Full Year 2013 NK Lukoil OAO Earnings Conference Call (US GAAP)
Feb 19, 2014 AM EST
LKOH.MZ - NK Lukoil PAO Full Year 2013 NK Lukoil OAO Earnings Conference Call (US GAAP) Feb 19, 2014 / 12:00PM GMT ============================== Transcript ------------------------------ Editor: [1] ------------------------------ (Audio in progress) ------------------------------ Unidentified Company Representative [2] ------------------------------ Dear colleagues, Russia has just won a 6th golden medal in the Olympic Games. Congratulations. An American -- well, he is a Russian guy. He used to be American. Now he's Russian. It's all about love and family values. But on a more serious note, we're here today to present to you the financial results for 2013. You know that they are something special. We wanted to explain to you something [sustained]. The way we are going to work today, I will first make the presentation. I will take the questions, including the questions from the press. And after that, the analysts will stay in the audience and we will continue talking to them. But we begin with forward-looking statements. Main events of 2013. For the first time in recent years, we recorded an increase in production of oil. We continue modernizing our refineries. They remain the sources of high profit for the Company. Almost -- more than 30% of real profit is generated through Russian refining. We made a breakthrough to the Asia Pacific market with regard access to the recent system of pipelines, and right now, we are actually entering this market. You know that a decision was taken to expand ESPO, and we support that decision wholeheartedly, [whilst] the Company improved its rating. The outlook is stable. Key financial performance highlights. Any impact on the financial performance was due to the so-called non-cash write-offs explained by a number of factors; revaluation of assets in upstream and downstream. A number of assets were revalued, and we also had to write off a number of dry wells, primarily in Africa. So the Company maintained its cash flow despite a very grand, ambitious investment program in the last year. It means that the Company is governed very efficiently. Debt to capital ratio. Although investment went up, it stayed at a level of 12%. Net income, given all write-offs, was $7.8 billion, EBITDA $16.6 billion; and about $20 billion if you calculate the real money without the accounting effects. Lukoil keeps its strong financial position. The Company will continue paying out [high] dividends, just as we promised, [fixed income] growth, and maybe it will be even more adjusted in dollar terms given the depreciation of the ruble. In dollar terms, dividends will grow most likely. We continue to perform efficiently in our finances. Net income, excluding one-off non-cash effects; Lukoil is number 1 in terms of per boe of production and EBITDA per boe of production as well. What are the main reasons for such a large scale write-off? It all happened in one quarter almost. You know that from 2015, all large companies will have to migrate to IFRS, International Financial Reporting Standards. 2014 will be a year of transition. And in order to develop a standard approach and not to create divisions for coming years, the auditors recommended one of [cleaning] of accounts over the first year. What is the difference between IFRS and US GAAP? Where is Mr. Kozyrev? By the way, Mr. Kozyrev is present to answer your questions about that. Because it's [called often], and why this is important, as Mr. (inaudible) has already told you, we have started our transition to IFRS. And those of you who know how these things happen, you should know how the -- it comes, the reports look like in IFRS and US GAAP. You know the differences are really big and we want to transition to IFRS. We want to do it very smoothly and we want to apply a conservative policy during that time. On the slide, you can see the main factors that differentiate IFRS and US GAAP. Currency, functional currency and reporting currency, why this is important for you and why it is important for us, is because according to the Russian legislation. all financial reporting IFRS for Russian companies must be done in rubles. Rubles is the reporting currency. If you open now the report of Rosneft, you will see that this report is in rubles as well as [a lot of other] companies. And then there are also requirements of the standards, and requirements of the IFRS standards are much more rigid than US GAAP standards. They are much more strict. In US GAAP, our functional currency for [upstream] could have been US dollar, and in IFRS, most likely the functional currency for us will be the Russian ruble. What are the consequences of this step? You will see ForEx, the impact, which is different from the ForEx impact that you see now because there will be a recalculation from the functional currency to the reporting currency and back to the functional currency. If you look at the ForEx gain and losses, if you compare our accounts with Rosneft, it would not be a good comparison because the systems that we use are different and the implications for us are different. Property, plant and equipment. This is one of the major issues in transition to IFRS, the IFRS principle, underlying principle is a fair value of assets. And because of that, we are now completing initial evaluation of our assets, of our property, plant and equipment, as a result of this estimate. Certain difficult decisions have to be taken to exchange the value of our assets in US GAAP. It doesn't mean that when we switch to IFRS, we will write everything off. No, a reverse scenario is more likely. Initial estimate means a revaluation of both -- not only to lower the value but also to increase the value. We will see how things stand in 2016. And as to property, plant and equipment, the subsequent accounting, which is another issue, we'll have to do detailed accounting for every property, for every asset. For you and for us, it means more detailed information about the performance of every single property that we hold. And asset impairment, which is also a major issue in impairment [test], in US GAAP, this is done based on the following [trigger]. The [now] discounted cash flow, and only after that you apply future cash flows, discounted future cash flow. And in IFRS, discounted cash flow is applied straightaway for asset impairment. It means that IFRS is a much stricter standard. And disclosure of information in accordance with IFRS, we will have to present to you much more detailed information about our business, about our operations. And a separate component in our reporting is Company risks and the system of risk management. It will have to be presented separately in our reports in a very detailed fashion. So these are the main differences between IFRS and US GAAP, and you will see all of that in our report in 2016. We will publish those reports of 2014 and 2015 in 2016. And the performance that you see today, these results, these financial results are the implication of our preparation to switching to IFRS. Next slide. This is a description of total impairments that we had to do last year. You see here several productions, properties [South-Khylchuyuskoe], (inaudible) other fields, wells in Africa. And there is another set of properties in refining. Mainly it's petrochemistry in foreign countries and other downstream assets. Let's look at all of this in greater detail. South-Khylchuyuskoe field. Mr. Kozyrev said that the impairment test in IFRS is done per property. You see that we are writing off $110 million of South-Khylchuyuskoe field, but as the overall economic effect will be about $1 billion due to the potential of the use of the [field] infrastructure. In the past, we [include] the whole complex together and we had one kind of performance. But now, we have to calculate the assets separately, it means that South-Khylchuyuskoe field will have to be written off. You know that Conoco wrote it off immediately, and we are writing it off in two stages. We had hoped that we will be able to slow down the decline in carbonate strata, but you see that the reserves that are left are not impressive; only $13 million boe. And it means that South-Khylchuyuskoe field will be written off, is written off, but the extent of the economic effect of the infrastructure, this infrastructure will be available to other -- this effect is impressive. Inzyreiskoe field, same story. Carbonate reservoirs will also have hope that the potential there will be greater. When we drilled, we had an expectation that it will exceed $100 million of barrels, but during production, we realized that our forecast of initial results are not confirmed. This field has infrastructure. This field, this infrastructure, can be made available to neighboring fields. According to new standards, it will have to be set aside and written off separately. ISAB. You know that it was not our best investment perhaps. We entered the asset when the refining margin was very good. After the crisis of 2008, the European market started shrinking and you see that about 2 million barrels of daily refining we lost. And Europe will close other refining capacity to approximately to the same amount in coming years. I had a meeting in Brussels with the commissaries who are responsible for European refining and I talked to them about the future of the industry. And I heard from them that, well, we lost shipbuilding. No-one remembers shipbuilding now in Europe; and, well, the plants have to close down. They should not be maintained. And I told them, well, you know that every year refining brings to Europe about EUR340 billion to the consolidated branches. Who is going to --? How are you going to replace that money? But I didn't get any answer to that question. So the problem that slowed down the ISAB project, which is two managing partners, you know that now there is just one managing partner, which is us. There is a roadmap now for ISAB. This roadmap addresses a number of issues. All the [loss draining] contracts were imposed on us by our Italian partners are either already closed, or will be closed, will be terminated. We'll cut the cost. We'll use a new blend, a more efficient blend; light oil that we get. And according to our estimates, from 2014 onwards, the losses on ISAB will start declining. And we expect that without significant investment, all this, with improvement of our operations, only through an improvement of our operations with feedstock and end product will be able bring this plant to operational profitability. But the refining industry in Europe is going through very hard times. Oil from Russia, the Persian Gulf, the United States; there is so much pressure now on this market, the European refining industry. Another asset that we must write off. For political reasons, you know what's going on in the Ukraine now, but Karpatneftekhim is an excellent production facility. It produces a number of construction polymers. And the economy of Ukraine also needs those polymers. Ukraine is a friendly country to Russia, but the economy has not been on the top of the agenda of this country for some time now, and we have plans with the government of this country together to reduce the [series] and to potentially cut the headcount, but we could not go through with this commitment and the auditors demanded that we write off $411 million. And so when the situation stabilizes and they agree one way or another, and when there is an active and acting government, we will start negotiations again, because this is a wonderful facility. It's a good plant. There is no other production facility that will produce industrial polymers of that quality and on this scale. But unfortunately, politics took us hostage. Power. We wrote off $270 million of Lukoil-Ecoenergo. You know that virtually all companies who own power assets have to do write-offs. The commitments that were given by the government for privatization were not met, especially in what concerns the tariffs. Freezing of tariffs leads to a number -- leads to a shortage. There was a difference in the prices on gas and electricity. It's an artificial difference, and artificially, but in practice, it creates losses. At the end of 2015, we expect to start [building our gas] from the [Caspian] to the southern consumers, and we expect to improve our performance in power greatly. We will be able to supply our own power stations with our own gas, and now we are currently negotiating with Gazprom to make sure that we'll be able to transport our own gas at a reasonable tariff, and then power generation will be viable. We cannot separate power generation and gas. The systems are interconnected, and all energy companies in the world are -- they all operate in this fashion, energy sites to gas. But right now, we have to separate them and do their accounting separately. Another significant write-off was Africa; dry wells, unfortunately. The three wells that we drilled in Sierra Leone, or Ivory Coast and Ghana, what we found, hydrocarbons was the modern -- even the most modern methods of finding hydrocarbons do not give any guarantee that you will be able to produce them commercially. We found hydrocarbons, but they're not much -- the reserves are low. Is our campaign in Africa over? No. We still have some optimism about [a few blocks] and rather will continue drilling because we made a discovery there. And there is hope that there will be structural [trips]. And independents made another discovery. There is one well we managed to get 100 barrels, and if we get confirmation from other wells, we'll be able to commercialize that project and then we'll be able to offset all the losses that we incurred in that region before. But we are cautious. Most likely in 2014 there will be no drilling. We will continue analyzing available information. Main operating results for the year. As I have already told you, there is an increase of production of 1.5%, because we acquired several new production assets, and decline of production in Western Siberia is slowing down. Refined products production is also up. We are talking here about the most [appealing] segment of our activity, and that's why we are currently lowering the crude oil exports. The macroeconomic environment. As you can see, compared to 2012, 2013 was lower by several percentage points. If you take our net income, and if you clean off the write-offs, you will not see any major differences. According to our projections, in 2014, we will exist on more or less the same pricing. Stability, that emerged in 2012; there will be some small volatility. The markets are reviving slowly but steadily, and OPEC is pursuing wise policy. They keep the prices stable despite the speculants -- despite this speculations. We expect the basic prices stay the same in 2014. In 2013, there was a devaluation of the ruble by 2.4%. You know that this process is evolving this year as well. On the whole, I have to say that this is a positive factor for companies such as ours, positive because if you take the free cash flow, more than 80% of our costs are in rubles and about 60% of our revenue is in foreign currency. That's why we are gaining here. [Taxes] didn't change, almost; they changed together with the prices. Hydrocarbon production. Lukoil is perhaps the only independent non-government oil company that managed to grow its production last year. Growth points. Rather expectedly, we see the emergence of a growth point. In Timan-Pechora, we invested in Yaregskoe and Usinskoe fields high viscous oils. As you can see, production has grown because of these two fields mainly, and also, we can, working with the [complex collectors] who are on Oschskoe field -- it used to be considered a bad field, not good for anything, but the horizontal wells with multi-zone [hydrofracking] produced excellent results. And Oschskoe and East-Lambeyshorskoe fields, still there is optimism. We made several good discoveries [underneath Oschskoe depression], and about 400 million/500 million barrels were discovered there in a recent time, which [gives us] a good, strong base for our development in Timan-Pechora. 2013 was a good year in some of our explorations, especially in Russia. New discoveries amounted to more than 600 million barrels. That's oil mainly, because in the past, we used to have many gas discoveries. This time it's oil. As you can see, we also stepped up investments into exploration. A number -- in 2013, we drilled 62 wells, while in 2012, we only drilled 43 exploration wells. 2013 was a year of a major acquisition. We acquired Samara-Nafta. We promise that this will be our growing assets that we will be able to manage more effectively than the previous owners, and we give a confirmation on our reports now, and the last year, oil production increased by 4.2%. We are restructuring the systems now so that oil can be delivered not using oil carriers or gasoline carriers, but we want to connect Samara-Nafta to Transneft pipeline so that we can save on ports and generate additional synergies. And in just one year, we managed to improve our oil reserves but need to [complete] for the European [area of] Russia. This is a very good performance in just half a year. Within 2014 (sic), with just one well, we managed to add an additional 3.4 million barrels of oil, and this is a highly [potential] company in Samara who will be able to replenish its reserves, that will be able to add on more -- many reserves as it produces every year. High-octane gasoline. You know that the allowances given to the Russian companies simulate a transition to Euro-5 standards. Those companies who [govern to the dollar first] can now profit from excise tax differentiation. We are compliant with the tripartite agreement which exists today between the companies and the government to modernize production facilities. Shall we remain the only Company to do this? Well, we are -- we can give promises only on our own behalf, and [we] promise to continue modernizing. Premium segment is actually development -- developing aircraft refueling business in Russia; gained 200% in the last four years. And the main financials is also given on this slide. 24. Sales improved in 2013. The prices were going down but our sales are going up which means that we are working. Net income. It went down, but this is a point mainly through the non-financial, non-cash write-offs. All other performance indicators I think are in line with our expectations and the models that you have. Operating expenses. Operating expenses are [rising] below inflation rate; about 4% on the whole. This is both production and refining. All other expenses related to power generation and petrochemistry, these expenses have increased, as explained through the growth in prices on feedstock. Transport and commercial expenses are within our promises and within the budget and the rules that we adopted for this year. On the fourth quarter of 2012, the yuan went down a little bit, but more -- the devaluation of the ruble played a small role in the first quarter. And in the second quarter, you will see an ever-more dramatic effect from the devaluation of the ruble. Lifting costs are under control as well, so the prices of electricity are growing and hard drilling is also of the number of horizontal wells is multi-zone fracturing has gone up significant for our Company. It means that the lifting costs per boe must also rise, but you can see that in terms of recent quarter, performance is rather stable. Financial position of the Company. Despite its very ambitious investment program of 2013, it was a record investment program, by the way, the financial performance remains stable. There was a slight increase in debt, but you can see that debt went up through an increase in the share of cheap debt capital; will continue doing the same in 2014. And then as we get compensation of our cost for [worse than a corner] from the Government [of Iraq], this share will be decreased. But otherwise, our potential for debt to capital] ratio is significant, and 2014 is the last year for the ambitious growth of our investment Company. In 2015/2016, our investment program will be more limited. 2014 is the year for the launch of Western Qurna, and all the investment in Filanovsky and in Uzbekistan gas project. We will start amortizing this project so that the capital expenses on them will scale down. So the point of fact, the capital expenses were not for our market conditions, so the Board of Directors will be to increase the pay-up of dividends on 2013 [on] 2012. And should everything go well, and there are no catastrophes on the market in 2014, our budget -- our assumption for the budget is that on 2015/2016, the dividends in our Company will continue to grow. We understand that unlike other markets, Russia finds itself in a rather critical scenario when the price of a company's shares is in proportion to the dividends paid out. It's not speculation any more. When the Company was [remanaged], is valued at a level of a good production company, so we take dividends extremely seriously, and there is no doubt that the dividend payout will continue to enhance. Net income reconciliation. You see the main factors to which the decline in profit can be attributed. Capital expenses. We have three major projects into which about $4 billion a year goes from [Ulyanovsk], Uzbekistan and Western Qurna, three major projects that consumed the investment. Our other projects are within the same corridor where they existed in, say, 2011 or 2012. In 2016, we will -- we should complete modernizing our refinery. Refining capacity has become a major source of income for our Company. 2014/2015 we will be closing down. We will be -- or rather we will be closing our major ambitious investment projects of Ulyanovsk, Uzbekistan and Western Qurna. In 2013, we invested $3.2 billion, plus 90% of that is Western Qurna We hope that in the next two years, we'll be able to recover those expenses. Environmental safety is Lukoil's priority, as you can tell from the slide in terms of our performance. So that when [area is sick], like waste water discharge or area contaminated lands or recycling, Lukoil remains the leader of the Russian oil industry. And in conclusion, I have to say that the Company moved from the [utilization] phase to the growth phase focusing on the long-term sustainable growth of production. We hope that when we launch our three ambitious projects, this growth will be even more active. It is important that in 2013, the Company [directs us to] strategic reserves of Russia and expands its [growth rate] through exploration. [Remember, we won an award]. And the Company's objective, brand new objective, is value creation and [exploiting] growth of dividends. The Company's management you will see that in the future will continue to buy back the shares of the Company. Your humble servants will [still be the same]. We believe that the shares of the Company is the best asset that you can afford today in the market, especially at today's prices. Thank you very much. Your questions now, please. We'll start with the journalists, and after that, we'll take all other questions. ============================== Questions and Answers ------------------------------ Unidentified Audience Member [1] ------------------------------ First quarter 2014, any more write-offs? And how big, if any? Second question is you said you're plan to continue moving eastwards. ------------------------------ Unidentified Company Representative [2] ------------------------------ I'll start with your first question first. First quarter 2014, no cash write-offs. There may be some ForEx changes because of changes in the ruble rates, and it will have an impact on the debt. There will be a ForEx effect on the debt. It's hard to predict where the ruble will end at the end of this quarter. The ruble is a rather volatile currency and we can't calculate that at the moment. But as to non-cash write-offs of assets in 2014, no write-offs are expected, non-cash write-offs. Can you take the [four], please? ------------------------------ Unidentified Company Representative [3] ------------------------------ It's not a write-off of an asset. What we are saying is fair value. We must understand the fair value of certain assets in the Company's portfolio according to IFRS standards. That's why technically we have these issues. The IFRS has its vision and the US GAAP has its vision of the value of our assets, and in order to make sure that in the future the value of the assets is comparable, as well as amortization values, as well as financial performance values. That's why we have to go into this exercise of one-off write-offs. So this was a technical exercise. This is a technical transition. So after that, there should be no write-offs. Obviously, if the asset in the future is performing sub-adequately, then maybe we'll do it as part of a normal accounting practice. But what has happened so far is a technical exercise. A write-off doesn't mean that we close down the property and we throw away the key. This is simply an impairment. Impairment is the best word for what has happened. ------------------------------ Unidentified Audience Member [4] ------------------------------ Yes, exactly. That's what I wanted to make sure that it just happened once and will not -- ------------------------------ Unidentified Company Representative [5] ------------------------------ In the P&L, for the transition purposes, yes, it happened once. ------------------------------ Unidentified Audience Member [6] ------------------------------ Transneft Rosneft additional shares; I don't understand why Rosneft has to get those additional shares. ------------------------------ Unidentified Company Representative [7] ------------------------------ Well, there is this initiative. ------------------------------ Unidentified Audience Member [8] ------------------------------ Well, yes, I understand that there is this initiative. Transneft has sufficient financial resources and I'm saying that they don't want to pay out dividends. ------------------------------ Unidentified Company Representative [9] ------------------------------ Well, we support the idea of expanding standing ESPO, [recent system of bank lines], but this year we are entering this year a specific market from the south. The profitable oil compensation orders we'll get from the Government of Iraq will be sold in the east. ------------------------------ Unidentified Audience Member [10] ------------------------------ Point of clarification; buyback of shares by the management. Last year, how much did the management buy out? Because we only have information for 2012. What about in 2013? What was the volume? ------------------------------ Unidentified Company Representative [11] ------------------------------ The management -- it's not in the report. I can tell you I bought -- I personally bought shares for [$400 million] last year. It's not at 10%. I'm getting there, but I'm not there yet. It's not 10% share. ------------------------------ Unidentified Audience Member [12] ------------------------------ (Inaudible) at the end of last year it was rumored that Lukoil wants to go into a gas project in Uzbekistan. Was it just an idea or is it practical? ------------------------------ Unidentified Company Representative [13] ------------------------------ No, we have a commitment. We made a commitment to build a gas processing unit in Gissar. This is our commitment to produce gas. It must be treated, must be fractionated, and it must be made into marketable gas. ------------------------------ Unidentified Audience Member [14] ------------------------------ No, as far as I understood, it was a different plant that was rumored. ------------------------------ Unidentified Company Representative [15] ------------------------------ No, it was just a rumor and just a project and, no, there is a technological processing facility, which is part of gas production, and then there is a greater treatment, greater processing. So first part, yes. Second part is just a project at this point. ------------------------------ Unidentified Audience Member [16] ------------------------------ What about the issue of Transneft shares? Do you support the idea? ------------------------------ Unidentified Company Representative [17] ------------------------------ I've heard that Transneft has sufficient resources to expand ESPO. That's all I have to say. I can't support or not support. That's my personal point of view. ------------------------------ Unidentified Audience Member [18] ------------------------------ In the presentation, you say that your projection for 2014 and the growth of hydrocarbon production is to add an additional [3%]. What about a breakdown? ------------------------------ Unidentified Company Representative [19] ------------------------------ Well, I can't give you a breakdown right now. We expect there will be growth in production of both gas and oil. ------------------------------ Unidentified Audience Member [20] ------------------------------ (Inaudible). The Iraqi oil, you said you will sell it in the East. How much in [form]? ------------------------------ Unidentified Company Representative [21] ------------------------------ Well, it wouldn't be proper of me to give you any details right now before we agree with the Government of Iraq the size of the compensation that we'll get. ------------------------------ Unidentified Audience Member [22] ------------------------------ It hasn't been agreed yet? ------------------------------ Unidentified Company Representative [23] ------------------------------ Well, it is agreed, but there is a schedule, and there is a certain procedure and there is a process of consolidating our losses with them. It's a delicate issue and I cannot disclose any details before everything is signed. I heard yesterday or today -- I just brought it -- I don't want to talk about Ukraine right now. The metro is not working in Kiev today. I have no comments. I can't -- no comment. ------------------------------ Unidentified Audience Member [24] ------------------------------ Is the pipeline working? That is the question. ------------------------------ Unidentified Company Representative [25] ------------------------------ Well, we use the system, it was efficient. They switched on reverse. It's not working any more. We sold the Odessa plant. I can't give you any comment. Every hour brings news from the Ukraine. I don't want to comment anything about Ukraine now. ------------------------------ Unidentified Audience Member [26] ------------------------------ Investment CapEx, acquisitions, what was the total volume of investment of Lukoil in 2013? ------------------------------ Unidentified Company Representative [27] ------------------------------ It was around $17 billion/$18 billion -- around $17 billion. ------------------------------ Unidentified Audience Member [28] ------------------------------ Apart from Iraq, what is the oil production growth in terms of all Lukoil outside of Russia? ------------------------------ Unidentified Company Representative [29] ------------------------------ Well, Western Africa is still on the agenda. It's a pity that we have to write off almost $300 million, but now we understand the geology of the region very well. You can't understand the geology without drilling. So I have this cautious optimism. About two more blocks, every well produced discoveries. If it were not deepwater, if it were on onshore, it would have probably been a very good project, but in deepwater, you have to be more and not what we discovered. Qurna means growth center, and then Uzbekistan among our international assets. We also signed an agreement with Mexico as well; you know, with Pemex. Mexico is one of the most venerable oil powers in the world, and maybe we can have our development, our next development center there. ISAB blends with [zelulite]. ------------------------------ Unidentified Audience Member [30] ------------------------------ Zelulite and what; blends with what? ------------------------------ Unidentified Company Representative [31] ------------------------------ Well, we usually blend all the time to ensure best output at best prices. Zelulite is one of the excellent opportunities. ------------------------------ Unidentified Audience Member [32] ------------------------------ So buy them from the sellers. ------------------------------ Unidentified Company Representative [33] ------------------------------ No. We do not disclose our commercial secrets. So that's how we do it. ------------------------------ Unidentified Audience Member [34] ------------------------------ Treasury shares, what do you mean treasury bills? ------------------------------ Unidentified Company Representative [35] ------------------------------ We have treasury bills. ------------------------------ Unidentified Audience Member [36] ------------------------------ Do you have any plans to dispose of them or anything? ------------------------------ Unidentified Company Representative [37] ------------------------------ Well, I know that Russia adopted the amendments that are necessary to get leasing for an agreement with [Iovska]. I hope that this year the Central Bank will join the Iovska agreement, and then we will be able to get back to this idea of getting leasing somewhere in the East, either in Hong Kong or in Singapore. I hoped that it would happen at the end of last year, 2013, but the national currency today is a greater priority and including of the banking industry. But on the legitimacy level, there is the protocol. The Central Bank has the right to sign the Iovska protocol, and now it's up to the Central Bank to go there and to sign the protocol. So as soon as the protocol is signed, we will get back to this idea of getting a listing. ------------------------------ Unidentified Audience Member [38] ------------------------------ You said that Lukoil is interested in the East. Do you have plans to export (inaudible) million tons of oil, or you will --? ------------------------------ Unidentified Company Representative [39] ------------------------------ Well, wherever netbacks are greater, we'll use that route, euros included, the one that you mentioned. ------------------------------ Unidentified Audience Member [40] ------------------------------ So your specific figures, how much will be pumped through the pipeline? ------------------------------ Unidentified Company Representative [41] ------------------------------ Well, I can't tell right now. ------------------------------ Unidentified Company Representative [42] ------------------------------ Thank you very much, gentlemen and ladies, for your participation. [Technical difficulty] More information will be presented there, and not only about 2013, but also a glance for 2014, 2015 and 2016. Everyone present are invited. Barclays will be organizing that presentation, so everyone is welcome. I hope most of the questions related to the future you will save for the London event. Thank you. ------------------------------ Unidentified Company Representative [43] ------------------------------ Very well, gentlemen, your turn now. You asked that there should be no journalists in the room when you ask your questions, so the time is now. Any questions? ------------------------------ Unidentified Audience Member [44] ------------------------------ First, on Siberia. You said production declined and the depths of drilling went up. How did this affect costs? ------------------------------ Unidentified Company Representative [45] ------------------------------ Well, a horizontal well, your regular horizontal well, costs about -- [Technical difficulty] ------------------------------ Operator [46] ------------------------------ Ladies and gentlemen, that does conclude your conference for today. If you are still connected, please feel free to disconnect. Have a wonderful day. ------------------------------ Editor [47] ------------------------------ Statements in English on this transcript were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event. ------------------------------ Definitions ------------------------------ PRELIMINARY TRANSCRIPT: "Preliminary Transcript" indicates that the Transcript has been published in near real-time by an experienced professional transcriber. While the Preliminary Transcript is highly accurate, it has not been edited to ensure the entire transcription represents a verbatim report of the call. 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