finance costs                                                                        (11,026) 
  Depreciation, 
   depletion and 
   amortisation                                                                        (87,058) 
Profit for 
 the period 
 attributable 
 to PJSC LUKOIL 
 shareholders                                                                            63,748 
--------------------  ---------------  -----------------  ----------  -----------  ------------ 
 

For the six months ended 30 June 2016

 
                                               Refining, 
                          Exploration          marketing   Corporate 
                       and production   and distribution   and other  Elimination  Consolidated 
--------------------  ---------------  -----------------  ----------  -----------  ------------ 
Sales and other 
 operating revenues 
  Third parties                95,462          2,400,709      20,462            -     2,516,633 
  Inter-segment               693,546             31,983      25,906    (751,435)             - 
--------------------  ---------------  -----------------  ----------  -----------  ------------ 
Total revenues                789,008          2,432,692      46,368    (751,435)     2,516,633 
--------------------  ---------------  -----------------  ----------  -----------  ------------ 
Operating expenses            133,623            104,645       9,524     (20,839)       226,953 
Selling, general 
 and administrative 
 expenses                      19,976             66,697      24,903     (18,451)        93,125 
Profit (loss) 
 for the period 
 attributable 
 to PJSC LUKOIL 
 shareholders                 117,994             56,211    (68,727)         (86)       105,392 
EBITDA                        261,611            109,991    (66,422)           18       305,198 
  Income tax 
   expense                                                                             (29,723) 
  Finance income                                                                          7,342 
  Finance costs                                                                        (21,469) 
  Depreciation, 
   depletion and 
   amortisation                                                                       (155,956) 
Profit for 
 the period 
 attributable 
 to PJSC LUKOIL 
 shareholders                                                                           105,392 
--------------------  ---------------  -----------------  ----------  -----------  ------------ 
 

For the six months ended 30 June 2015

 
                                               Refining, 
                          Exploration          marketing   Corporate 
                       and production   and distribution   and other  Elimination  Consolidated 
--------------------  ---------------  -----------------  ----------  -----------  ------------ 
Sales and other 
 operating revenues 
  Third parties               126,470          2,777,380      13,421            -     2,917,271 
  Inter-segment               867,940             27,680      28,600    (924,220)             - 
--------------------  ---------------  -----------------  ----------  -----------  ------------ 
Total revenues                994,410          2,805,060      42,021    (924,220)     2,917,271 
--------------------  ---------------  -----------------  ----------  -----------  ------------ 
Operating expenses            126,479             87,242      10,808     (13,020)       211,509 
Selling, general 
 and administrative 
 expenses                      20,088             60,740      19,022     (18,637)        81,213 
Profit (loss) 
 for the period 
 attributable 
 to PJSC LUKOIL 
 shareholders                 137,754             62,923    (20,875)     (12,023)       167,779 
EBITDA                        312,734            115,273    (20,907)     (16,189)       390,911 
  Income tax 
   expense                                                                             (43,692) 
  Finance income                                                                          8,567 
  Finance costs                                                                        (22,486) 
  Depreciation, 
   depletion and 
   amortisation                                                                       (165,521) 
Profit for 
 the period 
 attributable 
 to PJSC LUKOIL 
 shareholders                                                                           167,779 
--------------------  ---------------  -----------------  ----------  -----------  ------------ 
 

Geographical segments

 
 
                                      For the    For the 
                                        three      three      For the      For the 
                                       months     months   six months   six months 
                                        ended      ended        ended        ended 
                                      30 June    30 June      30 June      30 June 
                                         2016       2015         2016         2015 
Sales of crude oil within 
 Russia                                23,404     37,859       44,744       75,232 
Export of crude oil and 
 sales of crude oil by 
 foreign subsidiaries                 340,858    390,764      633,406      771,001 
Sales of petroleum products 
 within Russia                        146,110    149,217      276,286      280,196 
Export of petroleum products 
 and sales of petroleum 
 products by foreign subsidiaries     740,748    817,644    1,365,635    1,620,430 
Sales of chemicals within 
 Russia                                 8,915      6,296       18,094        9,394 
Export of chemicals and 
 sales of chemicals by 
 foreign subsidiaries                   8,804      8,875       18,962       17,089 
Sales of gas and gas products 
 within Russia                          8,582      9,533       17,820       18,831 
Export of gas products 
 and sales of gas and gas 
 products by foreign subsidiaries      19,877     21,187       44,285       48,859 
Sales of energy and related 
 services within Russia                11,642     11,523       30,678       29,420 
Sales of energy and related 
 services by foreign subsidiaries       2,797      1,719        6,525        4,209 
Other sales within Russia              12,677      9,797       22,896       18,628 
Other export sales and 
 other sales of foreign 
 subsidiaries                          14,545     12,552       37,302       23,982 
----------------------------------  ---------  ---------  -----------  ----------- 
Total sales                         1,338,959  1,476,966    2,516,633    2,917,271 
----------------------------------  ---------  ---------  -----------  ----------- 
 

For the three months ended 30 June 2016

 
                                          Russian 
                                       Federation  International  Elimination  Consolidated 
------------------------------------  -----------  -------------  -----------  ------------ 
Sales and other operating 
 revenues 
 Third parties                            224,961      1,113,998            -     1,338,959 
 Inter-segment                            272,210            732    (272,942)             - 
------------------------------------  -----------  -------------  -----------  ------------ 
Total revenues                            497,171      1,114,730    (272,942)     1,338,959 
------------------------------------  -----------  -------------  -----------  ------------ 
Operating expenses                         81,746         29,386        2,577       113,709 
Selling, general and administrative 
 expenses                                  24,937         21,286        (921)        45,302 
Profit for the period attributable 
 to PJSC LUKOIL shareholders               58,503          6,049      (1,985)        62,567 
EBITDA                                    125,434         35,635      (1,350)       159,719 
------------------------------------  -----------  -------------  -----------  ------------ 
 

For the three months ended 30 June 2015

 
                                          Russian 
                                       Federation  International  Elimination  Consolidated 
------------------------------------  -----------  -------------  -----------  ------------ 
Sales and other operating 
 revenues 
 Third parties                            229,945      1,247,021            -     1,476,966 
 Inter-segment                            320,174          1,474    (321,648)             - 
------------------------------------  -----------  -------------  -----------  ------------ 
Total revenues                            550,119      1,248,495    (321,648)     1,476,966 
------------------------------------  -----------  -------------  -----------  ------------ 
Operating expenses                         78,785         29,575      (2,532)       105,828 
Selling, general and administrative 
 expenses                                  20,121         21,032      (1,125)        40,028 
Profit (loss) for the period 
 attributable to PJSC LUKOIL 
 shareholders                              68,049        (3,397)        (904)        63,748 
EBITDA                                    125,477         51,775        (637)       176,615 
------------------------------------  -----------  -------------  -----------  ------------ 
 

For the six months ended 30 June 2016

 
                                          Russian 
                                       Federation  International  Elimination  Consolidated 
------------------------------------  -----------  -------------  -----------  ------------ 
Sales and other operating 
 revenues 
 Third parties                            429,952      2,086,681            -     2,516,633 
 Inter-segment                            509,437          1,327    (510,764)             - 
------------------------------------  -----------  -------------  -----------  ------------ 
Total revenues                            939,389      2,088,008    (510,764)     2,516,633 
------------------------------------  -----------  -------------  -----------  ------------ 
Operating expenses                        155,859         61,275        9,819       226,953 
Selling, general and administrative 
 expenses                                  48,874         46,058      (1,807)        93,125 
Profit for the period attributable 
 to PJSC LUKOIL shareholders               99,012          7,277        (897)       105,392 
EBITDA                                    219,209         86,517        (528)       305,198 
------------------------------------  -----------  -------------  -----------  ------------ 
 

For the six months ended 30 June 2015

 
                                          Russian 
                                       Federation  International  Elimination  Consolidated 
------------------------------------  -----------  -------------  -----------  ------------ 
Sales and other operating 
 revenues 
 Third parties                            444,517      2,472,754            -     2,917,271 
 Inter-segment                            648,487          2,757    (651,244)             - 
------------------------------------  -----------  -------------  -----------  ------------ 
Total revenues                          1,093,004      2,475,511    (651,244)     2,917,271 
------------------------------------  -----------  -------------  -----------  ------------ 
Operating expenses                        147,953         62,236        1,320       211,509 
Selling, general and administrative 
 expenses                                  42,109         41,357      (2,253)        81,213 
Profit for the period attributable 
 to PJSC LUKOIL shareholders              179,874            795     (12,890)       167,779 
EBITDA                                    303,605        102,648     (15,342)       390,911 
------------------------------------  -----------  -------------  -----------  ------------ 
 

In the International segment the Group receives the most substantial revenues in Switzerland and the USA.

 
                      For the   For the 
                        three     three      For the      For the 
                       months    months   six months   six months 
                        ended     ended        ended        ended 
                      30 June   30 June      30 June      30 June 
                         2016      2015         2016         2015 
-------------------  --------  --------  -----------  ----------- 
Sales revenues 
    in Switzerland    641,323   683,645    1,148,389    1,368,906 
    in the USA        127,777   130,394      210,305      212,498 
-------------------  --------  --------  -----------  ----------- 
 

These amounts are attributed to individual countries based on the jurisdiction of subsidiaries making the sale.

Note 29. Fair value

There are the following methods of fair value measurement based on the valuation technique:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability,

either directly or indirectly;

Level 3: unobservable inputs.

The following table shows the carrying amounts and fair values of financial assets and financial liabilities included in the consolidated statement of financial position at 30 June 2016 and 31 December 2015.

 
                                     Fair value 
---------------  ---------  --------------------------- 
 30 June          Carrying     Level    Level     Level 
  2016              amount         1        2         3     Total 
---------------  ---------  --------  -------  --------  -------- 
 Financial 
  assets: 
 Commodity 
  derivative 
  contracts         14,640         -   14,640         -    14,640 
 Available 
  for sale 
  securities         3,813         -        -     3,813     3,813 
---------------  ---------  --------  -------  --------  -------- 
 Financial 
  liabilities: 
 Commodity 
  derivative 
  contracts         16,969         -   16,969         -    16,969 
 Long-term 
  debt             799,520   376,856        -   452,253   829,109 
---------------  ---------  --------  -------  --------  -------- 
 
 
                                     Fair value 
---------------  ---------  --------------------------- 
 31 December      Carrying     Level    Level     Level 
  2015              amount         1        2         3     Total 
---------------  ---------  --------  -------  --------  -------- 
 Financial 
  assets: 
 Commodity 
  derivative 
  contracts         41,648         -   41,648         -    41,648 
 Available 
  for sale 
  securities         4,045         -        -     4,045     4,045 
---------------  ---------  --------  -------  --------  -------- 
 Financial 
  liabilities: 
 Commodity 
  derivative 
  contracts         10,827         -   10,827         -    10,827 
 Long-term 
  debt             820,493   400,140        -   392,952   793,092 
---------------  ---------  --------  -------  --------  -------- 
 

The fair values of cash and cash equivalents (Level 1), current and long-term accounts receivable (Level 3) are approximately equal to their value as disclosed in the consolidated statement of financial position. The fair value of long-term receivables was determined by discounting with estimated market interest rates for similar financing arrangements. The fair value of long-term loans (Level 3) was determined as a result of discounting using estimated market interest rates for similar financing arrangements. These amounts include all future cash outflows associated with the long-term debt repayments, including the current portion and interest. Market interest rates mean the rates of raising long-term debt by companies with a similar credit rating for similar periods, repayment schedules and similar other main terms. The fair value of bonds (Level 1) was determined based on market quotations at 30 June 2016 and 31 December 2015.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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