Yukos Annual Report 2002

YUKOS
U.S. GAAP
Consolidated
Financial
Statements 2
1
3
4
5
6
7
8
1
9 2
10 3
4
11
5
12 6
Table of Contents
7
13
Report of Independent Accountants p. 41 8
14 9
U.S. GAAP Consolidated Financial Statements p. 42
10
15
Management’s Discussion and Analysis p. 73
11
16 12
Shareholder Information p. 96
40.
page
December 31, 2002
report of independent accountants
To the Board of Directors and

Shareholders of YUKOS Oil Company
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, of cash
flows, and of changes in shareholders’ equity present fairly, in all material respects, the financial position of YUKOS Oil
Company and its subsidiaries at December 31, 2002 and 2001, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted
in the United States of America. These financial statements are the responsibility of the Company’s management; our
responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the United States of America, which require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material mis-
statement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
Moscow, Russian Federation

May 8, 2003
41.
page
2002
YUKOS Oil Company
Annual Report 2002
YUKOS Oil Company consolidated balance sheets

(Expressed in millions of U.S. Dollars, except as indicated)
December 31, Notes 2002 2001
Assets
Cash and cash equivalents 4 982 684
Cash and cash equivalents deposited with equity investees 4, 16 665 725
Marketable securities and other short-term investments 5 2,348 2,036
Accounts and notes receivable, net 7 2,446 1,906
Inventories 8 541 390
Current deferred income tax asset and other current assets 14 250 169
Total current assets 7,232 5,910
Equity investees and long-term investments 9, 10 446 204
Property, plant and equipment, net 11 6,116 3,763
Noncurrent deferred income tax asset 14 107 71
Other long-term assets 493 554
Total assets 14,394 10,502
Liabilities and Shareholders’ Equity
Short-term debt and current portion of long-term debt 12 121 109
Trade accounts and notes payable 502 294
Other accounts payable and accrued liabilities 13 664 319
Taxes payable 14 392 512
Current deferred income tax liability 14 25 30
Total current liabilities 1,704 1,264
Long-term debt 12 378 7
Noncurrent deferred income tax liability 14 1,121 669
Other long-term liabilities 320 317
Total liabilities 3,523 2,257
Minority interest 316 182
Ordinary shares (authorized and issued at December 31, 2002
42.
and 2001 – 2,237 million shares; nominal value – RR 0.004 per share) 9 9
Additional paid in capital 934 924
Retained earnings 9,599 7,214
Accumulated other comprehensive income (net of income tax expense of
USD 6 and of USD 1 at December 31, 2002 and 2001, respectively) 117 26
page
Ordinary shares held in treasury, at cost (December 31, 2002 – 81 million shares;
December 31, 2001 – 85 million shares) (104) (110)
Total shareholders’ equity 10,555 8,063
Commitments and contingent liabilities 19 – –
Total liabilities and shareholders’ equity 14,394 10,502
The accompanying notes are an integral part of these consolidated financial statements.
2002
YUKOS Oil Company consolidated statements of income
Year ended December 31, Notes 2002 2001 2000
Sales and other operating revenues (including excise and fuel sales tax
of USD 459, USD 476 and USD 245 for the years ended
December 31, 2002, 2001 and 2000, respectively) 20 11,373 9,461 9,032
Operating costs and other deductions
Crude oil and petroleum products purchased 340 481 662
Operating expenses 1,479 1,182 872
Distribution expenses 1,514 1,048 697
Selling, general and administrative expenses 835 671 562
Depreciation, depletion and amortization 459 270 218
Taxes other than income tax 14 3,087 2,075 1,246
Write-offs of property and investments 39 48 52
Goodwill impairment 50 – –
Exploration expenses 87 52 35
Total operating costs and other deductions 7,890 5,827 4,344
Other income (expenses)
Realized gains on marketable securities, net 5 46 128 165
Income from equity affiliates 9 29 7 15
Other income, net 101 3 67
Interest income 5 333 309 132
Interest expense (64) (45) (160)
Exchange gain (loss), net (118) (170) 43
Total other income, net 327 232 262
Income before income tax and minority interest 3,810 3,866 4,950
Income tax
Current income tax expense 490 598 612
43.
Deferred income tax expense 256 104 595
Total income tax expense 14 746 702 1,207
Income before minority interest 3,064 3,164 3,743
Minority interest (6) (8) (19)
Net income 3,058 3,156 3,724
page
Earnings per share (USD per share)
Basic 1.42 1.47 1.68
Diluted 1.41 1.47 1.68
Weighted-average shares outstanding (Millions of shares) 17
Basic 2,155 2,142 2,212
Diluted 2,163 2,145 2,212
2002
YUKOS Oil Company
Annual Report 2002
YUKOS Oil Company consolidated statements of cash flows

(Expressed in millions of U.S. Dollars)
Year ended December 31, 2002 2001 2000
Operating activities
Net income 3,058 3,156 3,724
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income tax expense 256 104 595
Depreciation, depletion and amortization 459 270 218
Realized gains on marketable securities (46) (128) (165)
Write-offs of property and investments 39 48 52
Reversal of provision for doubtful debts (20) (40) (35)
Minority interest 6 8 19
Income from equity affiliates (29) (7) (15)
Effect of foreign exchange on balance sheet items 118 170 (43)
Goodwill impairment 50 – –
Other 84 (5) (41)
Changes in operational working capital, excluding cash and debt:
Accounts receivable (731) (350) (768)
Inventories (25) (63) (105)
Other current assets (91) (62) 8
Trade accounts and notes payable 46 94 (68)
Other accounts payable and accrued liabilities (2) 33 (206)
Taxes payable (205) (114) 140
Net cash provided by operating activities 2,967 3,114 3,310
Investing activities
Net additions to property, plant and equipment (1,263) (954) (589)
Net purchases of long-term investments, including additional shares of subsidiaries and
advances to investment dealers, net of cash acquired (1,032) (653) (368)
Purchases of available-for-sale marketable securities (2,313) (4,746) (1,417)
44.
Proceeds from sales and maturity of available-for-sale marketable securities 2,265 4,068 908
Loans issued (2,273) (1,035) –
Repayment of loans issued 2,247 459 –
Other 20 (101) (167)
Net cash used for investing activities (2,349) (2,962) (1,633)
page
Financing activities
Net proceeds from (repayments of) short-term debt 3 (50) 40
Net repayments of long-term debt (36) (256) (399)
Net sales of treasury shares 13 67 9
Dividends paid (280) (473) (103)
Return of proceeds from share emission (60) – –
Other – 73 236
Net cash (used for) financing activities (360) (639) (217)
Effect of foreign exchange on cash balances (20) (43) (19)
Net change in cash and cash equivalents 238 (530) 1,441
Cash and cash equivalents at beginning of year 1,409 1,939 498
Cash and cash equivalents at end of year 1,647 1,409 1,939
Supplemental cash flow information:
Cash paid for interest 18 24 60
Cash paid for income taxes 445 489 447
2002
YUKOS Oil Company consolidated statements of changes in shareholders’ equity
Number of Accumulated
ordinary Additional other Ordinary Total
shares issued Ordinary paid in Retained comprehensive shares held shareholders’
(Millions) shares capital earnings income in treasury equity
Balance at December 31, 1999 2,237 9 854 917 – (1) 1,779

Net income – – – 3,724 – – 3,724
Change in net unrealized gains
on securities – – – – 34 – 34
Total comprehensive income 3,758
Purchases of treasury shares – – – – – (171) (171)
Sales of treasury shares – – 37 – – 28 65
Dividends declared – – – (205) – – (205)
Balance at December 31, 2000 2,237 9 891 4,436 34 (144) 5,226
Net income – – – 3,156 – – 3,156
on securities – – – – (8) – (8)
Purchases of treasury shares – – – – – (1) (1)
Stock-based compensation plans – – 1 – – – 1
Net income – – – 3,058 – – 3,058
on securities – – – – 84 – 84
Foreign currency
45.
translation adjustment – – – – 7 – 7
Stock-based compensation plans – – 3 – – – 3
page
2002
YUKOS Oil Company
Annual Report 2002
YUKOS Oil Company notes to consolidated financial statements

(Expressed in U.S. Dollars (tabular amounts in millions))
Note 1: Organization Note 2: Basis of Presentation
YUKOS Oil Company (or “OAO NK YUKOS”) was incor- The consolidated financial statements are presented in
porated as an open joint stock company on April 15, 1993 accordance with accounting principles generally accepted
in accordance with Presidential Decree No. 1403 on in the United States of America (“U.S. GAAP”).
Privatization and Restructuring of Enterprises and Cor-
porations into Joint Stock Companies. Use of estimates. The preparation of consolidated financial
statements in conformity with U.S. GAAP requires esti-
YUKOS Oil Company and its subsidiaries and associates mates and assumptions that affect the reported amounts
(the “Company”) are a vertically integrated group of com- of assets, liabilities, revenues and expenses, and the disclo-
panies. The Company, which is incorporated in the Russian sure of contingent assets and liabilities. Actual amounts
Federation and includes domestic and foreign subsidiaries may differ from such estimates.
and associates, engages in the exploration, development
and production of crude oil and natural gas, refining crude Reporting and functional currencies. The Company’s
oil into finished petroleum products, and marketing and reporting currency is the U.S. Dollar. As the economy of the
distributing crude oil, natural gas and petroleum products. Russian Federation was considered highly inflationary
through December 31, 2002, transactions and balances of
The Company is controlled by Group MENATEP Limited domestic operations not already measured in U.S. Dollars
(“Group MENATEP”) through two wholly owned sub- were remeasured as if the functional currency were the
sidiary holding companies, YUKOS Universal Limited U.S. Dollar, in accordance with the relevant provisions of
(“YUKOS Universal”) and Hulley Enterprises Limited, Statement of Financial Accounting Standards No. 52,
which together owned a majority interest in the Company’s Foreign Currency Translation. The U.S. Dollar is also the
outstanding shares at December 31, 2002. Three senior functional currency of substantially all of the Company’s
managers of the Company, including the Company’s international operations. Beginning January 1, 2003, the
Chairman of the Executive Committee of the Board of economy of the Russian Federation ceased to be consid-
46.
Directors, are principal shareholders of Group MENATEP ered highly inflationary. There will be no effect from exiting
(the Company’s Chairman of the Executive Committee of hyperinflation for the Company’s principal Russian oil and
the Board of Directors had a majority beneficial interest in gas operations, as the U.S. Dollar is the functional currency
Group MENATEP at December 31, 2002). Group MENATEP for those subsidiaries. The Russian Ruble is the functional
page
also directly or indirectly controls the Company’s two currency for all other Russian operations.
equity investee banks, Trust and Investment Bank (Note 9)
and Bank MENATEP Saint Petersburg (Note 9), as well as a Currency exchange rates. The following summarizes the
number of other entities. AKB Bank MENATEP (“Bank end of period exchange rates of the Russian Ruble (“RR”)
MENATEP”), which declared bankruptcy in 1999 and was to the U.S. Dollar (“USD”) for the dates presented:
subsequently liquidated in 2001, was also related to the
Company by virtue of common shareholdings. Russian Rubles
2002 2001 2000
March 31 31.12 28.74 28.46

June 30 31.45 29.07 28.07
September 30 31.64 29.39 27.75
December 31 31.78 30.14 28.16
2002
Notes to Consolidated
Financial Statements
(Expressed in U.S. Dollars
(tabular amounts in millions))
Prior to 1992, RR/USD exchange rates were set by the state monetary assets and liabilities. Such movements may also
and were not determined under free market conditions. affect the Company’s ability to realize nonmonetary assets
Consequently, RR/USD exchange rates for those periods represented in U.S. Dollars in these consolidated financial
may differ from rates that might have prevailed had free statements. Accordingly, the remeasurement of underlying
market conditions existed. For purposes of remeasur- Russian Ruble amounts to U.S. Dollars in these consoli-
ing nonmonetary assets acquired prior to 1992 into dated financial statements should not be construed as a
U.S. Dollars, the Company used the historic official representation that such Russian Ruble amounts have
exchange rate of RR 110 to USD 1.00 that existed at been, could be, or will in the future be converted into
January 1, 1992. U.S. Dollars at the exchange rates shown or at any other
exchange rate.
A redenomination of the Russian Ruble was enacted
on January 1, 1998. This redenomination resulted in the Reclassifications. Certain reclassifications have been made
exchange of the then existing national currency with to previously reported balances to conform to the current
the new Russian Ruble at the ratio of 1,000 old Russian year’s presentation; such reclassifications have no effect
Rubles at December 31, 1997 to one new Russian Ruble at on net income or shareholders’ equity.
January 1, 1998.
Note 3: Summary of Significant Accounting Policies
Devaluation, inflation, and currency restrictions and con- Principles of consolidation and long-term investments. The
trols. The Russian Ruble has historically been devaluing consolidated financial statements include the operations
against the U.S. Dollar due to significant inflation in the of all entities in which the Company directly or indirectly
Russian Federation as well as other factors. During 2002, controls more than 50 percent of the voting stock, except
for instance, the Russian Ruble devalued by 5.7 percent where conditions exist such that the Company is not able
against the U.S. Dollar (2001 – 7.2 percent; 2000 – 4.3 per- to exercise control of the entities’ operations. Significant
cent) while official Russian Ruble inflation was 15.1 percent joint ventures and investments in which the Company has
(2001 – 18.8 percent; 2000 – 20.2 percent). Additionally, voting ownership interests between 20 and 50 percent or
significant currency restrictions and controls exist related otherwise exercises significant influence are accounted for
47.
to converting Russian Rubles into other currencies. At using the equity method and adjusted for estimated
present, the Russian Ruble is not convertible outside of the impairment. Long-term investments in other unquoted
Commonwealth of Independent States and, furthermore, companies are accounted for at cost and adjusted for esti-
all transactions within the Russian Federation must be mated impairment.
page
settled in Russian Rubles. At December 31, 2002, the
Company was required to sell 50 percent of its foreign cur- Cash equivalents. Cash equivalents include all marketable
rency receipts within the Russian Federation to authorized securities with original maturities of three months or less.
banks for Russian Rubles; from March 1999 through
August 2001, the related requirement was 75 percent. Such Marketable securities. Substantially all marketable securi-
amounts are subject to certain deductions depending on ties with original maturities greater than three months are
debt payments on certain hard currency denominated bor- classified as available-for-sale. Such securities are reported
rowing agreements that were entered into by the Company at fair value. Realized gains and losses are included in the
prior to March 1999. consolidated statements of income. Unrealized gains and
losses, net of related income taxes, are included as a sepa-
Future movements in the exchange rate between the rate component of shareholders’ equity and changes
Russian Ruble and the U.S. Dollar will affect the carrying therein are included in other comprehensive income.
values of the Company’s Russian Ruble-denominated
2002
YUKOS Oil Company
Annual Report 2002
Other short-term investments. Other short-term invest- Depreciation of assets not directly associated with produc-
ments represent loans receivable from Russian corpora- tion is calculated on a straight-line basis as follows:
tions with maturities of less than one year. Such amounts
are recorded at their respective face values, less any valua- Buildings and constructions 5–33 years
tion allowances, as appropriate. Machinery and equipment 5–15 years
Computers and telecommunications equipment 2–5 years
Accounts receivable. Accounts receivable are presented at

Long-lived assets, including proved oil and gas properties,
their respective face values, less any valuation allowances, as
are assessed for possible impairment in accordance with
appropriate, and include value-added taxes which are payable
Statement of Financial Accounting Standards No. 144,
to tax authorities upon collection of such receivables.
Accounting for the Impairment or Disposal of Long-Lived
Assets, which requires long-lived assets with recorded values
Inventories. Inventories are recorded at the lower of aver-
that are not expected to be recovered through undiscounted
age cost and net realizable value. Costs capitalized to
future cash flows to be written down to current fair value.
inventory include, but are not limited to, direct and indirect
labor costs, utilities and production taxes.
Maintenance and repairs and minor renewals are expensed
as incurred. Major renewals and improvements are capital-
Property, plant and equipment. The Company follows the
ized and the assets replaced are retired.
successful efforts method of accounting for its oil and gas
properties, whereby property acquisitions, successful
In addition to its production assets, the Company also
exploratory wells, all development costs (including devel-
maintains and constructs assets for the social use of the
opment dry holes), and support equipment and facilities
local community (“social assets”). Such assets are capital-
are capitalized. Unsuccessful exploratory wells are charged
ized only to the extent that they are expected to result in
to expense at the time the wells or other exploration activi-
future economic benefits to the Company. Maintenance
ties are determined to be nonproductive. Production costs,
and repairs of social assets are expensed as incurred.
overheads and all exploration costs other than exploratory
drilling are charged to expense as incurred. Acquisition
48.
Environmental liabilities. Liabilities for environmental

costs of unproved properties are evaluated periodically and
remediation are recorded when it is probable that obliga-
any impairment assessed is charged to expense.
tions have been incurred and the amounts can be reason-
ably estimated.
Depreciation, depletion and amortization of capitalized
page
costs of proved oil and gas properties is calculated using

Pension and post-employment benefits. The Company’s
the units-of-production method for each field based upon
mandatory contributions to the government pension
proved reserves for property acquisitions and proved
scheme are expensed when incurred. Costs associated with
developed reserves for exploration and development costs.
discretionary pension and other post-employment benefits
Estimated costs of dismantling oil and gas production
are expensed over the vesting periods associated with cov-
facilities, including abandonment and site restoration
ered employees or expensed immediately if no service
costs, are reserved using the units-of-production method
requirement exists.
and are included as a component of depreciation, deple-
tion and amortization.
Revenue recognition. Revenues from the production and
sale of crude oil and petroleum products are recognized
Gains or losses are not recognized for normal retirements
when deliveries to final customers are made, title passes to
of oil and gas properties subject to composite deprecia-
the customer, and collectibility is reasonably assured.
tion, depletion and amortization. Gains or losses from
other retirements or sales are included in the determina-
tion of net income.
2002
Stock-based compensation. The Company has elected to Basic and diluted earnings per share. Basic earnings per
account for stock-based compensation awards to employ- share is calculated by dividing net income by the weighted-
ees and third parties in accordance with Statement of average number of ordinary shares outstanding during
Financial Accounting Standards No. 123, Accounting for the year. Diluted earnings per share reflects the potential
Stock-Based Compensation (“SFAS 123”). Under SFAS 123, dilution that would occur if stock compensation awards
the Company recognizes compensation expense equal to and third-party options were exercised using the treasury
the fair value of the award on the date of grant for fixed stock method.
awards. For conditional stock awards, the Company follows
SFAS 123 provisions for accounting for plans with perfor- Comprehensive income. Comprehensive income includes
mance conditions and records compensation cost over the all changes in equity (net assets) during the year from
period from grant date to vesting based upon the fair value nonowner sources and is detailed in the consolidated
of the awards at grant date. statements of changes in shareholders’ equity.
Deferred income tax. Deferred income tax assets and liabil- Sale and repurchase transactions with financial assets. In
ities are recognized for future tax consequences attributa- accordance with Statement of Financial Accounting Standards
ble to differences between the financial statement carrying No. 140, Accounting for Transfers and Servicing of Financial
amounts of existing assets and liabilities and their respec- Assets, the Company accounts for qualifying sale and repur-
tive tax bases. Included in this calculation are deferred chase transactions as secured borrowings. The Company
income taxes for the unremitted earnings of equity affili- does not have a policy requiring collateral on sale and
ates and foreign subsidiaries on basis differences between repurchase agreements involving financial assets.
the relevant parent company financial statement carrying
amounts and the respective tax bases of its investments in Accounting changes. From January 1, 2002, the Company
subsidiaries and equity affiliates. Management periodically adopted Statement of Financial Accounting Standards
assesses possible methods of remitting the earnings to the No. 142, Goodwill and Other Intangible Assets (“SFAS 142”).
parent and adjusts this liability to the amount calculated at This standard requires that goodwill and intangible assets
enacted rates corresponding to the expected method of with indefinite lives be no longer amortized and that such
49.
distribution. Management believes that current tax legisla- goodwill and intangible assets be tested for impairment
tion provides a means by which unremitted earnings from periodically, but not less frequently than annually.
its domestic subsidiaries can be transferred to the parent
company without tax. Accordingly, the Company does not Recent accounting pronouncements. In June 2001, the
page
provide for taxes on unremitted earnings from its domestic Financial Accounting Standards Board (“FASB”) issued
subsidiaries. Statement of Financial Accounting Standards Statement of Financial Accounting Standards No. 143,
No. 109, Accounting for Income Taxes, prohibits recognition Accounting for Asset Retirement Obligations (“SFAS 143”).
of a deferred tax liability or asset for differences related to This new statement is effective for fiscal years beginning
assets and liabilities that, under SFAS 52, are remeasured after June 15, 2002. The Company will adopt SFAS 143
from the local currency into the functional currency using effective January 1, 2003. SFAS 143 addresses the account-
historical exchange rates and that result from (1) changes ing and reporting for obligations associated with the retire-
in exchange rates or (2) indexing for tax purposes. De- ment of tangible long-lived assets and the associated asset
ferred income tax assets and liabilities are measured using retirement costs. The adoption of this statement primarily
enacted tax rates in the years in which temporary differ- affects the Company’s accounting for oil and gas produc-
ences are expected to reverse. Valuation allowances are ing assets. SFAS 143 differs in several significant respects
provided for deferred income tax assets when manage- from current accounting under Statement of Financial
ment believes that it is more likely than not that the assets Accounting Standards No. 19, Financial Accounting and
will not be realized. Reporting by Oil and Gas Producing Companies (“SFAS 19”).
Under SFAS 143, the Company will recognize a liability for
2002
YUKOS Oil Company
Annual Report 2002
the fair value of an asset retirement obligation in the period entities in the first financial year or interim period begin-
in which it is incurred if a reasonable estimate of fair value ning after June 15, 2003. Management does not expect that
can be made. If a reasonable estimate of fair value cannot adoption of FIN 46 will have a significant impact on the
be made in the period the asset retirement obligation is financial position or results of operations of the Company.
incurred, the liability is recognized when a reasonable esti-
mate of fair value can be made. In periods subsequent to Note 4: Cash and Cash Equivalents
initial measurement, the Company recognizes period- At December 31, 2002 and 2001, cash and cash equivalents
to-period changes in the liability for an asset retirement comprised the following:
obligation resulting from (a) the passage of time and
(b) revisions to either the timing or the amount of the orig- December 31, 2002 2001
inal estimate of undiscounted cash flows. Upon initial U.S. Dollar bank deposits 1,310 925
recognition of a liability for an asset retirement obligation, U.S. Dollar bank promissory notes – 15
the Company capitalizes an asset retirement cost by Russian Ruble bank deposits
(RR 10,318 million and RR 13,883 million
increasing the carrying amount of the related long-lived
at December 31, 2002 and 2001, respectively) 325 461
asset by the same amount as the liability. Management is Russian Ruble certificates of deposit
currently completing its assessment of the effect of the (RR 259 million and RR 20 million at
adoption of SFAS 143 on the Company. December 31, 2002 and 2001, respectively) 8 1
Russian Ruble bank promissory notes
(RR 141 million and RR 220 million at
In November 2002, the FASB issued Interpretation No. 45,
December 31, 2002 and 2001, respectively) 4 7
Guarantor’s Accounting and Disclosure Requirements for 1,647 1,409
Guarantees, Including Indirect Guarantees of Indebtedness of Less: cash and cash equivalents at Trust and
Others (“FIN 45”). FIN 45 requires that, upon issuance of Investment Bank and Bank MENATEP
certain types of guarantees, a guarantor recognize and Saint Petersburg (665) (725)
Total cash and cash equivalents 982 684
account for the fair value of the guarantee as a liability. The
initial recognition and measurement provisions of FIN 45
The Company’s balances at Trust and Investment Bank
should be applied on a prospective basis for guarantees
50.
(Note 16) and Bank MENATEP Saint Petersburg (Note 16)

issued or modified after December 31, 2002. The disclo-
comprise a substantial portion of the banks’ total assets.
sure requirements of FIN 45 are effective for financial state-
At December 31, 2001, the Company’s balances comprised
ments of both interim and annual periods ending after
41 percent of Trust and Investment Bank’s total assets and
December 15, 2002, and are included in Note 19 to the con-
26 percent of Bank MENATEP Saint Petersburg’s total
page
solidated financial statements.

assets. At December 31, 2002, the Company reduced its
concentration in Trust and Investment Bank to 26 per-
In January 2003, the FASB issued Interpretation No. 46,
cent of Trust and Investment Bank’s total assets, and the
Consolidation of Variable Interest Entities (“FIN 46”). FIN 46
Company’s balances comprised 30 percent of Bank
amended Accounting Research Bulletin No. 51,
MENATEP Saint Petersburg’s total assets. At December 31,
Consolidated Financial Statements (“ARB 51”), and estab-
2002, the majority of the assets of Trust and Investment
lished standards for determining under what circum-
Bank and Bank MENATEP Saint Petersburg were invested
stances a variable interest entity (“VIE”) should be
in securities issued by the government of the Russian
consolidated with its primary beneficiary. FIN 46 also
Federation and in loans to Russian corporations. Because
requires disclosures about VIEs that an entity is not
the Company’s deposits represent a significant portion of
required to consolidate but in which it has a significant
the banks’ total assets, the immediate availability of a por-
variable interest. The consolidation requirements of
tion of this amount depends upon the banks’ liquidity at
FIN 46 apply immediately to VIEs created after January 31,
any given point in time.
2003. The consolidation requirements apply to older
2002
Note 5: Marketable Securities and Gross realized gains and losses on marketable securities
Other Short-Term Investments for the years ended December 31, 2002, 2001 and 2000
were as follows:
December 31, 2002 2001
Marketable securities 1,752 1,577 Year ended December 31, 2002 2001 2000
Other short-term investments 596 459 Gross realized gains 63 140 168
Total marketable securities and other Gross realized losses (17) (12) (3)
short-term investments 2,348 2,036 Net realized gains on
marketable securities 46 128 165
All marketable securities held by the Company are classified
as available-for-sale. Unrealized gains and losses, net of Interest income earned on cash deposits, marketable
related income taxes, for available-for-sale securities are securities, and from other sources for the years ended
included as a separate component of shareholders’ equity. December 31, 2002, 2001 and 2000 were as follows:
Realized gains and losses are included in income on a current
basis. The Company determines cost on a last-in-first-out Year ended December 31, 2002 2001 2000
basis. Details of the net carrying amount, gross unrealized Interest income on
holding gains and losses, and fair value of marketable securi- marketable securities 180 172 29
ties at December 31, 2002 and 2001 are as follows: Interest income on cash deposits
and other interest income 153 137 103
Total interest income 333 309 132
Gross Gross
unrealized unrealized
Net carrying holding holding Fair Securities lending. The Company occasionally engages in
amount gains losses value securities lending activities to augment its investment
Bonds and returns. At December 31, 2001, the Company had outstand-
other Russian ing short-term unsecured loans of securities with market
government securities 1,029 113 – 1,142 values of USD 98 million to Trust and Investment Bank.
Corporate debt securities 442 7 – 449
These securities were recorded within marketable securi-
51.
Equity securities 167 20 (26) 161
Total marketable ties in the consolidated balance sheet. At December 31,
securities at 2002, the Company had no outstanding short-term unse-
December 31, 2002 1,638 140 (26) 1,752 cured loans of securities.
Bonds and
page
other Russian
Note 6: Financial Instruments
government securities 829 33 – 862
Corporate debt securities 661 5 – 666 Fair values. A financial instrument is defined as cash, evi-
Equity securities 60 2 (13) 49 dence of an ownership interest in an entity, or a contract
Total marketable that imposes an obligation to deliver or right to receive
securities at cash or another financial instrument. The fair values of
December 31, 2001 1,550 40 (13) 1,577
financial instruments are determined with reference to var-
ious market information and other valuation methods, as
At December 31, 2002, marketable debt securities with fair considered appropriate. However, considerable judgment
values totaling USD 613 million mature during 2003, and is required to interpret market data and to develop the esti-
with fair values totaling USD 978 million mature between mates of fair value. Accordingly, the estimates presented
2004 and 2028. herein may differ from the amounts the Company could
receive in current market exchanges.
2002
YUKOS Oil Company
Annual Report 2002
The net carrying values of cash and cash equivalents, other Concentration risks. As discussed in Note 4, a significant
short-term investments, accounts and notes receivable, portion of the Company’s cash and cash equivalents are
accounts and notes payable, taxes payable and accrued lia- held by Trust and Investment Bank (Note 16) and Bank
bilities approximate their fair values because of the short MENATEP Saint Petersburg (Note 16).
maturities of these instruments.
Note 7: Accounts and Notes Receivable, Net
Marketable securities are carried at their fair values in the
consolidated balance sheets. December 31, 2002 2001
Prepaid and recoverable value-added and

Long-term investments are valued at their historical cost other taxes 964 821
adjusted for impairment, as appropriate. Management Trade accounts receivable (net of allowances
for doubtful accounts of USD 41 million and
believes that the carrying values of long-term investments
USD 50 million at December 31, 2002
approximate their fair values. and 2001, respectively) 912 461
Advances to suppliers (net of allowances for
The fair value of the Company’s long-term debt, including doubtful accounts of USD 1 million and
the current portion of long-term debt, was USD 432 mil- USD 4 million at December 31, 2002
and 2001, respectively) 300 172
lion and USD 91 million, while the carrying value of such
Promissory notes receivable (net of allowances
liabilities was USD 436 million and USD 94 million as of for doubtful accounts of USD nil at both
December 31, 2002 and 2001, respectively. December 31, 2002 and 2001) 23 27
Other receivables (net of allowances for
The fair value of the Company’s long-term liabilities was doubtful accounts of USD 11 million and
USD 22 million at December 31, 2002
USD 211 million and USD 218 million, while the carry-
and 2001, respectively) 247 425
ing value of such liabilities was USD 320 million and Total accounts receivable, net 2,446 1,906
USD 317 million as of December 31, 2002 and 2001, respectively.
Prepaid and recoverable value-added and other taxes
Credit risks. A significant portion of the Company’s
52.
includes value-added tax from purchases that will be

accounts receivable are from domestic customers and for- recoverable only when the underlying accounts payable
eign oil companies, and its other short-term investments have been settled. This amount also includes input value-
represent loans receivable from Russian corporations. added tax eligible for offset, prepayments of export duties,
Although collection of these amounts could be influenced excise taxes at customs relating to the Company’s revenues
page
by economic factors affecting these entities, management on exports from the Russian Federation income, and other
believes there is no significant risk of loss to the Company less significant prepaid taxes.
beyond the provisions already recorded.
Note 8: Inventories
The Company has significant amounts of securities held in
trust at its equity investee banks (Note 16). Management December 31, 2002 2001
believes that, under existing depositary agreements, Crude oil and petroleum products 298 167
Russian and international law, securities held in trust at Materials and supplies 243 223
such banks would not be subject to each bank’s creditors Total inventories 541 390
in the event of bankruptcy.
2002
Note 9: Equity Investees and Long-Term Investments

The Company has several investment affiliates and joint ventures accounted for using the equity method, and long-term
investments accounted for at cost. The nature and extent of these investments change over time. Equity investees include
those entities in which the Company has voting ownership interests between 20 and 50 percent or otherwise exercises sig-
nificant influence, or entities in which the Company has voting ownership interests of more than 50 percent but does not
control the entity. A summary of the impact of equity investees and long-term investments on the consolidated financial
statements is as follows:
Income (loss) from equity

Ownership percentage Net book value affiliates for the year ended
at December 31, at December 31, December 31,
2002 2001 2002 2001 2002 2001 2000
Trust and Investment Bank 37.2 37.2 61 47 14 6 3

Bank MENATEP Saint Petersburg 20.5 20.1 31 9 20 1 2
Belgorodenergo 25.0 19.9 13 11 – – –
Kubanenergo 26.3 19.9 15 12 – – –
Tomskenergo 25.9 19.9 27 21 – – –
Tambovenergo 25.1 – 7 – – – –
Urengoil Inc. (Note 10) 100.0 50.0 – 25 – – –
Transpetrol a.s. (Note 10) 49.0 – 77 – 4 – –
Rospan (Note 10) 56.0 – 110 – – – –
AB Mazeikiu Nafta (Note 10) 53.7 – – – (12) – –
Other affiliates and joint ventures 26 9 3 – 10
Long-term investments, at cost 79 70 – – –
Total 446 204 29 7 15
The Company’s ownership interests in Trust and Invest- Note 10: Acquisitions
ment Bank and Bank MENATEP Saint Petersburg did Acquisition of Sakhaneftegas. Through a series of trans-
53.
exceed 50 percent during part of 2000. Consequently, the actions during 2002, the Company purchased a 50.4 percent
Company consolidated the banks for this short period of interest in OAO NNGK Sakhaneftegas (“Sakhaneftegas”),
time. The Company’s ownership interests in the banks an oil and gas company operating in Eastern Siberia. The
were permanently reduced to below 50 percent during total purchase price of the interest was USD 50 million.
2000 and they continue to be controlled by Group
page
MENATEP Limited (Note 16). Sakhaneftegas and its subsidiaries hold a number of
licenses for exploration, development and production of
Losses of USD 12 million from the Company’s equity hydrocarbon reserves in Yakutia, Eastern Siberia. The
interest in Mazeikiu Nafta represent its share of the acquisition of Sakhaneftegas positions the Company for
results of operations during the period from June 2002 to participation in future developments in the oil and gas
September 2002, when the Company held a 26.85 percent industry in Eastern Siberia.
interest in Mazeikiu Nafta. Mazeikiu Nafta’s results begin-
ning from the Company’s acquisition of a controlling stake The results of operations of Sakhaneftegas were included
in September 2002 are consolidated in the Company’s con- in the consolidated statements of income beginning
solidated statements of operations, of cash flows and of December 2002. No pro forma results have been provided
shareholders’ equity. as the acquisition does not have a material impact on the
Company’s consolidated financial statements.
2002
YUKOS Oil Company
Annual Report 2002
Acquisition of stakes in AB Mazeikiu Nafta. In June 2002, Acquisition of OAO Arcticgas. In March 2002, the
the Company purchased a 26.85 percent interest in Company purchased an 88 percent interest in OAO
AB Mazeikiu Nafta (“MN”), a Lithuanian company that Arcticgas (“Arcticgas”), a holder of exploration and devel-
owns a refinery, export terminal and pipeline. The Company’s opment licenses for a number of gas and condensate
investment included USD 75 million for the purchase of the fields located in Western Siberia, for USD 251.8 million. In
shares and a USD 75 million loan guaranteed by the December 2002, the Company acquired the remaining
Lithuanian government to MN to modernize the refinery. 12 percent stake in Arcticgas for USD 22.5 million, increas-
In addition, the Company secured an agreement to supply ing its ownership to 100 percent.
4.8 million metric tons (35 million barrels) of crude oil
annually to the refinery for ten years, beginning in Acquisition of ZAO Rospan International. In 2001 and dur-
July 2002. In September 2002, the Company purchased an ing the first half of 2002, the Company acquired, through
additional 26.85 percent interest in MN for USD 85 million. intermediaries, a 100 percent interest in ZAO Rospan
In connection with this additional purchase, the Company International (“Rospan”), a domestic natural gas producer
acquired the rights and obligations relating to a second with assets in Western Siberia for USD 101 million. Further
loan to MN of USD 75 million (also guaranteed by the toward strengthening its position in the bankruptcy
Lithuanian government). In addition to the share purchase process, the Company also directly purchased an addi-
and loans, the Company secured the rights to manage MN. tional 49 million of Rospan’s outstanding liabilities. The
Other acquisition costs related to the purchase of MN USD 21 million excess of purchase cost over the fair value
totaled USD 4 million. of the liabilities acquired was included in the Company’s
cost of investment in Rospan. In May 2002, 44 percent of
The financial position and results of operations of MN the shares of Rospan were sold to Tyumen Oil Company
were included in the Company’s consolidated financial (“TNK”) for USD 44 million. In June 2002, the Company
statements beginning September 2002. paid USD 20 million to terminate a purchase option
granted at acquisition over a portion of its interest in
The table below sets forth the condensed balance sheet infor- Rospan’s shares. In August 2002, the Company entered
mation of Mazeikiu Nafta at acquisition and at December 31, into a shareholders agreement with TNK whereby it was
54.
2002, excluding intercompany balances and following pur- agreed that the Company and TNK would jointly control
chase accounting adjustments: Rospan. In December 2002, the Company and TNK agreed
that TNK would manage Rospan and, accordingly, the
At December 31, Company accounts for its investment in Rospan under the
page
At acquisition 2002
equity method. Other acquisition costs related to the pur-
(Unaudited)
chase of Rospan totaled USD 12 million.
Cash 135 109
Accounts and notes receivable, net 60 91
Acquisition of ZAO Urengoil Inc. In two transactions in
Inventories 67 84
Other current assets 5 – December 2001 and May 2002, the Company acquired a
Property, plant and equipment and 100 percent interest in ZAO Urengoil Inc., a domestic natu-
other long-term assets 699 708 ral gas producer, for USD 75 million. The shares acquired at
Total assets 966 992 December 31, 2001 are included within equity investees
Accounts payable and accrued liabilities 143 91
and long-term investments at cost, as the Company did not
Short-term borrowings and current
portion of long-term debt 13 27 have greater than 50 percent ownership of the voting
Long-term debt 341 336 shares at that date.
Other long-term liabilities 41 6
Total liabilities 538 460 The Company’s acquisitions of Arcticgas, Rospan and ZAO
Urengoil were performed in accordance with its long-term
strategy to enhance its position in the Russian gas market.
2002
Acquisition of additional stake in Eastern Oil Company. Note 11: Property, Plant and Equipment, Net
During 2002, the Company acquired an additional 42.3 per-
cent in its subsidiary, Eastern Oil Company, through a com- Accumulated
depreciation,
bination of purchases in a public tender and on the open
depletion and Net
market, effectively increasing its ownership to 97.0 percent Cost amortization book value
at December 31, 2002. Total acquisition costs for the pur-
Oil and gas properties
chases were USD 256 million. Subsequent to December 31,
and equipment 4,612 1,367 3,245
2002, Eastern Oil Company approved a plan to merge its Refining and
assets into the parent company. Under the plan, the related equipment 1,000 276 724
Company shall acquire the remaining 3.0 percent of out- Assets under construction 1,186 – 1,186
standing shares. Other assets 1,376 415 961
Balance at December 31, 2002 8,174 2,058 6,116
Oil and gas properties
Acquisition of Transpetrol a.s. In April 2002, the Company and equipment 3,240 1,108 2,132
acquired a 49 percent interest in Transpetrol a.s. Refining and
(“Transpetrol”), a Slovakian state-owned oil pipeline opera- related equipment 588 295 293
tor, for USD 74 million. The Company’s investment in Assets under construction 837 – 837
Other assets 844 343 501
Transpetrol is accounted for under the equity method.
Balance at December 31, 2001 5,509 1,746 3,763
Acquisition of Kvaerner businesses. In November 2001, the

Estimated costs of dismantling oil and gas production
Company acquired the Hydrocarbon and Process Technology
facilities, including abandonment and site restoration
divisions of Kvaerner. Cash paid upon acquisition was
costs, amounted to USD 602 million and USD 532 million
USD 100 million plus the assumption of certain outstand-
at December 31, 2002 and 2001, respectively. Of these
ing liabilities of the businesses. Subsequent to the acquisi-
amounts, USD 199 million and USD 164 million have been
tion of the Hydrocarbon and Process Technology divisions,
accrued and are included within accumulated depreciation,
the Company renamed the businesses to the internation-
depletion and amortization in the consolidated balance
ally recognized brands of John Brown Hydrocarbons
55.
sheets at December 31, 2002 and 2001, respectively.
Limited and Davy Process Technology Limited, respec-
tively. The entities are incorporated in the United Kingdom.
The Company has estimated its liability based on current
environmental legislation using estimated costs at the
Prior to this acquisition, the Company had substantial
balance sheet dates. As is further described in Note 19,
page
contractual relationships with the divisions of Kvaerner
environmental regulations and their enforcement are con-
mentioned above and, accordingly, had an interest in pre-
tinually being considered by government authorities.
serving the level of service it had been receiving from those
Consequently, the ultimate liabilities may differ from the
divisions, despite Kvaerner’s financial uncertainties.
recorded amounts.
In the fourth quarter of 2002, the Company analyzed its

The Company’s oil and gas fields are situated on land
investments in John Brown Hydrocarbons Limited and
belonging to government authorities. The Company
wrote off the associated goodwill of USD 50 million.
obtains licenses from such government authorities and
pays certain taxes to explore and produce from these fields.
Acquisition of East Siberian Oil and Gas Company. In late
These licenses expire between 2013 and 2026, with the
2000, the Company purchased 68 percent of East Siberian
most significant licenses expiring between 2013 and 2015,
Oil and Gas Company (“East Siberian”), an oil production
and management believes that they may be extended at the
company located in Eastern Siberia, for USD 65 million.
initiative of the Company. Management intends to extend
During 2001, the Company purchased an additional
2.2 percent of East Siberian for USD 4 million.
2002
YUKOS Oil Company
Annual Report 2002
such licenses for properties expected to produce subse- the Republic of Lithuania. The debt is payable in install-
quent to their license expiry dates. ments from October 2005 to February 2007 and bears
interest at 10 percent per annum.
Note 12: Debt
Short-term debt and current portion of long-term debt Other Mazeikiu Nafta borrowings. Other long-term bor-
were as follows: rowings assumed in the Mazeikiu Nafta acquisition totaled
USD 58 million. The weighted-average interest rate of
December 31, 2002 2001 other Mazeikiu Nafta borrowings was 3.3 percent at
Short-term debt 63 22 December 31, 2002.
Current portion of long-term debt 58 87
Total short-term debt and current Intercompany debt of Mazeikiu Nafta. As discussed in
portion of long-term debt 121 109
Note 10, concurrent with its acquisition of first an equity
stake and then a controlling stake in Mazeikiu Nafta, the
Included in short-term debt at December 31, 2002 and 2001,
Company provided a USD 75 million loan to Mazeikiu
were Russian Ruble denominated amounts of RR 1,333 mil-
Nafta and then purchased another USD 75 million loan
lion (USD 42 million) and RR 151 million (USD 5 million),
receivable from Mazeikiu Nafta. While these loans are
respectively. The Company’s significant outstanding short-
eliminated for financial reporting purposes, the Company
term borrowing agreements at December 31, 2002 bear
intends to refinance the loans through third party lenders.
interest at 7.0 percent per annum.
Such refinancing will be reflected as an increase in borrow-
ings in the Company’s consolidated financial statements.
Long-term debt was as follows:
Aggregate maturities of long-term debt outstanding at
December 31, 2002 2001
December 31, 2002 were as follows:
Ministry of Finance/International Bank for
Reconstruction and Development 43 82 For the year ended December 31,
Government of the Republic of Lithuania 289 –
56.
Other long-term borrowings 104 12 2004 22

Less: current portion of long-term debt (58) (87) 2005 142
Total long-term debt 378 7 2006 136
2007 20
Thereafter 58
Ministry of Finance/International Bank for Reconstruction
Total long-term debt 378
page
and Development. At December 31, 2002 and 2001, the

Company had outstanding obligations to the Ministry of
Note 13: Other Accounts Payable and Accrued Liabilities
Finance of the Russian Federation and to the International
Bank for Reconstruction and Development arising from December 31, 2002 2001
borrowing agreements entered into by two of its sub-
Dividends payable 402 9
sidiaries. At December 31, 2002, the interest rates ranged Advances from customers 54 67
from 5.06 percent to 6.01 percent per annum. Salaries and wages payable 64 34
Other 144 209
The following long-term borrowings were assumed with Total other accounts payable and
the Company’s acquisition of Mazeikiu Nafta (Note 10) in accrued liabilities 664 319
September 2002.
Note 14: Taxes
Government of the Republic of Lithuania. At December 31, Deferred income tax. Deferred income tax reflects the
2002, a U.S. Dollar-denominated loan agreement totaling impact of temporary differences between the carrying val-
USD 289 million was outstanding from the Government of ues of assets and liabilities recognized for U.S. GAAP
financial reporting purposes and such amounts recognized
2002
for statutory tax purposes. Deferred income tax assets and

liabilities arising in different tax jurisdictions are not offset.
Deferred income tax assets (liabilities) were comprised of rates were in place effective from January 1, 2002. The
differences arising between the carrying values of the fol- amended tax code reduces the income tax rate for income
lowing assets and liabilities: received from ordinary types of activities from 35 to 24 per-
cent, the income tax rate for dividends received from
December 31, 2002 2001 domestic companies from 15 to 6 percent, and the income
Property, plant and equipment 76 67 tax rate for dividends received from foreign companies
Accounts receivable 8 17 from 35 to 15 percent. This reduction resulted in a one-time
Taxes payable 20 19 net credit to expense related to the adjustment to the
Tax loss carryforwards 51 –
Company’s deferred tax asset and liability balances as of
Other 44 65
Gross deferred income tax assets 199 168 the date of enactment of this change in income tax rates.
Unremitted earnings of subsidiaries The net credit totaled USD 525 million, and was included
and equity affiliates (926) (589) within deferred income tax expense in the consolidated
Property, plant and equipment (201) (87) statement of income for 2001.
Accounts receivable (7) (31)
Other (35) (3)
Gross deferred income tax liabilities (1,169) (710) Reconciliation of income tax. Presented below is a recon-
Net deferred income tax liability (970) (542) ciliation between total income tax expense and theoretical
income tax expense determined by applying the Russian
Tax loss carryforwards expire between 2010 and 2012. statutory tax rate to income before income tax and minor-
Based on the current statutory results of the Company and ity interest.
its subsidiaries, management believes that it is likely that
all deferred tax assets will be realized. Accordingly, no valu- Year ended December 31, 2002 2001 2000
ation allowances have been provided against deferred tax Income before income tax and
assets at December 31, 2002 and 2001. minority interest 3,810 3,866 4,950
Theoretical income tax expense
at the statutory rate of 24 percent
Deferred income tax balances were classified in the consol- (35 percent in 2001; 30 percent
idated balance sheets as follows:
57.
in 2000) 914 1,353 1,485
Increase (decrease) in the
December 31, 2002 2001 theoretical income tax expense
due to:
Current deferred income tax asset and
Income taxed at other rates (745) (828) (854)
other current assets 69 86
Effect on deferred taxes of change
page
Noncurrent deferred income tax asset 107 71
in statutory income tax rate – (525) (24)
Current deferred income tax liability (25) (30)
Investment tax credits and
Noncurrent deferred income tax liability (1,121) (669)
other rate effects (9) (80) (57)
Net deferred income tax liability (970) (542)
Nondeductible/nontaxable items 120 140 105
Deferred tax on
Enacted changes in income tax rates. In August 2000, the unremitted earnings 782 633 669
Federal Law on Income Tax for Companies was amended, Change in estimate of taxes on
increasing, effective January 1, 2001, the statutory income unremitted earnings (368) – –
Foreign exchange effects 52 9 (117)
tax rate from 30 percent to 35 percent in most jurisdictions.
Total income tax expense 746 702 1,207
This increase resulted in a one-time net increase to expense
related to the adjustment to the Company’s deferred tax
In the fourth quarter of 2002, the Company recorded a
asset and liability balances as of the date of enactment of
USD 368 million reduction in deferred tax liabilities that
this change in income tax rates. The net increase totaled
resulted from management’s revised estimate of the appli-
USD 24 million, and was included within deferred income tax
cable tax rates associated with the expected remittance of
expense in the consolidated statement of income for 2000.
earnings from certain subsidiaries. In conjunction with its
ongoing review of tax strategy, management believes it can
In August 2001, the tax code of the Russian Federation was
2002
reduce its effective tax rate on such remittances by 5 percent.

further amended. As a result, new statutory income tax
YUKOS Oil Company
Annual Report 2002
Taxes other than income tax. The Company is subject to a At December 31, 2002 and 2001, USD 91 million and
number of taxes other than on income that are detailed USD 87 million, respectively, of value-added taxes payable
below. Payroll-based taxes are included with salary costs represent deferred amounts that are due upon settlement
within selling, general and administrative expenses and of the related receivable balances.
operating expenses, as appropriate.
Final 2002 dividend. In April 2003, the Company’s Board of
Year ended December 31, 2002 2001 2000 Directors recommended for consideration at the
Export duties 914 987 577 Company’s annual general meeting of shareholders that
Royalty and mineral restoration tax – 409 212 dividends of nominal RR 9.89 per share be paid for the
Unified production tax 1,478 – – Company’s results for the year ended December 31, 2002.
Excise and fuel sales tax 459 476 245
The Company’s annual general meeting of shareholders is
Road users tax 128 102 98
Property tax 54 47 39 scheduled for June 2003. The recommended dividend
Tax penalties and interest 12 40 16 comprises an interim dividend of nominal RR 5.70 per
Other 42 14 59 share, which was declared in the fourth quarter of 2002
Total taxes other than income tax 3,087 2,075 1,246 and paid to shareholders in the first quarter of 2003, and
an additional dividend of nominal RR 4.19 per share to be
Beginning January 1, 2002, mineral restoration tax, royalty paid no later than August 2003.
tax and excise tax on crude oil production were abolished
and replaced by the unified natural resources production Reserves available for distribution to shareholders are
tax. Through December 31, 2004, the base rate for the uni- based on the statutory accounting reports of YUKOS Oil
fied natural resources production tax is set at RR 340 per Company, which are prepared in accordance with Regula-
metric ton of crude oil produced, and is to be adjusted tions on Accounting and Reporting of the Russian Federation
depending on the market price of Urals blend and the and which differ from U.S. GAAP. Russian legislation iden-
RR/USD exchange rate. The tax becomes nil if the Urals tifies the basis of distribution as net income. For 2002,
blend price falls to or below USD 8.00 per barrel. From the current year statutory net income for YUKOS Oil
January 1, 2005, the unified natural resources production Company as reported in the annual statutory accounting
58.
tax rate is set by law at 16.5 percent of crude oil revenues reports was RR 40,701 million. However, current legislation
recognized by the Company’s exploration and production and other statutory laws and regulations dealing with
subsidiaries based on Regulations on Accounting and distribution rights are open to legal interpretation and,
Reporting of the Russian Federation. consequently, actual distributable reserves may differ from
page
the amount disclosed.

Taxes payable. Taxes payable at December 31, 2002 and
2001 were as follows: Note 16: Related Parties
The Company has undertaken numerous transactions
December 31, 2002 2001
with several of the companies within the Group
Value-added tax 140 132 MENATEP structure. These transactions primarily con-
Income tax 8 95 sisted of banking and investment activities, as well as
Tax penalties and interest 7 62
Excise and fuel sales tax 105 91
consulting services, carried out by Trust and Investment
Road users tax 38 14 Bank and Bank MENATEP Saint Petersburg, and are fur-
Property tax 8 13 ther described in the table below. As is further described
Royalty tax – 35 in Note 18, the Company’s core shareholders, through
Mineral restoration tax – 29 YUKOS Universal, agree to fund benefits paid under the
Unified production tax 21 –
Other 65 41
Veteran Social Support Program. Additionally, the
Taxes payable 392 512 Company undertook a number of transactions involving
collection rights and installment liabilities with entities
controlled by Group MENATEP and Bank MENATEP as a
2002
result of the bankruptcy proceedings of Bank MENATEP

from 1999 to 2001 (Note 1).
Other significant related parties with whom the Company has undertaken transactions are outlined below:
Entity Nature of relationship Nature of transactions/balances
AB Mazekiu Nafta Equity investee from July 2002 through Sales of crude oil
September 2002, subsidiary thereafter Purchase of transportation and logistics services
Achinsk Refinery Equity investee partly through 2000; Purchase of crude oil processing services
consolidated beginning in 2000
Angarsk Petrochemical Company Equity investee partly through 2000 and 2001; Purchase of crude oil processing services
subsidiary thereafter
MENATEP IFA Common control Sale of Bank MENATEP collection rights
Group MENATEP Common control Installment liabilities
Pecunia Universal Limited Common control Purchases and sales of marketable securities
Progress Garant Subsidiary partly through 2000; equity investee Purchase of insurance
partly through 2000 and 2001; cost investment
thereafter, common control
Rospan Equity investee since December 2002 Long-term accounts receivable
Transpetrol a.s. Equity investee since April 2002 Purchase of transportation services
Sibintek Subsidiary partly through 2001, equity investee Purchase of information technology services
thereafter, common control
Volgotanker Equity investee partly through 2000; cost Purchase of transportation services
investment thereafter
A summary of balances and transactions with Trust and A summary of balances and transactions with other related
Investment Bank and Bank MENATEP Saint Petersburg is parties is as follows:
as follows:
At and for the year ended December 31, 2002 2001 2000 At and for the year ended December 31, 2002 2001 2000
Balances Balances
59.
Cash and cash equivalents (Note 4) 665 725 1,524 Accounts receivable 7 4 2
Undiscounted installment Long-term accounts receivable 29 – –
liabilities and notes payable 13 17 20 Trade accounts payable 3 1 18
Collateralized loans receivable 44 – – Undiscounted installment liabilities
Long-term accounts receivable 29 – – and promissory notes payable 26 34 15
page
Transactions Transactions
Purchases of marketable Purchases of marketable securities – – 22
securities and other Sales of marketable securities – – 14
short-term investments 4,267 4,354 956 Purchases of shares of Trust and
Sales of marketable securities Investment Bank and Bank
and other short-term MENATEP Saint Petersburg – 3 22
investments 4,060 2,975 542 Sales of shares of Trust and
Interest income 51 43 9 Investment Bank and Bank
MENATEP Saint Petersburg – 17 128
Other
Sales of crude oil to AB Mazeikiu
Unsecured loans of marketable
Nafta from June 2002 to
securities (Note 5) – 98 –
September 2002 220 – –
Marketable securities held by the
Purchases of information
banks as depositories 359 222 201
technology, administrative and
Outstanding guarantees issued
management services 38 3 –
in favor of third parties 41 140 23
Insurance premiums 21 32 14
Transportation fees 8 – 56
Processing fees paid for refining
of crude oil – 70 84
2002
Purchases of petroleum products – – 4

Interest income 2 – –
YUKOS Oil Company
Annual Report 2002
Note 17: Earnings Per Share In October 2001, the Company granted 1,556,920 non-
Basic earnings per share is computed by dividing net transferable options to purchase shares of the Company’s
income (the “numerator”) by the weighted-average num- ordinary stock at USD 1.63 per share, the market price of
ber of ordinary shares outstanding (the “denominator”). the Company’s ordinary shares as of the date the Board of
Diluted earnings per share is similarly computed using the Directors authorized the development of a stock-based
treasury stock method, except the denominator is increased compensation plan. Options granted in October 2001 vest
to include the dilutive effect of outstanding stock options 11 percent in each of the first three years following their
and unvested shares of conditional stock (Note 18). Exer- grant, 33 percent four years following the grant, and 34 per-
cise of these shares for option holders is contingent upon a cent five years following the grant. The options expire ten
continued specified service period by the grantees. Issuance years following grant date.
of the shares for conditional stockholders is contingent upon
both a continued specified service period and upon meeting Additionally, in October 2001, the Company granted
certain performance conditions by the grantees. 5,349,610 nontransferable conditional stock awards to cer-
tain key management personnel. Under this award, Russian
The denominator is based on the following weighted-average participants will receive the designated shares of stock on
number of ordinary shares outstanding (millions of shares): October 19, 2007 if they are continuously employed by the
Company through October 19, 2007, and if the average
Year ended December 31, 2002 2001 2000 market value of the Company’s stock for the six months pre-
Weighted-average shares ceding October 19, 2007 is at least USD 1.20. Other partici-
outstanding – basic earnings pants may receive their shares on an accelerated basis
per share 2,155 2,142 2,212 based upon the terms of their employment.
Add: incremental shares from
assumed conversions of
Stock options 4 1 – In December 2002, the Company granted 6,121,665 non-
Conditional stock 4 2 – transferable conditional stock awards to certain key man-
Weighted-average shares agement personnel. The awards vest 20 percent each
outstanding – diluted earnings October through 2007. Participants will receive the desig-
60.
per share 2,163 2,145 2,212

nated shares of stock on each vesting date if they have
been continuously employed by the Company and have
Note 18: Stock-Based Compensation
maintained satisfactory performance.
Employee stock-based compensation. In October 2000,
the Company’s Board of Directors passed a resolution
page
The Company has elected to account for employee stock

authorizing management to develop a stock-based com-
compensation in accordance with the fair value provisions
pensation plan. In April 2001, the Company’s Board of
of SFAS 123. Under SFAS 123, the Company recognizes
Directors approved the YUKOS Stock Compensation Plan
compensation expense equal to the fair value of the awards
(the “Stock Compensation Plan”) through 2011 and author-
on the date of grant for fixed awards and based upon the
ized up to 85 million shares of the Company’s ordinary
fair value of variable awards during the vesting period.
stock. The Stock Compensation Plan provides for the
granting of stock options and conditional stock awards to
The fair value of the Company’s stock awards is measured
certain management personnel and other key employees.
as the estimated present value at grant date using the
Vesting terms and exercise price for the awards are deter-
Black-Scholes option pricing model. The following
mined at the date of grant. The Company’s Chairman of the
weighted-average assumptions were used for employee
Executive Committee of the Board of Directors is not a par-
grants made during 2001: expected volatility of 68.5 per-
ticipant in the Stock Compensation Plan. It was manage-
cent, a risk-free interest rate of 4.2 percent for conditional
ment’s intention that such ordinary shares as will be issued
stock awards and 4.5 percent for stock options, expected
under the plan will be from treasury shares.
annual dividend yield of 2.5 percent, and an expected term
2002
of six years. The weighted-average fair value of the Total benefits payable under the Program are based upon
Company’s employee stock options granted in 2001 was the market appreciation on a notional number of shares of
USD 2.06 and the weighted-average fair value of condi- the Company’s stock from a base of USD 1.20 per share to a
tional stock grants was USD 2.59. ceiling of USD 3.25 per share. Accordingly, at December 31,
2002, maximum benefits payable under the plan were
For conditional stock grants made in December 2002, total USD 358 million.
compensation expense was measured equal to the market
value of the Company’s shares on grant date less the pres- U.S. GAAP establishes that the substance of the Program is
ent value of expected dividends prior to vesting. The follow- substantially the same for the Company and the employee
ing weighted-average assumptions were used for the whether the Plan is adopted by the Company or by a princi-
conditional stock grants made in December 2002: a pal shareholder. Consequently, the Company recognizes all
risk-free interest rate of 2.0 percent and an expected annual expenses under the Program. Any Program costs paid by
dividend yield of 3.0 percent. The weighted-average the shareholders or by the Trust will be recognized as addi-
fair value of the Company’s conditional stock granted tional capital contributions to the Company in the periods
in December 2002 was USD 8.79. in which the Company receives such contributions from
the shareholders or the Trust. The cost of Program benefits
Recorded compensation expense related to conditional is recognized as compensation expense over the Partici-
stock awards and stock options issued by the Company to pants’ remaining service lives in accordance with the provi-
employees was USD 3 million and USD 1 million for the sions of SFAS 123.
years ended December 31, 2002 and 2001, respectively.
During 2002, 2001 and 2000, the Company recognized
Veteran Social Support Program. During 2000, the USD 56 million, USD 136 million and USD 10 million,
Company established the Veteran Social Support Program respectively, of compensation expense related to the
(the “Program”) to provide retirement benefits and to fund Program. At December 31, 2002 and 2001, accumulated
the benefits for employees of the Company with at least Program benefits of USD 202 million and USD 146 million,
10 years experience as of January 1, 1999 (the “Partici- respectively, were recorded within other long-term liabilities.
61.
pants”). Specifically, the Program’s objective is to provide
payments to Participants that would allow the Participants Other stock compensation. In October 2001, the Company
to move from their current residences to a more desirable issued 6,153,846 options to a third party for advisory
location. Program benefits are based upon the perfor- services. The options were immediately exercisable for
page
mance of the Company’s stock, subject to certain minimum USD 3.25 per share.
stock performance and maximum benefit restrictions.
The following weighted-average assumptions were used
During 2001, certain core shareholders of the Company for third-party grants made during 2001: expected volatility
established the Veterans’ Trust (the “Trust”) to fund bene- of 68.5 percent, a risk-free interest rate of 4.2 percent,
fits paid under the Program. The Trust was funded by the expected annual dividend yield of 2.5 percent, and an
shareholders with shares of YUKOS Oil Company ordinary expected term of three years. The weighted-average fair
stock. Under the terms of the Trust, benefits under the value of the Company’s third-party stock options granted in
Program will be paid directly by the Trust beginning in 2001 was USD 1.39. Recorded compensation expense
2005. Until that time, benefits claimed under the Program related to third-party grants was USD 8.6 million for the
will be paid by the Company. year ended December 31, 2001.
2002
YUKOS Oil Company
Annual Report 2002
All awards outstanding at December 31, 2002 are out- Guarantees. At December 31, 2002, the Company and its
lined below. subsidiaries provided guarantees, either directly or indi-
rectly, of USD 41 million for notes and other contractual
Weighted- obligations of third parties and for performance obliga-
average
tions as discussed below. There are no amounts being car-
Shares exercise
under price
ried as liabilities for these guarantees as management does
option (USD) not believe that it is probable that the Company will be
required to perform under these guaranties. The Company
Awards outstanding at
December 31, 2000 – – has provided cash or other assets as collateral for certain of
Granted 13,060,376 1.73 the guarantees as described further below.
Awards outstanding at
December 31, 2001 13,060,376 1.73 The Company has provided loan guarantees on behalf of
Granted 6,152,665 0.01
the administrations of local governments for improvement
Exercised (3,108,404) 3.25
Canceled (34,620) 1.63 of infrastructure in areas where the Company operates. The
Awards outstanding at guarantees expire in periods from three months to seven
December 31, 2002 16,070,017 0.77 years. The Company would be required to perform under
the guarantees in the event of default by the local adminis-
Weighted- trations. The maximum amount of potential payments is
Number Weighted- average
USD 41 million. The Company has deposited cash and
exercisable average remaining
Shares at exercise contractual marketable securities as collateral against these guaran-
under December 31, price life tees in the amount of USD 25 million.
option 2002 (USD) in years
Conditional The Company provides bid and performance-related bonds

stock awards 11,470,275 – – – in connection with work it is required to perform under cer-
Employee tain contracts. The contracts typically have terms ranging
stock options 1,545,896 160,369 – – from 2 month to 3 years. Any potential payments that
62.
Third-party
stock options 3,053,846 3,053,846 3.25 1.8
would be required are related to performance under the
applicable contract. The Company has placed cash of
Note 19: Commitments and Contingent Liabilities USD 21 million with banks to guarantee its performance.
Operating environment. While there have been improve-
page
ments in the economic situation in the Russian Federation Taxation. Russian tax legislation is subject to varying inter-
in recent years, it continues to display some characteris- pretations and periodic changes, which may be retroactive.
tics of an emerging market. These characteristics include, Further, the interpretation of tax legislation by tax authori-
but are not limited to, the existence of a currency that is ties as applied to the transactions and activities of the
not freely convertible in most countries outside of the Company may not coincide with that of management. As a
Russian Federation, restrictive currency controls, and rela- result, certain transactions may be challenged by tax
tively high inflation. authorities and the Company may be assessed additional
taxes, penalties and interest. Consolidated tax returns are
The prospects for future economic stability in the Russian not required under existing Russian tax legislation and tax
Federation are largely dependent upon the effectiveness of audits are performed on an individual entity basis only.
economic measures undertaken by the government, Tax periods remain open to review by the tax authorities for
together with legal, regulatory, and political developments. three years.
2002
Environmental liabilities. The Company and its predeces- Refining and Marketing purchases crude oil produced by our
sor entities have operated in the Russian Federation for Exploration and Production entities and then refines, mar-
many years and certain environmental problems have kets and distributes crude oil and markets and distributes
developed. Environmental regulations and their enforce- petroleum products for international and domestic sales. To
ment are continually being considered by government a limited extent, Refining and Marketing also purchases
authorities and the Company periodically evaluates its obli- crude oil and petroleum products produced by third parties.
gations related thereto. As obligations are determined,
they are provided for over the estimated remaining lives of Our two major business segments are dependent on each
the related oil and gas reserves, or recognized immediately, other, with the revenues of Exploration and Production
depending on their nature. The existence of environmental being a significant part of the costs of Refining and
liabilities under proposed or any future legislation, or as a Marketing. The prices set for Refining and Marketing’s pur-
result of stricter enforcement of existing legislation, cannot chases from Exploration and Production reflect a combina-
reasonably be estimated. Under existing legislation, man- tion of factors, including tax considerations and market
agement believes there are no probable liabilities that are forces. Taking this into account, as well as the close inte-
in excess of amounts accrued under the units-of-production gration of these segments, and the relatively small size and
method in the consolidated financial statements which low liquidity of the Russian crude oil market, we believe
would have a material adverse effect on the financial posi- that any estimates of the financial performance of our
tion, operating results or liquidity of the Company. separate segments, including segment net income, would
have limited analytical value.
Legal contingencies. The Company is the named defendant
in a number of lawsuits as well as a named party in numer- In addition to these two major business segments, the
ous other proceedings arising in the ordinary course of Corporate and Other segment consists primarily of
business. While the outcomes of such contingencies, law- the Company’s corporate offices, which provide treasury
suits or other proceedings cannot be determined at pres- operations, business services and infrastructure support to
ent, management believes that any resulting liabilities will its operating business segments, a retail grocery chain and
not have a material adverse effect on the financial position, other subsidiaries that provide procurement and logistics
63.
operating results or liquidity of the Company. services to internal and third parties.
Note 20: Segment Information The accounting policies of the business segments are the
The Company’s business activities are conducted predomi- same as those described in the Summary of Significant
page
nantly through two major business segments: Exploration Accounting Policies (Note 3). Sales from the transfer of
and Production, and Refining and Marketing. These seg- products between segments are at actual sales prices.
ments were determined based on the way that manage- Domestic sales exclude distribution costs which, under the
ment organizes and reports on the segments within the Russian crude oil distribution system, are charged to the
Company for making operating decisions and assessing purchasers of crude oil by Transneft, the state-owned oil
performance and by the structure of the Company’s inter- distribution company. Costs and other deductions exclude
nal organization. internal transfers. Intersegment purchases represent the
elimination of intersegment sales for the purposes of deriv-
Exploration and Production primarily explores for, devel- ing segment net income. Corporate administration costs
ops and extracts liquid hydrocarbons, which are then and assets are not allocated to the operating segments.
processed into crude oil and natural gas liquids, primarily Segment assets do not include intercompany investments
through the Company’s subsidiaries, Yuganskneftegas and or intercompany receivable balances.
Tomskneft in Western Siberia, and Samaraneftegas in the
Samara region of the Russian Federation. No individual customer comprised more than 10 percent
of the Company’s sales during 2002, 2001 or 2000. Man-
agement does not believe that the Company is reliant on
2002
any particular customer.

YUKOS Oil Company
Annual Report 2002
Operating segment information as at and for the year ended December 31, 2002 is presented below.
Exploration Refining Corporate Intersegment

and and and sales
production marketing other elimination Total
Sales and other operating revenues

International sales – crude oil 2 5,956 – – 5,958
International sales – petroleum products – 2,289 – – 2,289
Domestic sales – crude oil 8 78 – – 86
Domestic sales – petroleum products 2 2,580 – – 2,582
Other 267 126 65 – 458
Intersegment sales 2,611 45 26 (2,682) –
Total sales and other operating revenues 2,890 11,074 91 (2,682) 11,373
Costs and other deductions
Crude oil and petroleum products purchased 18 322 – – 340
Operating expenses 993 527 76 (117) 1,479
Distribution expenses 1 1,513 – – 1,514
Selling, general and administrative expenses 250 259 326 – 835
Depletion, depreciation and amortization 408 27 24 – 459
Taxes other than income tax 1,577 1,507 3 – 3,087
Exploration expenses 87 – – – 87
Other 60 12 17 – 89
Intersegment purchases 42 2,518 5 (2,565) –
Total costs and other deductions 3,436 6,685 451 (2,682) 7,890
Interest income 3 – 330 – 333
Interest expense (17) – (47) – (64)
Exchange gain (loss), net 18 (87) (49) – (118)
Other income, net – – 176 – 176
Total other income (loss) 4 (87) 410 – 327
64.
Total income tax expense (benefit) (88) 366 468 – 746

Minority interest 10 (4) (12) – (6)
Segment net income (loss) (444) 3,932 (430) – 3,058
Additions to property, plant and equipment 932 268 82 – 1,282
Total assets 5,264 3,589 5,541 – 14,394
page
2002

and and and sales

International sales – crude oil – 4,942 – – 4,942
Domestic sales – crude oil 5 50 – – 55
Other 171 85 6 – 262
Crude oil and petroleum products purchased – 481 – – 481
Operating expenses 834 348 – – 1,182
Distribution expenses – 1,048 – – 1,048
Taxes other than income tax 646 1,428 1 – 2,075
Other 21 2 25 – 48
Exchange gain (loss), net (14) (130) (26) – (170)
Total other income (loss) (19) (130) 381 – 232
65.
Total income tax expense (benefit) 175 548 (21) – 702
Minority interest (16) 8 – – (8)
Segment net income 326 2,759 71 – 3,156
Additions to property, plant and equipment 759 98 36 – 893
Total assets 3,331 2,188 4,983 – 10,502
page
2002
YUKOS Oil Company
Annual Report 2002

and and and sales

International sales – crude oil – 4,639 – – 4,639
Domestic sales – crude oil – 142 – – 142
Other 176 108 8 – 292
Crude oil and petroleum products purchased – 662 – – 662
Operating expenses 623 249 – – 872
Distribution expenses – 697 – – 697
Taxes other than income tax 443 801 2 – 1,246
Other 41 2 9 – 52
Exchange gain (loss), net 41 (22) 24 – 43
Total other income (loss) 10 (22) 274 – 262
66.
Total income tax expense (benefit) (68) 649 626 – 1,207

Minority interest (17) (2) – – (19)
Segment net income (loss) 105 4,102 (483) – 3,724
Additions to property, plant and equipment 466 65 30 – 561
Total assets 2,868 1,952 3,708 – 8,528
page
Note 21: Subsequent Event exchanged will come from existing treasury shares, addi-
In April 2003, the Company reached a definitive agreement tional shares purchased on the market and/or from a new
with the major shareholders of Sibneft Oil Company issuance of shares. Each party to the agreement is subject
(“Sibneft”), under which the Company will acquire 20 per- to a termination clause requiring a payment of USD 1 billion
cent less one share of the outstanding shares of Sibneft for in the event that it terminates the arrangement without
a total cash consideration of USD 3 billion and an additional cause. The Company believes the merger will strengthen its
stake of up to 72 percent plus one share for up to 26.01 per- competitive advantages by combining with one of its princi-
cent of the fully diluted share capital of the new pal domestic competitors to provide a larger production
YUKOSSibneft. The Company expects that the shares to be and reserve base and serve as a platform for further growth.
2002
YUKOS Oil Company supplemental oil and gas information (unaudited)
(Expressed in U.S. Dollars (tabular amounts in millions))
In accordance with Statement of Financial Accounting Results of Operations for Oil and Gas Producing Activities
Standards No. 69, Disclosures about Oil and Gas Producing The Company’s results of operations for oil and gas pro-
Activities (“SFAS 69”), this section provides supplemen- ducing activities are shown below. Natural gas production
tal information on oil and gas exploration and produc- does not represent a material portion of the Company’s
tion activities. total oil and gas production.
The Company’s production activities are almost exclusively In accordance with SFAS 69, results of operations for oil
within the Russian Federation; therefore, substantially all and gas producing activities do not include general corpo-
of the information provided in this section pertains to this rate overhead and monetary effects, nor their associated tax
region. The Company operates directly and through vari- effects. Income tax is based on statutory rates for the year
ous production subsidiaries. adjusted for tax deductions, tax credits and allowances.
Oil and Gas Exploration and Development Costs Year ended December 31, 2002 2001 2000
The following tables set forth information regarding oil and Revenues from net production
gas exploration and development costs. The amounts Sales 5,131 4,524 4,350
reported as costs incurred include both capitalized costs Transfers(1) 1,525 1,678 2,205
6,656 6,202 6,555
and costs charged to expense during the year.
Operating expenses 771 774 568
Taxes other than income tax 2,267 1,333 900
Year ended December 31, 2002 2001 2000 Depreciation, depletion
Costs incurred in exploration and and amortization 381 159 149
development activities Exploration expenses 87 52 35
Development costs 787 647 419 Related income tax expense 267 576 695
Property acquisition costs 406 – 65 Results of operations for oil and
Exploration costs 85 102 54 gas producing activities 2,883 3,308 4,208
Total costs incurred in exploration
67.
(1) Transfers represent oil transferred to affiliated enterprises for processing. Such transfers are
and development activities 1,278 749 538 valued at average domestic market prices for crude oil, as required under SFAS 69.

Proved Oil and Gas Reserve Quantities
Capitalized costs of oil and As determined by the Company’s independent reservoir
page
gas properties engineers, DeGolyer and MacNaughton, the following
Producing assets 1,554 1,320 1,225
Support facilities and equipment 3,058 1,920 1,605
information presents the quantities of proved oil and gas
Incomplete construction 836 638 327 reserves and changes thereto as at and for the years ended
Total capitalized costs of oil and December 31, 2002, 2001 and 2000. The definitions used
gas properties 5,448 3,878 3,157 are in accordance with applicable United States Securities
Accumulated depreciation, and Exchange Commission (“SEC”) regulations.
depletion and amortization (1,367) (1,108) (875)
Net capitalized costs of oil and
gas properties 4,081 2,770 2,282
2002
YUKOS Oil Company
Annual Report 2002
Proved reserves are defined as the estimated quantities of oil recovered as a result of future investments to drill new
and gas which geological and engineering data demonstrate wells, to recomplete existing wells and/or install facilities
with reasonable certainty to be recoverable in future years to collect and deliver the production.
from known reservoirs under existing economic conditions.
In some cases, substantial new investment in additional “Net” reserves exclude quantities due to others when produced.
wells and related support facilities and equipment will be
required to recover such proved reserves. Due to the inher- The below reserve quantities include 100 percent of the net
ent uncertainties and the limited nature of reservoir data, reserve quantities attributable to the Company’s consoli-
estimates of underground reserves are subject to change dated subsidiaries.
over time as additional information becomes available.
A portion of the Company’s total proved reserves are classi-
Management believes that proved reserves should include fied as either developed nonproducing or undeveloped. Of
quantities which are expected to be produced after the the nonproducing reserves, a portion represents existing
expiry dates of the Company's production licenses. These wells which are to be returned to production at a future date.
licenses expire between 2013 and 2026, with the most sig-
nificant licenses expiring between 2013 and 2015. Manage- The prices used in the forecast of future net revenues are
ment believes the licenses may be extended at the initiative the year-end weighted-average of the prices received for sales
of the Company and management intends to extend such domestically, for exports to CIS countries and for exports to
licenses for properties expected to produce subsequent to non-CIS countries. Due to the absence of a developed mar-
their license expiry dates. The Company has disclosed ket for crude oil in Russia, the Company employs a “net-
information on proved oil and gas reserve quantities and back” method to estimate a domestic price for crude oil.
standardized measure of discounted future net cash flows
for periods up to and past the license expiry dates separately. Net proved reserves of crude oil, condensate and natural
gas liquids and natural gas are presented below. For con-
Proved developed reserves are those reserves which are venience, volumes of both crude oil, condensate and natu-
expected to be recovered through existing wells with exist- ral gas liquids and volumes of natural gas are provided
68.
ing equipment and operating methods. Undeveloped both in English units and in metric units.
reserves are those reserves which are expected to be
page
2002
Supplemental Oil and Gas
Information (Unaudited)
The tables below represents reserve quantities attributable to the Company’s consolidated subsidiaries.
Net proved reserved of crude oil, condensate and natural gas liquids are presented below.
Net proved reserves of crude Net proved reserves of

oil, condensate and natural crude oil, condensate and Total net proved reserves
gas liquids recoverable up natural gas liquids recoverable of crude oil, condensate
to license expiry dates past license expiry dates and natural gas liquids
Millions of Millions of Millions of Millions of Millions of Millions of
barrels metric tons barrels metric tons barrels metric tons
Reserves at December 31, 1999 5,050 690 4,503 613 9,553 1,303
Changes attributable to:
Revisions 292 40 (95) (12) 197 28
Extensions and discoveries 158 22 33 4 191 26
Acquisitions 51 7 2 – 53 7
Production (366) (50) – – (366) (50)
Revisions 196 27 (22) (4) 174 23
Production (421) (58) – – (421) (58)
Revisions 591 86 (73) (7) 518 79
Acquisitions 107 16 15 3 122 19
Production (507) (69) – – (507) (69)
Net proved developed reserves
(included above)
69.
At December 31, 1999 3,990 545 3,460 472 7,450 1,017
At December 31, 2000 4,092 559 3,407 465 7,499 1,024
At December 31, 2001 4,072 557 3,386 462 7,458 1,019
At December 31, 2002 3,966 543 3,474 475 7,440 1,018
page
2002
YUKOS Oil Company
Annual Report 2002
Net proved reserves of natural gas are presented below.
Net proved reserves of Net proved reserves of

natural gas recoverable natural gas recoverable Total net proved
up to license expiry dates past license expiry dates reserves of natural gas
Billions of Billions of Billions of Billions of Billions of Billions of
cubic feet cubic meters cubic feet cubic meters cubic feet cubic meters
Reserves at December 31, 1999 1,193 34 1,077 30 2,270 64

Revisions 89 3 (28) (2) 61 1
Acquisitions 160 5 3 – 163 5
Production (103) (3) – – (103) (3)
Revisions 80 2 (7) – 73 2
Extensions and discoveries 38 1 12 – 50 1
Production (117) (3) – – (117) (3)
Revisions (562) (17) (113) (1) (675) (18)
Extensions and discoveries 7 – 2 – 9 –
Acquisitions 2,532 72 344 9 2,876 81
Production (85) (2) – – (85) (2)
Net proved developed reserves (included above)
At December 31, 1999 927 26 790 23 1,717 49
At December 31, 2000 978 28 782 22 1,760 50
70.
At December 31, 2001 991 28 778 22 1,769 50

At December 31, 2002 1,675 47 814 23 2,489 70
The table below represents reserve quantities attributable to the Company’s net interest in equity affiliate, Rospan:
page
Net proved reserves of crude oil, Net proved reserves

condensate and natural gas liquids of natural gas
Millions of Millions of Billion of Billions of
barrels metric tons cubic feet cubic meters
Reserves at December 31, 2002 48 6 990 28

Net proved developed reserves (included above)
At December 31, 2002 9 1 203 6
2002
Supplemental Oil and Gas
Information (Unaudited)
Standardized Measure of Discounted Future Net Cash Flows excluded from the calculation as are discounted future net
The standardized measure of discounted future net cash cash flows from equity affiliates. As a result, future cash
flows is calculated in accordance with SFAS 69. SFAS 69 flows calculated under SFAS 69 are not necessarily indica-
requires measurement of future net cash flows by applying tive of the Company’s future cash flows, nor the fair value of
year-end prices and costs and a discount factor of ten per- its oil and gas reserves; other assumptions of equal validity
cent to year-end quantities of estimated net proved reserves could give rise to materially different results.
using a standardized formula. The calculation assumes
continuation of year-end economic and political conditions As described in the previous section, the Company has
and requires extensive judgment in estimating the timing of disclosed standardized measure of discounted future net
future production of reserves. Moreover, probable and pos- cash flows for periods up to and past the license expiry
sible reserves, which may become proved in the future, are dates separately.
Future cash flows Future cash flows Future cash flows

attributable to net proved attributable to net proved attributable to
reserves recoverable reserves recoverable total recoverable
December 31, 2002 up to license expiry dates past license expiry dates net proved reserves
Future cash inflows from production 96,718 75,207 171,925

Future development and production costs (35,254) (27,687) (62,941)
Future income tax expense (12,459) (11,063) (23,522)
Undiscounted future net cash flows 49,005 36,457 85,462
Ten percent annual discount (19,620) (32,390) (52,010)
Standardized measure of discounted
future net cash flows 29,385 4,067 33,452

71.

page
future net cash flows 15,456 2,529 17,985


future net cash flows 18,382 2,540 20,922 2002
YUKOS Oil Company
Annual Report 2002
Changes in Standardized Measure of Discounted Future Net Cash Flows

Year ended December 31, 2002 up to license expiry dates past license expiry dates net proved reserves

future net cash flows at beginning of year 15,456 2,529 17,985
Sales and transfers of oil and gas produced (3,150) – (3,150)
Accretion of discount 1,917 369 2,286
Net change in sales prices and in production (lifting)
costs related to future production 10,631 4,056 14,687
Net change due to revisions in quantity estimates 4,189 (1,687) 2,502
Changes in estimated future development costs (1,501) 80 (1,421)
Net change due to purchases and sales of minerals in place 718 35 753
Net change due to extensions, discoveries and improved recovery 4,092 (735) 3,357
Net change in income tax expense (3,754) (580) (4,334)
Development costs incurred 787 – 787
Net change for the year 13,929 1,538 15,467
future net cash flows at end of year 29,385 4,067 33,452

Standardized measure of discounted future net

cash flows at beginning of year 18,382 2,540 20,922
72.

costs related to future production (2,265) 990 (1,275)
Net change due to revisions in quantity estimates 823 (383) 440
Changes in estimated future development costs (400) (12) (412)
Net change due to extensions, discoveries and improved recovery 549 (90) 459
page
Net change in income tax expense (507) (805) (1,312)

Net change for the year (2,926) (11) (2,937)

Standardized measure of discounted future net

cash flows at beginning of year 22,489 3,027 25,516
costs related to future production (4,467) (13) (4,480)
Net change due to revisions in quantity estimates 1,345 (775) 570
Changes in estimated future development costs (351) 19 (332)
2002
Net change due to purchases and sales of minerals in place 97 – 97

Net change due to extensions, discoveries and improved recovery 740 (211) 529
Net change in income tax expense 446 141 587
Net change for the year (4,107) (487) (4,594)
YUKOS Oil Company management’s discussion and analysis
(Expressed in U.S. Dollars (tabular amounts in millions) except as indicated otherwise)
References to “YUKOS,” “Company,” “Group,” “we,” “our” or • international monetary conditions and exchange controls;
“us” are references to YUKOS Oil Company and its consolidated • liability for remedial actions under environmental regulations;
subsidiaries and associates. • inherent uncertainties in predicting oil and gas reserves and
oil and gas reservoir performance;
The discussion and analysis of YUKOS’ financial condition and • unsuccessful exploratory drilling activities;
results of operations should be read in conjunction with • unexpected cost increases or technical difficulties in con-
YUKOS’ consolidated financial statements. structing or modifying our company manufacturing and
refining facilities;
This report includes forward-looking statements. You can iden- • potential disruption or interruption of our production facili-
tify our forward-looking statements by the words “expects,” ties due to accidents or political events;
“intends,” “plans,” “projects,” “believes,” “estimates” and • liability resulting from litigation;
similar expressions. We have based the forward-looking state- • general domestic and international economic and politi-
ments relating to our operations on our current expectations cal conditions.
and on estimates and projections about YUKOS and the petro-
leum industry in general. We caution you that these state- Tabular amounts are rounded. However, percentage changes
ments are not guarantees of future performance and involve are calculated using actual amounts.
risks, uncertainties and assumptions that we cannot predict
with certainty. Accordingly, our actual outcomes and results For financial reporting purposes, we convert metric tons of
may differ materially from what we have expressed or fore- crude oil to barrels of crude oil using a conversion factor of 7.31.
casted in the forward-looking statements. Any differences This factor represents a blend of varying conversion factors spe-
could result from a variety of factors including, but not limited cific to each of our fields. Because the proportion of actual pro-
to, the following: duction by field varies from period to period, total production
volumes for the Company in barrels converted from metric
• fluctuations in crude oil and petroleum product prices; tons using the blended rate may differ from total production
73.
• changes in tax and other laws applicable to our business; calculated on a field by field basis. Accordingly, the total pro-
• changes in regulations governing access to export duction figures discussed in this Management’s Discussion and
infrastructure; Analysis differ insignificantly from those disclosed elsewhere.
• changes in tariffs charged by monopolies;
page
2002
YUKOS Oil Company
Annual Report 2002
Overview Our two major business segments are dependent on each

We are a vertically integrated oil company primarily engaged other, with the revenues of Exploration and Production being
in the exploration, development and production of crude a significant part of the costs of Refining and Marketing.
oil, the refining of crude oil into petroleum products and the Refining and Marketing purchases crude oil produced by
marketing and distribution of crude oil and petroleum prod- our Exploration and Production entities. To a limited
ucts. As of December 31, 2002, we were the second largest extent, Refining and Marketing also purchases crude oil
oil company in Russia in terms of proved oil reserves. In and petroleum products produced by third parties. The
2002, we were the second largest oil company in Russia in prices set for Refining and Marketing’s purchases from
terms of crude oil production and the second largest refiner Exploration and Production reflect a combination of fac-
of crude oil and wholesale marketer of petroleum products tors, including tax considerations and market forces.
in Russia. In the fourth quarter of 2002, we were the largest Taking these factors into account, as well as the close inte-
oil company in Russia in terms of crude oil production. gration of these segments, and the relatively small size and
low liquidity of the domestic Russian crude oil market, we
In April 2003, we reached a definitive agreement with the believe that any separate discussion of the financial per-
major shareholders of Sibneft Oil Company (“Sibneft”), formance of our two major segments, including segment
under which we will acquire 20 percent less one share of net income, would have limited analytical value and is not
Sibneft for a total cash consideration of USD 3 billion and necessary to the understanding of our business as a whole.
an additional stake of up to 72 percent plus one share for For this reason, we generally do not analyze either of our
up to 26.01 percent of the fully diluted share capital of the main segments separately in the discussion that follows
new YUKOSSibneft. We expect that the shares to be except where trends for the segments differ in a given item
exchanged will come from existing treasury shares, addi- and such distinctions assist in explaining fluctuations. We
tional shares purchased on the market and/or from a new do present certain financial data for each segment in Note 20
issuance of shares. Each party to the agreement is subject to the consolidated financial statements.
to a termination clause requiring a payment of USD 1 billion
in the event that it terminates the arrangement without Basis of Presentation and Critical Accounting Policies
cause. We believe the merger will strengthen our competi- The preparation of consolidated financial statements in
74.
tive advantages by combining with one of our principal conformity with U.S. GAAP requires estimates and assump-
domestic competitors to provide a larger production and tions that affect the reported amounts of assets, liabilities,
reserve base and serve as a platform for further growth. revenues and expenses and the disclosure of contingent
assets and liabilities. Actual amounts may differ from these
page
In the years ended December 31, 2002, 2001 and 2000, we estimates. The following critical accounting policies require
had revenues of USD 11,373 million, USD 9,461 million significant judgments, assumptions and estimates and you
and USD 9,032 million, respectively, and net income of should read them in conjunction with our consolidated
approximately USD 3,058 million, USD 3,156 million and financial statements.
USD 3,724 million, respectively. As of December 31, 2002, we
had total assets of USD 14,394 million and a cash and mar- Successful efforts method of oil and gas accounting. We
ketable securities position, net of debt, of USD 3,496 million. follow the successful efforts method of accounting for our
oil and gas properties, whereby property acquisitions, suc-
Our business activities are conducted primarily through cessful exploratory wells, all development costs (including
two major business segments – Exploration and Production, development dry holes) and support equipment and facili-
which explores for, develops and extracts hydrocarbons, ties are capitalized. We expense exploratory well costs if we
which it then treats to produce crude oil and natural gas, cannot determine whether proved reserves can be found
and Refining and Marketing, which refines, markets and within a reasonable amount of time following completion
sells crude oil and markets and sells petroleum products. of drilling. We expense all other exploratory costs. We cal-
In addition to these principal business segments, we also culate depreciation, depletion and amortization of capital-
have a Corporate and Other segment, consisting primarily ized costs of proved oil and gas properties using the
2002
of our corporate offices, which provide management, units-of-production method for each field based upon esti-
financial services, business services and infrastructure mates of proved and proved developed reserves.
support to our operating businesses, and our other busi-
nesses that are not related to oil and gas activities.
Management’s Discussion
and Analysis
(Expressed in U.S. Dollars (tabular amounts
in millions) except as indicated otherwise)
The process of estimating reserves is inherently judgmen- Acquisitions

tal. Proved oil and gas reserves are estimated quantities of Principal production and refining subsidiaries
crude oil and natural gas which geological and engineering As discussed in more detail below, since January 1, 2002,
data demonstrate with reasonable certainty to be recover- we either initiated, continued, or completed the acquisition
able in future years from known reservoirs under existing of controlling interests in several of our principal produc-
economic and operating conditions (i.e., prices and costs tion and refining subsidiaries. We continue to review vari-
as of the date that the estimate is made). Prices include ous potential acquisitions involving both upstream and
consideration of changes in existing prices provided only downstream operations and we are prepared to take
by contractual arrangements, but not on escalations based advantage of appropriate acquisition opportunities.
upon judgments about future conditions. Actual prices and
costs are subject to change due, in significant part, to fac- OAO NNGK Sakhaneftegas. Through a series of trans-
tors beyond our control. These factors include world oil actions during 2002, we purchased a 50.4 percent inter-
prices, energy costs and increases or decreases of oil field est in OAO NNGK Sakhaneftegas (“Sakhaneftegas”),
service costs. an oil and gas company operating in Eastern Siberia for
USD 50 million. Sakhaneftegas and its subsidiaries hold a
We accrue estimated costs of dismantling oil and gas pro- number of licenses for exploration, development and pro-
duction facilities, including abandonment and site restora- duction of hydrocarbon reserves in Yakutia, Eastern
tion costs, using the units-of-production method and we Siberia. Acquisition of Sakhaneftegas positions the
include these costs as a component of depreciation, deple- Company for participation in future development of the oil
tion and amortization. These estimates are based on currently and gas industry in Eastern Siberia.
available technology and current environmental regula-
tions and their interpretation. If these technologies or regu- OAO Arcticgas. In March 2002, we purchased an 88 per-
lations or their interpretation change in the future, actual cent interest in OAO Arcticgas (“Arcticgas”), a holder of
results could differ from our estimates. exploration and development licenses for a number of gas
and condensate fields located in Western Siberia for
Allowance for doubtful accounts. Our allowance for doubt- USD 251.8 million. In December 2002, we acquired the remain-
75.
ful accounts is based on our assessment of the collectibility ing 12 percent interest in Arcticgas for USD 22.5 million.
of specific customer accounts. If there is a deterioration of
a major customer’s creditworthiness or actual defaults are ZAO Urengoil Inc. In two transactions in December 2001
higher than our estimates, the actual results could differ and May 2002, through an intermediary, we acquired a
page
from these estimates. 100 percent interest in ZAO Urengoil Inc. (“Urengoil”), a
domestic natural gas company with assets in Western
Environmental remediation. We record liabilities for envi- Siberia, for USD 75 million.
ronmental remediation when it is probable that obligations
have been incurred and the amounts can be reasonably Eastern Oil Company. During 2002, we acquired an addi-
estimated. Liabilities for environmental remediation are tional 42.3 percent in our subsidiary, Eastern Oil Company,
subject to change because of matters such as changes in through a combination of purchases in a public tender and
laws and regulations and their interpretation, the determi- on the open market, effectively increasing our ownership to
nation of additional information on the extent and nature 97.0 percent at December 31, 2002. Total acquisition costs
of site contamination and improvements in technology. for the purchases were USD 256 million. Subsequent to
December 31, 2002, Eastern Oil Company approved a plan
Income tax accounting. The computation of our current to merge its assets into the parent company. Under the
and deferred provisions for income taxes requires the inter- plan, we shall acquire the remaining 3.0 percent of out-
pretation of complex tax laws in multiple jurisdictions both standing shares.
within the Russian Federation and internationally. Uncer-
tainty related to Russian tax laws exposes us to enforce- AB Mazeikiu Nafta. In June 2002, we purchased a 26.85 per-
2002
ment measures and the risk of significant fines despite our cent interest in AB Mazeikiu Nafta, a Lithuanian company
best efforts at compliance and could result in a greater whose principal assets are a refinery, a pipeline network and a
than expected tax burden. marine crude oil terminal located in Butinge, Lithuania on the
Baltic Sea. Our investment consisted of USD 75 million for
YUKOS Oil Company
Annual Report 2002
the purchase of the shares and a USD 75 million loan to December 31, 2002, excluding intercompany balances and
modernize Mazeikiu Nafta’s refinery, which was guaranteed following purchase accounting adjustments:
by the Lithuanian government. We secured an agreement to
supply 4.8 million metric tons (35 million barrels) of crude At December 31,
At acquisition 2002
oil annually, or an average of 96,000 barrels per day, to the
(Unaudited)
refinery for 10 years beginning in July 2002, at prices estab-
lished on the basis of market price formulas which are Cash 135 109
Accounts and notes receivable, net 60 91
applied to each individual shipment. In September 2002,
Inventories 67 84
we purchased an additional 26.85 percent interest in Other current assets 5 –
Mazeikiu Nafta from Williams International Company and Property, plant and equipment and
secured the rights to manage Mazeikiu Nafta for USD 85 other long-term assets 699 708
million. In connection with this transaction, we also pur- Total assets 966 992
chased from Williams International Company a USD 75 mil- Accounts payable and accrued liabilities 143 91
lion loan from Williams International Company to Mazeikiu Short-term borrowings and current portion
Nafta for USD 75 million plus accrued interest. This loan is of long-term debt 13 27
Long-term debt 341 336
also guaranteed by the Lithuanian government. Other Other long-term liabilities 41 6
acquisition costs related to the purchase of Mazeikiu Nafta Total liabilities 538 460
totaled USD 4 million. Mazeikiu Nafta’s results were
included in our financial statements using the equity method At acquisition, Mazeikiu Nafta had total outstanding debt
of accounting from June 2002 to September 2002 and have (excluding debt to our company) of USD 354 million, of
been fully consolidated in our financial statements since which USD 56 million is guaranteed by the Lithuanian gov-
September 2002. ernment and USD 289 million is payable to the Lithuanian
government. Mazeikiu Nafta’s debt bears interest at rates
The following table sets forth the condensed balance sheet ranging from 2.6 percent to 12.0 percent and is payable
information of Mazeikiu Nafta at acquisition and at between 2003 and 2009.
76.
The table below shows the increase in our ownership of our principal production and refining subsidiaries for the
periods indicated.
(In millions of U.S. Dollars, except for percentage data)

page
At Year ended At Year ended At

December 31, December 31, December 31, December 31, December 31,
1999 2000 2000 2001 2001
Ownership Cost of Percentage Ownership Cost of Percentage Ownership
Subsidiaries Percentage Purchases Acquired Percentage Purchases Acquired Percentage
Yuganskneftegas 80.6% 31 11.1% 91.7% 49 8.3% 100.0%

Samaraneftegas 85.8% 7 9.0% 94.8% 11 5.2% 100.0%
Kuibyshev refinery 46.3% 4 48.9% 95.2% 3 4.8% 100.0%
Novokuibyshevsk refinery 46.8% 6 44.6% 91.4% 4 8.6% 100.0%
Syzran refinery 38.0% 3 56.0% 94.0% 4 6.0% 100.0%
Tomskneft:
Direct acquisitions 43.5% 10 10.7% 54.2% 17 2.8% 57.0%
Through Eastern Oil 20.3% – 0.5% 20.8% – 2.7% 23.5%
Total 63.8% 10 11.2% 75.0% 17 5.5% 80.5%
Achinsk refinery:
Direct acquisitions – 2 22.0% 22.0% 25 25.4% 47.4%
Through Eastern Oil 20.3% – 0.5% 20.8% – 8.0% 28.8%
Total 20.3% 2 22.5% 42.8% 25 33.4% 76.2%
Angarsk Petrochemical Company – 32 19.1% 19.1% 74 80.9% 100.0%
2002
East Siberian Oil and Gas Company – 65 68.0% 68.0% 4 2.2% 70.2%
Urengoil – – – – 25 50.0% 50.0%
Arcticgas – – – – – – –
Mazeikiu Nafta – – – – – – –
Sakhaneftegas – – – – – – –
and Analysis

Year ended December 31, At December 31,
2002 2002
Cost of Percentage Ownership Date First
Subsidiaries Purchases Acquired Percentage Consolidated(1)
Yuganskneftegas – – 100.0% April 1993

Samaraneftegas – – 100.0% January 1996
Kuibyshev refinery – – 100.0% April 1993
Novokuibyshevsk refinery – – 100.0% April 1993
Syzran refinery – – 100.0% April 1993
Tomskneft:
Direct acquisitions – – 57.0%
Through Eastern Oil 246 18.2% 41.7%
Total 246 18.2% 98.7% July 1999
Achinsk refinery:
Direct acquisitions – – 47.4%
Through Eastern Oil 10 22.2% 51.0%
Total 10 22.2% 98.4% July 2000
Angarsk Petrochemical Company – – 100.0% July 2001
East Siberian Oil and Gas Company – – 70.2% December 2000
Urengoil 50 50.0% 100.0% May 2002
Arcticgas 274 100.0% 100.0% March 2002
Mazeikiu Nafta 164 53.7% 53.7% September 2002
Sakhaneftegas 50 50.4% 50.4% December 2002
(1) We consolidate entities for purposes of U.S. GAAP when we directly or indirectly control more than 50 percent of the entity’s voting shares. In certain cases, our ownership of voting shares dif-
fers from our ownership percentage of total outstanding shares indicated in the table above.
Other significant acquisitions Hydrocarbons was impaired, and wrote it off to our consol-
In addition to the acquisitions of our principal production idated statement of income.
77.
and refining subsidiaries described above, we also initi-
ated, continued or completed the following significant Transpetrol a.s. In April 2002, we acquired a 49 percent inter-
acquisitions since January 1, 2000. est in Transpetrol a.s. (“Transpetrol”), a Slovakian oil pipeline
operator, for USD 74 million. The Slovakian government
John Brown Hydrocarbons and Davy Process Technology. owns the remaining 51 percent interest in Transpetrol. If the
page
In November 2001, we acquired the Hydrocarbons and Slovakian government decides to sell its interest, we have an
Process Technology divisions of Kvaerner, an international option to acquire an additional 2 percent interest, which
group of engineering and construction companies, for would give us a majority interest in the company. We account
USD 100 million plus the assumption of certain outstand- for our investment in Transpetrol under the equity method.
ing liabilities of the businesses acquired. Prior to this
acquisition, our Company had substantial contractual rela- ZAO Rospan International. In 2001 and during the first half
tionships with the Hydrocarbons division and, accordingly, of 2002, we acquired, through intermediaries, a 100 per-
had an interest in preserving the level of service it had been cent interest in ZAO Rospan International (“Rospan”), a
receiving, despite Kvaerner’s financial uncertainties. domestic natural gas producer with assets in Western
Following our acquisition of these divisions, we renamed Siberia for USD 101 million. Further toward strengthening
the businesses John Brown Hydrocarbons and Davy our position in the bankruptcy process, we also directly
Process Technology, which had been their original names. purchased an additional 49 million of Rospan’s outstand-
As a result of these acquisitions, we recognized total good- ing liabilities. The excess USD 21 million of purchase cost
will of USD 128 million. In 2002, we determined that over the fair value of the liabilities acquired was included in
USD 50 million of the goodwill associated with John Brown our cost of investment in Rospan. In May 2002, 44 percent
2002
YUKOS Oil Company
Annual Report 2002
of the shares of Rospan were sold to Tyumen Oil Company international markets and in Russia. These prices are
(“TNK”) for USD 44 million. In June 2002, we paid USD 20 affected by external factors over which we have no control,
million to terminate a purchase option granted at acquisi- such as global economic conditions, demand growth,
tion over a portion of its interest in Rospan’s shares. In inventory levels, weather, competing fuel prices and global
August 2002, we entered into a shareholders agreement and domestic supply.
with TNK whereby it was agreed that we and TNK would
jointly control Rospan. In December 2002, we and TNK International prices for crude oil and petroleum products
agreed that TNK would manage Rospan and, accordingly, have been highly volatile, depending on the balance between
we account for our investment in Rospan under the equity supply and demand and on OPEC production levels.
method. Other acquisition costs related to the purchase of
Rospan totaled USD 12 million. Historically, crude oil prices in the Russian market have
been substantially below prices in the international market.
Certain Factors Affecting Our Results of Operations Moreover, there is no independent or uniform market price
Our results of operations and the period-to-period changes for crude oil in Russia primarily because nearly all crude oil
therein have been and will continue to be affected by vari- destined for sale in Russia is produced by vertically inte-
ous factors outlined below. grated Russian oil companies and is refined by the same
vertically integrated companies. Crude oil that is not
Crude oil and petroleum product prices exported from Russia, refined by the producer or otherwise
Our operations are significantly affected by changes sold is offered for sale in the domestic market at prices
in crude oil and petroleum product prices, both in determined on a transaction-by-transaction basis.
The following table shows some of the average crude oil and major petroleum products prices that affected our Company
during the periods indicated:
For the year ended December 31, 2002 2001 Change 2001 2000 Change
International:(1)
78.
(In U.S. Dollars per barrel, except for percentage data)

Brent crude oil 24.98 24.46 2.1% 24.46 28.39 (13.8)%
Urals crude oil (CIF Mediterranean)(2) 23.68 22.99 3.0% 22.99 26.53 (13.3)%
(In U.S. Dollars per metric ton, except for percentage data)
Fuel oil 128.89 110.93 16.2% 110.93 133.50 (16.9)%
page
Diesel fuel 208.84 219.30 (4.8)% 219.30 257.22 (14.7)%

High octane gasoline 243.62 247.09 (1.4)% 247.09 290.27 (14.8)%
Domestic:(3)
Fuel oil 69.53 54.01 28.7% 54.01 71.34 (24.3)%
Diesel fuel 191.20 219.32 (12.8)% 219.32 210.52 4.2%
Low octane gasoline 202.13 218.99 (7.7)% 218.99 226.22 (3.2)%
High octane gasoline 317.41 308.04 3.0% 308.04 289.90 6.3%
(1) Fuel oil, diesel fuel and high octane gasoline data based on Northwest Europe averages.
(2) CIF prices for crude oil include the cost of insurance and freight charges.
(3) Based on Central Russia averages.
Sources: Estimates based on Platts and Kortes.
2002
and Analysis
The crude oil that we sell in international markets has his- deliveries. Moreover, the system is subject to disruption as
torically been traded at a discount to dated Brent. Most of a result of its declining physical condition, a shortage of
the crude oil that we sell in international markets is trans- railcars, the limited capacity of border stations, spills,
ported through the Transneft pipeline system in which it is including those due to poorly maintained tank cars. To
blended with other crude oil of varying qualities to produce address these concerns, we have been acquiring our own
an export blend commonly referred to as Urals. The crude fleet of railcars which we believe will allow us to transport
oil that we sell in international markets other than through by rail more of our international crude oil and petroleum
the Transneft pipeline system is also of lower quality than products sales volumes without encountering some of
Brent and trades at a discount to the Brent price. these difficulties.
Constraints on the international sale of A significant proportion of crude oil and petroleum prod-
crude oil and petroleum products ucts transported by pipeline and rail is delivered to marine
We transport the crude oil and petroleum products that we terminals for onward transportation. There are significant
sell in international markets by pipeline, rail and sea. We constraints present in Russia’s oil shipment terminals due
seek to sell our crude oil in international markets when, as to geographic location, weather conditions and port capac-
is often the case, market conditions make international ity limitations. However, government-sponsored and pri-
sales of crude oil more profitable than international sales vate programs are seeking to improve port facilities.
of petroleum products. The reason for this is that the mar-
gins on our petroleum products often do not justify the In addition, our ability to sell crude oil internationally may
higher transportation costs as compared to crude oil. be constrained by the Russian government and its agen-
cies, which need to ensure the availability of sufficient sup-
We transport a substantial portion of the crude oil that plies of crude oil and petroleum products on the domestic
we sell in international markets through trunk pipelines market. Although Russia is not a member of OPEC, the
in Russia that are controlled by Transneft, which is a Russian government agreed with OPEC to reduce exports
state-controlled company. The Russian government is of crude oil through the Transneft pipeline by 150,000 bar-
expected to retain control over Transneft for the foresee- rels per day from the levels in the fourth quarter of 2001
79.
able future. Since September 2001, the Russian govern- through most of the first half of 2002. This voluntary reduc-
ment has allocated pipeline capacity among Russian oil tion of crude oil exported through the Transneft pipeline
producers and their parent companies in proportion to the was not extended.
volumes of oil produced and delivered to the Transneft
page
pipeline system, and not merely in proportion to oil pro- We believe that physical constraints, and constraints
duction levels, as was the case in the past. imposed by the Russian government, on our international
sales of crude oil and petroleum products may continue in
Although pipeline capacity in Russia has increased in the future.
recent years, the capacity of the pipeline network still acts
as a constraint on exports and indirectly on oil production Transportation costs
in Russia. Currently, there are government-sponsored and We incur transportation costs for the delivery of our crude
private programs to improve pipeline capacity. oil to our refineries and for the delivery of crude oil and
petroleum products to customers. Transportation costs
We also use the Russian rail network to transport the crude include pipeline, freight, railroad and river tariffs, loading
oil and petroleum products that we sell internationally. costs and port charges. We bear the cost of transportation
However, the Russian rail network also has limited capac- tariffs to bring our crude oil and petroleum products to
ity, and the Russian government may allocate use of the market. Almost 100 percent of the crude oil that we pro-
Russian railway system on a preferential basis to domestic duce is delivered to the Transneft pipeline system and then
2002
YUKOS Oil Company
Annual Report 2002
delivered to customers or to our refineries either solely by Accordingly, the relative movements of Ruble inflation and
the means of this pipeline system or in combination with Ruble/U.S. Dollar exchange rates can significantly affect
transportation by railway, river, sea or other pipeline. our results of operations. In particular, operating margins
Transneft collects, on prepayment terms, a Ruble tariff on are generally adversely affected by a real appreciation of the
domestic crude oil shipments and a combined Ruble and Ruble against the U.S. Dollar (i.e., by an inflation rate that
hard currency tariff on exports. A significant amount of is higher than the rate at which the Ruble is devaluing
petroleum products are transported using the Transnefte- against the U.S. Dollar) because this will generally cause
produkt pipeline system. However, the Transnefteprodukt our costs to increase relative to our revenues. We have not
system is not as extensive as the Transneft system for historically used financial instruments to hedge against
transporting crude oil. foreign currency exchange rate fluctuations, as these
instruments have not been readily available to companies
Transportation costs incurred in the delivery of our crude operating in Russia.
oil to customers are included as a component of distribu-
tion expenses in our consolidated statements of income. In addition, because we report in U.S. Dollars, our Ruble-
Transportation costs incurred in the delivery of our crude denominated revenues and costs (including, for example,
oil to our refineries for processing into petroleum products revenues from domestic petroleum product sales) are
are included within operating expenses in our consolidated reported at increased amounts relative to U.S. Dollar-
statements of income. denominated revenues and costs during periods of a real
appreciation of the Ruble.
The Russian Federal Energy Commission periodically
reviews and sets the tariff rates for each segment of the The following table shows the rates of inflation in Russia,
Transneft pipeline and the Transnefteprodukt pipeline. In the period-end and average Ruble/U.S. Dollar exchange
addition, we are subject to tariffs for crude oil and petro- rates, the rates of nominal devaluation of the Ruble against
leum products that we transport by railway. Railway tariffs the U.S. Dollar, and the rates of real change in the value of
are set by the Russian Federal Energy Commission and the the Ruble against the U.S. Dollar for the periods indicated.
Ministry of Railways. We are also subject to fluctuations in
80.
costs for freight delivered by sea for a portion of our inter- Year ended December 31, 2002 2001 2000
national sales. These costs are largely dictated by the Ruble inflation 15.1% 18.8% 20.2%
shipping markets from which we sell our crude oil and U.S. Dollar period-end
petroleum products. exchange rate 31.78 30.14 28.16
Average U.S. Dollar
page
exchange rate 31.35 29.17 28.12

Due to pipeline capacity constraints, in 2003 we expect to Nominal devaluation
increase our usage of railway and sea transportation in of the Ruble 5.4% 7.0% 4.3%
order to meet our expected increase in international sales. Real Ruble appreciation 9.2% 11.0% 15.2%
This will result in an increase in our average cost of trans- Sources: Goskomstat and Central Bank of Russia
portation, as the cost of transporting crude oil by railway
and sea is significantly higher than through pipelines. At present, the Ruble is not a convertible currency outside
Increases in our transportation costs have affected, and the CIS. Exchange restrictions and controls exist related to
possible future increases could further affect, our results converting Rubles into other currencies. For instance,
of operations. beginning from the second half of August 2001, we have
been required to sell 50 percent of our hard currency
Foreign currency exchange rate fluctuations and inflation export proceeds to authorized banks for Rubles. Between
Most of our revenues are derived from international sales of March 1999 and the first half of August 2001, the related
crude oil, which are denominated in U.S. Dollars, and inter- requirement was 75 percent. These amounts historically
national sales of petroleum products, which are denomi- have been subject to certain reductions, such as export and
nated in both U.S. Dollars and Euros. Our operating costs transportation fees.
2002
are denominated in U.S. Dollars, Euros, and Rubles.

and Analysis
Taxation from 15 percent to 6 percent and the tax rate for dividends
We are subject to numerous taxes that have had a signifi- received from foreign companies was reduced from 35 per-
cant effect on our results of operations. Russian tax legisla- cent to 15 percent. However, investment tax credits that
tion is and has been subject to varying interpretations and could be used to reduce income tax by up to 50 percent
frequent changes. have been abolished.
Through December 31, 2000, we were subject to income tax In addition to income taxes, we are also subject to:
at a maximum statutory rate of 30 percent. In August 2000,
the Federal Law on Income Tax for Companies was amended, • a unified natural resources production tax;
establishing the maximum statutory income tax rate of • export duties;
35 percent in most jurisdictions effective January 1, 2001. • excise taxes on petroleum products;
• road users taxes;
In August 2001, the Russian Tax Code was amended. As a • property taxes;
result of this amendment, which became effective on • other local taxes and levies; and
January 1, 2002, two new chapters of the Russian Tax Code • tax penalties and interest.
were introduced that affected our results of operations.
Under the first of these chapters, the maximum income tax These taxes are reflected in taxes other than income tax in
rate for income received from ordinary activities was our consolidated statements of income. In addition, we are
reduced from 35 percent to 24 percent, the tax rate for divi- subject to payroll-based taxes, which are included as salary
dends received from domestic companies was reduced costs within selling, general and administrative expenses
or operating expenses, as appropriate.
The table below sets forth the average tax rates that our Russian subsidiaries were subject to for the years ended
December 31, 2002 and 2001:
Year ended December 31,
81.
Tax 2002 2001 Change Taxable base
a. Crude oil export duty, average(1) USD 18.6 EUR 29.2 (38.9)%(2) Metric ton exported
b. Petroleum products export duty, average:
Light distilled products (gasoline products) EUR 30.0 EUR 38.7 (22.5)% Metric ton exported
Mid distilled products (diesel fuel) EUR 30.0 EUR 38.7 (22.5)% Metric ton exported
page
Fuel oil EUR 15.1 EUR 24.4 (38.1)% Metric ton exported
c. Crude oil excise tax(3) – RR 66 (100.0)% Metric ton produced and sold
d. Petroleum products excise tax:
High octane gasoline RR 2,072 RR 1,850 12.0% Metric ton produced and sold domestically
Low octane gasoline RR 1,512 RR 1,350 12.0% Metric ton produced and sold domestically
Diesel fuel RR 616 RR 550 12.0% Metric ton produced and sold domestically
Motor oil RR 1,680 RR 1,500 12.0% Metric ton produced and sold domestically
e. Mineral restoration tax(3) – 10% (100.0)% Sales revenues(4)
f. Royalty tax(3) – 6–16% (100.0)% Sales revenues(4)
g. Unified production tax(3) RR 668 – 100.0% Metric ton produced (crude oil)
h. VAT 20% 20% – Added value
i. Road users tax 1% 1% – Net revenues
j. Profit tax (corporate) – maximum rate 24% 35% (31.4)% Taxable income
(1) Beginning January 1, 2002, crude oil export duty rates began to be denominated in U.S. Dollars. Prior to January 1, 2002, crude oil export duty rates were denominated in Euros.
(2) Calculated using the Euro/U.S. Dollar exchange rate as of December 31, 2002.
(3) The crude oil excise tax, mineral restoration tax and royalty tax were replaced on January 1, 2002 by the unified production tax. 6 –16 percent represents the minimum and maximum
rates applicable.
2002
YUKOS Oil Company
Annual Report 2002
The table below sets forth the average tax rates that our Russian subsidiaries were subject to for the years ended
December 31, 2001 and 2000:
Year ended December 31,

Tax 2001 2000 Change Taxable base
a. Crude oil export duty, average EUR 29.2 EUR 22.7 28.6% Metric ton exported
b. Petroleum products export duty, average:
Light distilled products (gasoline products) EUR 38.7 EUR 22.3 73.5% Metric ton exported
Mid distilled products (diesel fuel) EUR 38.7 EUR 17.4 122.4% Metric ton exported
Fuel oil EUR 24.4 EUR 16.2 50.6% Metric ton exported
c. Crude oil excise tax(1) RR 66 RR 55 20.0% Metric ton produced and sold
d. Petroleum products excise tax:
High octane gasoline RR 1,850 RR 585 216.2% Metric ton produced and sold domestically
Low octane gasoline RR 1,350 RR 455 196.7% Metric ton produced and sold domestically
Diesel fuel RR 550 – 100.0% Metric ton produced and sold domestically
Motor oil RR 1,500 – 100.0% Metric ton produced and sold domestically
e. Mineral restoration tax(1) 10% 10% – Sales revenues(2)
f. Royalty tax(1) 6–16% 6–16% – Sales revenues(2)
g. VAT 20% 20% – Added value
h. Fuel tax – 25% (100.0)% Net revenues of gasoline, diesel fuel and
some other products
i. Road users tax 1% 2.5% (60.0)% Net revenues
j. Profit tax (corporate) – maximum rate 35% 30% 16.7% Taxable income
k. Housing tax – 1.5% (100.0)% Net revenues
(1) The crude oil excise tax, mineral restoration tax and royalty tax were replaced on January 1, 2002 by the unified production tax. 6 –16 percent represents the minimum and maximum
rates applicable.
(2) Sales revenues net of VAT and excise tax for domestic sales; sales revenues net of export duties, excise tax and transportation costs for export sales.
Prior to January 1, 2002, we were subject to mineral restora- market price of Urals blend and the Ruble exchange rate.
82.
tion and royalty taxes at average effective rates of approxi- The tax becomes zero if the Urals blend price falls to or
mately 6 percent and 8 percent, respectively, of oil and gas below USD 8.00 per barrel. For the year ended December 31,
revenues recognized under Russian accounting regula- 2002, the average rate for the unified production tax, based
tions by our production subsidiaries and excise taxes on on the Urals blend market price and Ruble exchange rates,
page
crude oil production of approximately USD 0.30 per barrel was 668 Rubles per metric ton of crude oil produced. At
at the December 31, 2001 exchange rate. Under the second December 31, 2002, the effective statutory rate for the uni-
chapter of the Russian Tax Code, the mineral restoration fied production tax was 753 Rubles per metric ton. From
tax, royalty tax and excise tax on crude oil production were January 1, 2005, the unified production tax rate is set by law
abolished and replaced by the unified production tax. In at 16.5 percent of crude oil revenues recognized by the
the year ended December 31, 2002, our unified production exploration and production companies in our Group based
tax expense was USD 1,478 million. Total mineral restora- on Russian accounting regulations.
tion tax, royalty tax and excise taxes on crude oil for the year
ended December 31, 2001 were USD 537 million. Through Maximum rates of export duties for crude oil were estab-
December 31, 2004, the base rate for the unified produc- lished by Russian Federal Law #126-FZ dated August 8,
tion tax is set at 340 Rubles per metric ton of crude oil pro- 2001 and have been effective since February 1, 2002. The
duced (USD 1.46 per barrel at the December 31, 2002 maximum rates depend on lagged average Urals blend
exchange rate) and is to be adjusted depending on the prices. The rates start at zero when the lagged Urals blend
2002
and Analysis
price is at or below USD 15.00 per barrel. They then possible methods of transferring the earnings to YUKOS
increase by USD 0.35 per barrel for each USD 1.00 increase Oil Company and adjust this provision accordingly. Such
in the lagged Urals blend price when the lagged Urals taxes are recognized at enacted rates corresponding to the
blend price is between USD 15.00 and USD 25.00 per bar- method we intend to utilize to distribute or transfer the
rel, and by USD 0.40 per barrel for each USD 1.00 increase unremitted earnings to YUKOS Oil Company. In the fourth
in the lagged Urals blend price when the lagged Urals quarter of 2002, we recorded a USD 368 million reduction
blend price is above USD 25.00 per barrel. in deferred tax liabilities that resulted from our revised
estimate of the applicable tax rates associated with the
Recent amendments to the Russian export legislation pro- expected remittances of earnings from certain subsidiaries.
vide that, effective from January 1, 2003, export duties on In conjunction with with our ongoing review of tax strategy
petroleum products are limited to 90 percent of the export we believe that we can reduce the Company’s effective tax
duties on crude oil. rate on such remittances by 5 percent.
Prior to January 1, 2001, we were subject to fuel tax equal to The maximum enacted statutory profits or income tax rates
25 percent of net revenues from gasoline and diesel fuel in Russia during the years ended December 31, 2002, 2001
sales. Beginning January 1, 2001, the excise tax on gasoline and 2000 were 24 percent, 35 percent and 30 percent,
was increased and we were subject to excise tax on diesel respectively. Our effective tax rate is affected significantly
fuel, motor oil and lubricants. Commencing on January 1, by enacted rates in the several tax jurisdictions both within
2002, the effective excise tax rates were 1,512 Rubles per Russia and internationally where we have operations. Many
metric ton for gasoline with octane ratings of 80 or lower, of the companies in our consolidated Group are resident in
2,072 Rubles per metric ton for gasoline with octane rat- tax jurisdictions in Russia and internationally where statu-
ings above 80, 616 Rubles per metric ton for diesel fuel and tory tax rates are lower than the statutory maximum in
1,680 Rubles per metric ton for motor oil. Commencing Russia or where we benefit from regional tax incentives. As
on January 1, 2003, the effective excise tax rates are a result of these lower tax rates and incentives, our income
2,190 Rubles per metric ton for gasoline with octane ratings taxes were reduced by USD 745 million, USD 828 million
of 80 or lower, 3,000 Rubles per metric ton for gasoline with and USD 854 million for the years ended December 31,
83.
octane ratings above 80, 890 Rubles per metric ton for 2002, 2001 and 2000, respectively, compared to the statu-
diesel fuel and 2,440 Rubles per metric ton for motor oil. tory maximum in Russia. In addition, several other factors
have had a significant impact in reducing our effective tax
We also are subject to value added tax, or VAT, of 20 percent rate during these years, including the investment tax credit.
page
on most of our purchases. These taxes are recoverable Factors that have increased our effective tax rate for the
against VAT received on domestic sales. Export sales, other years ended December 31, 2002, 2001 and 2000 included
than to some CIS countries, are subject to 0 percent VAT. deferred taxes provided for unremitted earnings of consoli-
Input VAT related to export sales is recoverable from the dated subsidiaries and expenses that were not deductible
Russian government. Our results of operations exclude the for Russian tax purposes.
impact of VAT.
The availability in Russia of the lower statutory tax rates
We provide for taxes on unremitted earnings of our foreign and regional tax incentives varies by jurisdiction. For exam-
subsidiaries that are payable upon distribution to the par- ple, regional and local profit tax concessions granted to
ent company through our existing legal structure if the some of the companies in our consolidated Group will be
retained earnings of our foreign subsidiaries are not con- phased out by mid-2006. We are unable to estimate the
sidered permanently invested. We continuously assess likelihood of extension of these benefits. In addition, effec-
tive January 1, 2002, the investment tax credit has been
2002
YUKOS Oil Company
Annual Report 2002
abolished. If we do not find other ways of reducing our introduced which may adversely affect the financial per-
effective income tax rate, our effective income tax rate on formance of our Company. In addition, uncertainty related
our domestic earnings will approach the statutory maxi- to Russian tax laws exposes us to enforcement measures
mum in the future, although the tax rate has now been and the risk of significant fines and could result in a greater
reduced to 24 percent. In addition, any changes in tax laws than expected tax burden.
in foreign countries where we have subsidiaries will affect
our tax efficiency. Results of Operations
The following table shows certain consolidated state-
In the context of the significant regulatory changes related ment of income data for the periods indicated, and also
to Russia’s transition from a centrally planned to a market in each case as a percentage of our sales and other oper-
economy over the past 10 years and the general instability ating revenues.
of the new market institutions introduced in connection
with this transition, taxes, tax rates and implementation of Certain reclassifications have been made to amounts previ-
taxation in Russia have experienced numerous changes. ously reported in our condensed consolidated interim
Although there are signs of improved political stability financial statements. There was no impact on net income
in Russia, further changes to the tax system may be as a result of these reclassifications.

USD % USD % USD %
Consolidated Statement of Income

Sales and other operating revenues 11,373 100.0 9,461 100.0 9,032 100.0
Crude oil and petroleum products purchased 340 3.0 481 5.1 662 7.3
Operating expenses 1,479 13.0 1,182 12.5 872 9.7
Distribution expenses 1,514 13.3 1,048 11.1 697 7.7
84.
Selling, general and administrative expenses 835 7.3 671 7.1 562 6.2
Depreciation, depletion and amortization 459 4.0 270 2.9 218 2.4
Taxes other than income tax 3,087 27.1 2,075 21.9 1,246 13.8
Write-offs of property and investments 39 0.3 48 0.5 52 0.6
Goodwill impairment 50 0.4 – – – –
Exploration expenses 87 0.8 52 0.5 35 0.4
page
Total operating costs and other deductions 7,890 69.4 5,827 61.6 4,344 48.1
Other income (expenses)
Realized gains on marketable securities, net 46 0.4 128 1.4 165 1.8
Income from equity affiliates 29 0.3 7 0.1 15 0.2
Other income, net 101 0.9 3 0.0 67 0.7
Interest income 333 2.9 309 3.3 132 1.5
Interest expense (64) (0.6) (45) (0.5) (160) (1.8)
Exchange gains (losses), net (118) (1.0) (170) (1.8) 43 0.5
Total other income, net 327 2.9 232 2.5 262 2.9
Income before income tax and minority interest 3,810 33.5 3,866 40.9 4,950 54.8
Income tax
Current income tax expense 490 4.3 598 6.3 612 6.8
Deferred income tax expense 256 2.3 104 1.1 595 6.6
Total income tax expense 746 6.6 702 7.4 1,207 13.4
Income before minority interest 3,064 26.9 3,164 33.5 3,743 41.4
Minority interest (6) (0.0) (8) (0.1) (19) (0.2)
Net income 3,058 26.9 3,156 33.4 3,724 41.2
2002
and Analysis
The following table shows certain key business and financial indicators.
Year ended December 31, 2002 2001 Change 2001 2000 Change
Crude oil production (Millions of metric tons) 69.5 58.2 19.3% 58.2 49.5 17.5%
Crude oil production (Millions of barrels) 508 426 19.3% 426 362 17.5%
Refining throughput (Millions of metric tons)(1) 32.9 28.8 14.3% 28.8 26.7 8.1%
Refining throughput (Millions of barrels)(1) 241 211 14.3% 211 195 8.1%
EBITDA (see below) 3,994 3,864 3.4% 3,864 5,177 (25.4)%
Net profit margin 26.9% 33.4% (19.4)% 33.4% 41.2% (19.1)%
Operating cash flow 2,967 3,114 (4.7)% 3,114 3,310 (5.9)%
Basic earnings per share (U.S. Dollars per share) 1.42 1.47 (3.4)% 1.47 1.68 (12.5)%
Diluted earnings per share (U.S. Dollars per share) 1.41 1.47 (4.1)% 1.47 1.68 (12.5)%
(1) The results of operations of Angarsk Petrochemical Company were included in our consolidated financial statements starting from July 2001, and the results of operations of Achinsk refinery
were included in our consolidated financial statements since July 2000. Volumes of our crude oil refined by these companies on processing terms in 2001 and 2000 were included in our total
refinery throughputs.
EBITDA is net income before income tax expense, interest light product yield at our refineries was 58.79 percent in
expense and depreciation, depletion and amortization 2002 compared to 58.10 percent in 2001. Approximately
expense, as shown in the following table. 1.8 million metric tons (13 million barrels) of the increase in
refining throughput and the increase in light product yield
Year ended December 31, 2002 2001 2000 is attributable to the refining throughput of Mazeikiu Nafta
Net income 3,058 3,156 3,724 for the fourth quarter of 2002.
Income tax expense 746 702 1,207
Interest expense 64 45 160 Revenues
Interest income (333) (309) (132)
Our total sales and other operating revenues were
Depreciation, depletion and
amortization expense 459 270 218 USD 11,373 million in 2002, an increase of 20.2 percent
EBITDA 3,994 3,864 5,177 from USD 9,461 million in 2001. The change resulted from
85.
a combination of higher production and higher prices, off-
Year Ended December 31, 2002 Compared to set slightly by lower third party purchases. Total sales vol-
Year Ended December 31, 2001 umes of crude oil and petroleum products increased by
Crude oil production 20.0 percent and 15.9 percent, respectively, compared to 2001.
page
Our crude oil production increased by 19.3 percent to
69.5 million metric tons (508 million barrels) in 2002 from The following table shows our average realized crude oil
58.2 million metric tons (426 million barrels) in 2001. Our and petroleum products prices for 2002 and 2001. These
gas production increased by 40.0 percent to 2,388 million prices can differ from quoted crude oil and petroleum
cubic meters in 2002 from 1,706 million cubic meters in products prices reported by information agencies due to a
2001. The primary reason for the production growth is con- number of factors, including:
tinuing exploration and development activities in our prin-
cipal production subsidiaries, with an insignificant part of • the effects of uneven volume distributions during the period;
this growth attributed to the production of subsidiaries • different sales and delivery terms compared to quoted
acquired during 2002. benchmarks;
• different conditions in local markets;
Refining • discounts or premiums related to quality, volume and
We increased refining throughput by 14.3 percent to time frame; and
32.9 million metric tons (241 million barrels) in 2002 from • other terms and conditions of individual sales contracts
28.8 million metric tons (211 million barrels) in 2001. The compared to standard terms.
2002
YUKOS Oil Company
Annual Report 2002
(U.S. Dollars per barrel) of petroleum products, and in 2001, we purchased 20.5 mil-
Year ended December 31, 2002 2001 Change
lion barrels of crude oil and 1 million metric tons of petro-
International sales – crude oil 22.98 22.43 2.5% leum products. See “Operating costs and other deduc-
Non-CIS 23.69 22.60 4.8% tions – Crude oil and petroleum products purchased.”
CIS 12.11 13.99 (13.4)%
Domestic sales – crude oil 6.73 8.79 (23.4)%
International sales of crude oil – non-CIS countries.
(U.S. Dollars per metric ton)
Revenues from international sales of crude oil to non-CIS
International sales –
petroleum products 186.64 171.34 8.9% countries were USD 5,765 million in 2002 compared to
Domestic sales – USD 4,880 million in 2001, an increase of USD 885 million,
petroleum products 138.29 149.31 (7.4)% or 18.1 percent. This increase reflects an increase in aver-
age realized prices of 4.8 percent combined with an
The following table shows the volumes of crude oil and increase in volumes of 12.7 percent when compared to
petroleum products that we sold in 2002 and 2001. 2001. The increase in our average realized price by 4.8 per-
cent was mainly driven by increase in world oil market
(In millions of barrels) prices, such as the increase in Urals (CIF Mediterranean)
crude oil prices by 3.0 percent. The increase in interna-
International sales – crude oil 259.3 220.3 17.7% tional crude oil sales volumes was supported by increased
Non-CIS 243.3 215.9 12.7% production of 19.3 percent and by increased utilisation of
CIS 16.0 4.4 261.2%
crude oil railway transportation.
Domestic sales – crude oil 12.7 6.3 103.7%
Total 272.0 226.6 20.0%
International sales of crude oil – CIS countries. Revenues
(In thousands of metric tons)
International sales – from international sales of crude oil to CIS countries were
petroleum products 12,266 9,875 24.2% USD 193 million in 2002 compared to USD 62 million in
Domestic sales – 2001, an increase of USD 131 million, or 212.7 percent. This
petroleum products 18,670 16,811 11.1% increase was primarily due to a 261.2 percent increase in
Total 30,936 26,686 15.9%
sales volume, which was partially offset by a 13.4 percent
86.
decrease in average realized prices. The Russian govern-

The following table shows our revenues from sales of crude ment’s restriction on crude oil exports during the first half
oil and petroleum products in 2002 and 2001. of 2002 was not extended to exports to CIS countries.
Consequently, we sold a portion of our crude oil to CIS coun-
(In millions of U.S. Dollars)
page

tries that we otherwise would have sold to non-CIS
countries. This increased supply of crude oil to CIS coun-
International sales – crude oil 5,958 4,942 20.6%
tries led to a decrease in crude oil market prices in these
Non-CIS 5,765 4,880 18.1%
CIS 193 62 212.7% countries and, consequently, to a decrease in our average
Domestic sales – crude oil 86 55 56.1% realized prices on such sales.
Total 6,044 4,997 21.0%
International sales – Domestic sales of crude oil. We generally seek to sell crude
petroleum products 2,289 1,692 35.3%
oil in international markets or refine crude oil and to sell
Domestic sales –
petroleum products 2,582 2,510 2.9% relatively small quantities of crude oil in Russia. Revenues
Total 4,871 4,202 15.9% from domestic crude oil sales were USD 86 million in 2002
compared to USD 55 million in 2001, an increase of USD 31
We produced substantially all of the crude oil and petroleum million, or 56.1 percent. This increase was primarily due to
products that we sold in 2002 and 2001, but we also sold a constraints imposed in the first half of 2002 by the Russian
small amount of crude oil and petroleum products that government on crude oil exports outside of the CIS
we purchased from third parties. In 2002, we purchased through the Transneft pipeline system in response to
14.1 million barrels of crude oil and 0.6 million metric tons OPEC demands and higher crude oil production volumes
2002
in this period.
and Analysis
International sales of petroleum products. Revenues Hydrocarbons and Davy Process Technology (October 2001)
from international sales of petroleum products were and Arcticgas (March 2002), which together contributed
USD 2,289 million in 2002 compared to USD 1,692 million approximately USD 94 million to the increase. The remain-
in 2001, an increase of USD 597 million, or 35.3 percent, ing increase of USD 65 million or 7.8 percent was mainly the
driven primarily by a 24.2 percent increase in international result of our increase in production by 19.3 percent, offset by
petroleum products sales volumes. In addition, average improvements in production efficiency.
realized prices increased by 8.9 percent, primarily as a result
of higher prices on fuel oil, partially offset by lower prices on Operating expenses of our Refining and Marketing seg-
diesel fuel. ment increased by USD 179 million or by 51.4 percent to
USD 527 million from USD 348 million. This increase was
Domestic sales of petroleum products. Revenues from primarily due to a USD 89 million increase in the costs of
domestic sales of petroleum products were USD 2,582 mil- transportation of crude oil to our refineries. Transportation
lion in 2002 compared to USD 2,510 million in 2001, an costs increased due to increases in Transneft tariffs on
increase of USD 72 million, or 2.9 percent. This increase of domestic deliveries, increases in the refining throughput of
sales was due to an increase in sales volumes by 11.1 per- our Russian refineries, and costs of transportation of crude
cent, which was partially offset by a decrease in average oil to our Mazeikiu Nafta refinery during the fourth quarter
realized prices by 7.4 percent. Both the increase in sales of 2002. In addition, operating costs at Mazeikiu Nafta for
volumes and the decrease in average realized prices were the fourth quarter of 2002 contributed USD 24 million
the result of the Russian government’s restriction on crude to the increased operating expenses. The remaining
oil exports during the first half of 2002. USD 66 million was due to increases in certain refining
costs, such as electricity and salary expenses, and
Operating costs and other deductions increased throughput at our Russian refineries.
Crude oil and petroleum products purchased. Purchases of
crude oil and petroleum products were USD 340 million in Operating expenses of our Corporate and Other segment
2002 compared to USD 481 million in 2001, a decrease of increased to USD 76 million in 2002 from nil in 2001.
USD 141 million or 29.3 percent. Purchases of crude oil and This increase was due to the acquisition of Kopeika in
87.
petroleum products are variable based upon market May 2002.
demands and our available supply in a given geographic
area. While a portion of this decrease can be explained by Distribution expenses. We incur transportation costs for
our increased production, this amount has varied and will the delivery of our crude oil to our refineries and for the
page
continue to vary based upon regional market forces. delivery of crude oil and petroleum products to final cus-
tomers. Transportation costs includes pipeline, freight,
Operating expenses. Operating expenses consist primarily railroad and river tariffs, loading costs and port charges. As
of direct operating costs associated with crude oil extrac- discussed above, transportation costs incurred in the deliv-
tion and the refining of crude oil into petroleum products. ery of our crude oil to our refineries for processing into
Operating expenses also include costs of crude oil trans- petroleum products are included within operating
portation to our refineries for processing as well as costs expenses in our consolidated statements of income. Other
associated with other operating revenues. Operating transportation costs are included within distribution
expenses were USD 1,479 million in 2002 compared to expenses in our consolidated statements of income.
USD 1,182 million in 2001, an increase of USD 297 million, Transportation costs, whether they are included in operat-
or 25.1 percent. ing expenses or in distribution expenses, are wholly attrib-
uted to our Refining and Marketing segment.
Operating expenses of our Exploration and Production seg-
ment increased by USD 159 million or by 19.1 percent to Distribution expenses were USD 1,514 million in 2002
USD 993 million in 2002 from USD 834 million in 2001. This compared to USD 1,048 million in 2001, an increase of
increase was primarily due to the acquisitions of John Brown USD 466 million, or 44.5 percent. During 2002, we
2002
YUKOS Oil Company
Annual Report 2002
increased our usage of railways to sell our crude oil produc- by 9.0 percent to USD 326 million in 2002 from USD 299
tion in international markets, partially to overcome restric- million in 2001. Selling, general and administrative
tions on sales of crude oil outside of CIS countries through expenses for 2001 included USD 68 million of expense
Transneft and partially to develop new markets. This related to retired, fully vested beneficiaries under the
resulted in an increase in our average cost of transpor- Veteran Social Support Program, for which there are no
tation, as the costs of transporting crude oil by railway are expenses recognized during 2002 as they were fully
significantly higher than through pipelines. Our increased accrued during 2001. Excluding the expenses under the
railway usage increased our distribution costs by approxi- Veteran Social Support Program, selling, general and
mately 17 percent in 2002 compared to 2001. This factor, administrative expenses of the Corporate and Other segment
combined with an increase in production volumes by increased by USD 95 million. Selling, general and adminis-
19.3 percent and tariff increases for petroleum products trative expenses of recently acquired companies, such as
transport through the trunk pipeline of Transnefteprodukt, a Kopeika (May 2002), contributed USD 8 million to this
state owned company, caused the increases in our distribu- increase. Non-cash write-offs of certain balances deter-
tion expenses. mined to be impaired contributed approximately USD 41
million to the increase. Significant increases in selling, gen-
Selling, general and administrative expenses. Selling, general and administrative expenses in 2002 include increase
eral and administrative expenses increased by USD 164 in salaries and performance bonuses, consulting and legal
million or by 24.4 percent to USD 835 million in 2002 from fees, and expenses for the investigation of international
USD 671 million in 2001. and domestic acquisitions and strategic investments.
Selling, general and administrative expenses of the Explora- Certain elements of selling, general and administrative
tion and Production segment increased by USD 82 million expenses, such as expenses related to our acquisition activity
or by 48.8 percent to USD 250 million in 2002 from and performance bonuses, are either activity based or highly
USD 168 million in 2001. Selling, general and administra- variable and have, and will continue to have varying impacts
tive expenses of John Brown Hydrocarbons (October 2001), on our overall selling, general and administrative expenses.
Davy Process Technology (October 2001), and Arcticgas
88.
(March 2002) contributed USD 36 million to this increase. Depreciation, depletion and amortization. Depreciation,
The remaining increase was primarily due to a number of depletion and amortization expense in 2002 was USD 459
non-cash charges such as inventory and bad debt provi- million compared to USD 270 million in 2001, an increase
sions, and the increase in production levels, partly offset by of USD 189 million, or 70.0 percent. During 2002 and
page
a credit due to a reduction in the reserve for legal liabilities. 2001, we invested USD 1,282 million and USD 893 million,
respectively, in property, plant and equipment, excluding
Selling, general and administrative expenses of the Refining acquisitions. These additional investments, combined with
and Marketing segment increased by USD 55 million or acquisitions and higher production volumes, contributed
by 27.0 percent to USD 259 million in 2002 from to the increase of depreciation, depletion and amortization
USD 204 million in 2001. Selling, general and administra- expense in 2002 compared to 2001.
tive expenses of recently acquired companies, such as the
Angarsk refinery (July 2001) and Mazeikiu Nafta Our Exploration and Production depreciation, depletion
(September 2002), contributed USD 40 million to this and amortization was USD 408 million in 2002 compared
increase. The remaining increase was primarily due to the to USD 240 million in 2001, an increase of USD 168 mil-
significant growth of our retail network of gas stations. lion, or 70.0 percent. This increase was primarily due to
additions of new assets and higher production, which
Selling, general and administrative expenses of the Cor- resulted in a higher depletion rate.
porate and Other segment increased by USD 27 million or
2002
and Analysis
Our Refining and Marketing depreciation, depletion and Income taxes

amortization was USD 27 million in 2002 compared to Our total income tax expense was USD 746 million in 2002
USD 22 million in the same period of 2001. This increase of compared to USD 702 million in 2001, an increase of
USD 5 million or 22.7 percent was primarily a result of the USD 44 million, or 6.3 percent, while our income before
acquisition of Mazeikiu Nafta in September 2002. income tax and minority interest decreased to USD 3,810
million in 2002 from USD 3,866 million in 2001.
Taxes other than income tax. Taxes other than income Reconciliation of our theoretical tax expense to actual tax
tax were USD 3,087 million in 2002 compared to expense is provided in Note 14 to the consolidated finan-
USD 2,075 million in 2001, an increase of USD 1,012 mil- cial statements.
lion, or 48.8 percent. This increase was primarily due to the
introduction of the unified production tax, which replaced We provide for taxes on unremitted earnings of our foreign
royalty taxes, mineral restoration tax and excise taxes on subsidiaries that are payable upon distribution to the parent
crude oil production. In the year ended December 31, 2002, company through our existing legal structure if the retained
our unified production tax expense was USD 1,478 million. earnings of our subsidiaries are not considered perma-
Total mineral restoration tax, royalty tax and excise taxes nently invested. Such provisions are adjusted from time to
on crude oil for the year ended December 31, 2001 were time based upon changes in our legal structure, changes in
USD 537 million. tax rates or changes in intended methods of remitting the
earnings available to us under enacted tax legislation. In the
Other income fourth quarter of 2002, we recorded a USD 368 million
Realized gains on marketable securities, net. Net realized reduction in deferred tax liabilities, which resulted from our
gains on marketable securities were USD 46 million in revised estimate of the applicable tax rates associated with
2002 compared to USD 128 million in 2001, a decrease of the expected remittance of earnings from certain sub-
USD 82 million or 64.1 percent. The amount of realized sidiaries. In conjunction with our ongoing review of tax
gains and losses on marketable securities depends to a strategy we believe that we can reduce the Company’s effec-
large extent on the timing and volume of marketable secu- tive tax rate on such remittances by 5 percent.
rities disposals, as well as on specific market conditions at
89.
the times that transactions are effected. Accordingly, our Our effective income tax rate in 2002 was 19.6 percent.
realized gains and losses on marketable securities vary This rate is lower than the statutory maximum rate for the
from period to period and we expect to continue to see Russian Federation primarily because of the lower tax rates
such variances in the future. for certain subsidiaries in several tax jurisdictions both
page
within Russia and internationally and the reduction in
Interest income (expense). Interest income increased to deferred tax liabilities discussed above, offset by deferred
USD 333 million in 2002 compared to USD 309 million in taxes on unremitted earnings of our subsidiaries.
2001, primarily as a result of higher cash balances held in
2002, partially offset by the disposal of certain high yield Our effective income tax rate in 2001 was 18.2 percent. In
investments. Interest expense increased to USD 64 million 2001, we recognized a USD 525 million deferred tax credit
in 2002 compared to USD 45 million in the 2001, mainly as resulting from a change in the tax code of the Russian
a result of interest accrued on debt of Mazeikiu Nafta dur- Federation. This change, combined with the lower tax rates
ing the fourth quarter of 2002, expense on accretion of dis- for certain subsidiaries and offset by deferred taxes on
count on certain tax and other long-term liabilities, and unremitted earnings contributed to the variance from the
interest on issued trade notes. statutory maximum rate.
2002
YUKOS Oil Company
Annual Report 2002
Cost per barrel The increase in the depreciation expense per barrel of pro-
Below is an analysis of our production and refining costs duced crude oil was primarily the result of continued signif-
per barrel. icant investments in the development of oil fields.
(U.S. Dollars per barrel) Our operating expenses for crude oil refining increased
due to increases in certain production costs of our Russian
Production: refineries, such as electricity and salary expenses. Our
Lifting expenses(1) 1.47 1.78 (17.4)% acquisition of Mazeikiu Nafta in September 2002 also con-
General and administrative
tributed approximately USD 0.04 to the increase in operat-
expenses(1) 0.38 0.33 15.2%
Total taxes other than ing expenses per barrel because the cost structure of
income tax 3.01 1.48 103.4% Mazeikiu Nafta is significantly higher than that of our
Depreciation, depletion Russian refineries.
and amortization 0.78 0.55 41.8%
Total cost per barrel – production 5.64 4.14 36.2%
The increase in our taxes other than income taxes per bar-
Refining: rel of refined crude oil was also primarily due to the acquisi-
Operating expenses 1.11 0.98 13.3%
tion of Mazeikiu Nafta, which is subject to higher excise tax
Total taxes other than
income tax 2.00 1.73 15.6% rates than our Russian refineries. The increase in our
Depreciation, depletion depreciation per barrel of refined crude oil was also primar-
and amortization 0.12 0.08 50.0% ily due to the acquisition of Mazeikiu Nafta, which has
Total cost per barrel – refining 3.23 2.79 15.8% higher carrying value of property, plant and equipment
(1) Lifting and general and administrative expenses directly related to oil and gas production and than our Russian refineries.
incurred by our oil and gas producing subsidiaries (including compensation expenses
incurred as a result of the Veteran Social Support Program); lifting expenses are consistent Year Ended December 31, 2001 Compared to Year Ended
with the information disclosed in the results of oil and gas operations section of the
December 31, 2000
Supplemental Oil and Gas Information disclosure in the consolidated financial statements,
and exclude costs incurred in conjunction with services rendered to third parties, goods pro-
Revenues
Our total sales and other operating revenues were USD 9,461
90.
duced or purchased and then subsequently sold and other auxiliary activities of our
Exploration and Production segment unrelated to the extraction or treatment of our oil and million in 2001, an increase of 4.7 percent from USD 9,032
gas reserves. million reported in 2000. The change was primarily due to an
increase in crude oil and petroleum products sales volumes
Our direct operating costs for crude oil extraction averaged supported by an increase in production, partially offset by a
page
USD 1.47 per barrel in 2002 compared to USD 1.78 per bar- decrease in world oil prices. During 2001, our total sales vol-
rel in 2001, representing a 17.4 percent decrease. The umes of crude oil and petroleum products increased 19.2 per-
decline of lifting costs in 2002 compared to 2001 occurred cent and 9.1 percent, respectively, compared to 2000. These
primarily as a result of improved production efficiency due increases were primarily due to increased production.
to production growth, reduction of the number of active
wells, improvement of water cut through sophisticated The following table shows our average realized crude oil
reservoir management, headcount reduction, improve- and petroleum products prices for 2001 and 2000.
ment of procurement and other efficiency improvements.
(U.S. Dollars per barrel)
The increase in total taxes other than income tax per barrel Year ended December 31, 2001 2000 Change
of produced oil was primarily the result of the introduction International sales – crude oil 22.43 26.05 (13.9)%
of the unified production tax, which replaced royalty taxes, Non-CIS 22.60 26.17 (13.6)%
mineral restoration tax and excise taxes on crude oil pro- CIS 13.99 19.22 (27.2)%
duction. In 2002, the effective unified production tax rate Domestic sales – crude oil 8.79 11.83 (25.7)%
was USD 21.31 per metric ton, or USD 2.92 per barrel. The (U.S. Dollars per metric ton)
effective aggregate tax rate for royalty, mineral restoration International sales –
petroleum products 171.34 192.94 (11.2)%
2002
and excise on production was USD 9.29 per metric ton, or

Domestic sales –
USD 1.27 per barrel, in 2001. petroleum products 149.31 148.03 0.9%
and Analysis
The following table shows the volumes of crude oil and volumes, offset by a 13.6 percent decrease in crude oil
petroleum products that we sold in 2001 and 2000. prices. The increase in the volume of crude oil sold to non-
CIS countries was primarily due to an increase in our sales
(In millions of barrels) to Europe (by 30 million barrels) and to Asia (by 7 million
barrels), primarily China.
International sales – crude oil 220.3 178.1 23.7%
Non-CIS 215.9 175.0 23.4% International sales of crude oil – CIS countries. Revenues
CIS 4.4 3.1 44.0%
from international sales of crude oil to CIS countries were
Domestic sales – crude oil 6.3 12.0 (47.5)%
Total 226.6 190.1 19.2% USD 62 million in 2001 compared to USD 59 million in
2000, an increase of USD 3 million, or 4.9 percent. This
(In thousands of metric tons)
increase was primarily due to a 44.0 percent increase in
petroleum products 9,875 7,505 31.6% crude oil sales volumes, which was largely offset by a
Domestic sales – 27.2 percent decrease in crude oil prices.
petroleum products 16,811 16,963 (0.9)%
Total 26,686 24,468 9.1% Domestic sales of crude oil. Domestic crude oil sales were
USD 55 million in 2001 compared to USD 142 million in
The following table shows our revenues from sales of crude 2000, a decrease of USD 87 million, or 61.3 percent. This
oil and petroleum products in 2001 and 2000. decrease was primarily due to a 47.5 percent decrease in
the volume of crude oil sold in Russia and a 25.7 percent
(In millions of U.S. Dollars)
decrease in domestic crude oil prices.
International sales – crude oil 4,942 4,639 6.5%

International sales of petroleum products. Revenues
Non-CIS 4,880 4,580 6.6%
CIS 62 59 4.9% from international sales of petroleum products were
Domestic sales – crude oil 55 142 (61.3)% USD 1,692 million in 2001 compared to USD 1,448 million
Total 4,997 4,781 4.5% in 2000, an increase of USD 244 million, or 16.9 percent.
This increase was primarily due to a 31.6 percent increase
91.
petroleum products 1,692 1,448 16.9% in our international petroleum products sales volumes,
Domestic sales – offset in significant part by a 11.2 percent decrease in the
petroleum products 2,510 2,511 0.0% price of the petroleum products that we sold in interna-
Total 4,202 3,959 6.1%
tional markets. The increase in our international petro-
page
leum products sales volumes was primarily due to an
We produced substantially all of the crude oil and petro-
increase in sales from the Angarsk refinery to Asia by
leum products that we sold in 2001 and 2000, but we also
approximately 1.0 million metric tons.
sold crude oil and petroleum products that we purchased
from third parties. In 2001, we purchased 20.5 million bar-
Domestic sales of petroleum products. Revenues from
rels of crude oil and 1 million metric tons of petroleum
domestic sales of petroleum products remained almost
products, and in 2000, we purchased 26.3 million barrels
unchanged at USD 2,510 million in 2001 compared to
of crude oil and 0.9 million metric tons of petroleum prod-
USD 2,511 million in 2000. A slight increase in domestic
ucts. See “Operating costs and other deductions – Crude
market prices was offset by a slight decrease in the volume
oil and petroleum products purchased.”
of petroleum products sold in Russia.
International sales of crude oil – non-CIS countries.

Revenues from international sales of crude oil to non-CIS
Crude oil and petroleum products purchased. Purchases of
countries were USD 4,880 million in 2001 compared to
crude oil and petroleum products were USD 481 million in
USD 4,580 million in 2000, an increase of USD 300 mil-
2001 compared to USD 662 million in 2000, a decrease of
lion, or 6.6 percent. This increase was primarily due to a
USD 181 million or 27.3 percent. This decrease was primarily
2002
23.4 percent increase in our international crude oil sales

YUKOS Oil Company
Annual Report 2002
due to a combination of lower market prices and a reduced Depreciation, depletion and amortization. Depreciation,
need to purchase crude oil on the domestic market as a depletion and amortization expenses were USD 270 million
result of increases in our own production during 2001. in 2001 compared to USD 218 million in 2000, an increase
of USD 52 million, or 23.9 percent. This increase was prima-
Operating expenses. Operating expenses were USD 1,182 rily due to the combined result of increased production and
million in 2001 compared to USD 872 million in 2000, an development expenditures offset by purchase accounting
increase of USD 310 million, or 35.6 percent. This increase, adjustments that reduced the net book value of property,
which related primarily to higher production levels, also plant and equipment by USD 128 million during 2001.
resulted from an increase in the number of well workovers,
increased energy costs and salary increases. In addition, Taxes other than income tax. Taxes other than income
USD 68 million of the increase related to accruals for active tax were USD 2,075 million in 2001 compared to USD 1,246
employees participating in the Veteran Social Support million in 2000, an increase of USD 829 million, or
Program. Benefits under the Veteran Social Support 66.5 percent. This increase was primarily due to increases
Program, to the extent they relate to active employees, are in export duties, excise taxes and royalty and mineral
accrued over the estimated remaining service life of such restoration taxes. In 2001, the weighted average export
employees. The Veterans Social Support Program is duty on crude oil increased 29 percent compared to 2000
described in more detail in Note 18 to our consolidated and the weighted average export duty on international
financial statements. sales of fuel oil and diesel fuel, the two principal petroleum
products that we sell in international markets, increased by
Distribution expenses. Distribution expenses were 51 percent and 122 percent, respectively. These increases,
USD 1,048 million in 2001 compared to USD 697 million in combined with the increase in our international crude oil
2000, an increase of USD 351 million, or 50.4 percent. This and petroleum products sales volumes, generated a higher
increase was primarily due to an increase in both volumes export duty expense. Excise tax rates also increased in 2001
transported and transport tariffs for crude oil and petro- compared to 2000 from 55 Rubles per metric ton to
leum products. During 2001, we increased the volumes of 66 Rubles per metric ton on crude oil and from a range of
crude oil and petroleum products transported by rail by zero to 585 Rubles per metric ton to a range of 550 Rubles
92.
244 percent, which was due in significant part to the to 1,850 Rubles per metric ton on certain petroleum prod-
increase in sales to China. This resulted in an increase in ucts. The increase in royalty and mineral restoration taxes
our average cost of transportation, as the costs of trans- primarily resulted from higher sales recorded by our pro-
porting crude oil by railway are significantly higher than duction subsidiaries.
page
through pipelines.
Other income
Selling, general and administrative expenses. Selling, gen- Realized gains on marketable securities, net. Net realized
eral and administrative expenses were USD 671 million in gains on marketable securities were USD 128 million in
2001 compared to USD 562 million in 2000, an increase of 2001, a decrease of USD 37 million from USD 165 million
USD 109 million, or 19.4 percent. This increase was prima- in 2000. Included in 2000 realized gains was USD 116 mil-
rily due to USD 68 million in one-time increases in accrued lion from the sale of shares of ONAKO and Orenburgneft,
liabilities for fully vested participants in the Veteran Social a Russian oil holding company and its principal produc-
Support Program. Benefits under the Veteran Social Support tion subsidiary, which we had purchased during 2000.
Program increase in parallel with the increase in the market Excluding these sales, our realized gains increased by
value of our stock up to a limit of USD 3.25 per share. USD 79 million compared to 2000 as we benefited from
During 2001, our share price increased from USD 1.71 per the improvement in the market value of Russian govern-
share at the beginning of the year to USD 5.20 per share ment securities, which constituted the largest portion of
at year end. our marketable securities holdings during 2001.
2002
and Analysis
Interest income (expense). Interest income continued to Net cash provided by operating activities
grow during 2001, totaling USD 309 million compared with In 2002, our net cash provided by operating activities
USD 132 million in 2000, and reflecting our significant decreased by 4.7 percent to USD 2,967 million compared
increase in holdings of interest-bearing securities and to USD 3,114 million in 2001. This decrease was due to a
other investments. Interest expense declined significantly combination of slightly lower net income and to changes in
as we continued to pay down our total borrowings from our working capital, primarily increases in trade accounts
USD 423 million at December 31, 2000 to USD 116 million receivable (after excluding the effects of foreign exchange),
at December 31, 2001. and reductions in taxes payable.
Income taxes During 2001 and 2000, we generated cash from operations
Total income tax expense was USD 702 million in 2001 of USD 3,114 million and USD 3,310 million, respectively.
compared to USD 1,207 million in 2000, a decrease of Cash from operations decreased by only USD 196 million,
41.8 percent. This decrease was primarily due to a net despite the decrease in net income of USD 568 million, pri-
credit of USD 525 million to income related to the adjust- marily due to working capital changes.
ment to our deferred tax asset and liability balances dis-
cussed below. Net cash used for investing activities
During 2002, our net investing activity was USD 2,349 mil-
Current income tax decreased slightly as a result of higher lion compared to USD 2,962 million in 2001. However, the
levels of investment tax credits from our development focus of our investments shifted from the acquisition of
expenditures. Effective January 1, 2002, the investment tax marketable securities (primarily Russian government
credit was abolished. securities) to strategic acquisitions and investment in
development of our existing production base. In 2002, our
The net deferred tax benefit that we recognized in 2001 was cash expenditures for acquisitions, including advances to
substantially attributable to the change in the Russian tax intermediaries were USD 1,032 million compared to
code during the third quarter of 2001. Under the new USD 653 million in 2001. This increase primarily related
Russian tax code, which became effective on January 1, to our acquisition of an additional interest in Eastern
93.
2002, maximum statutory income tax rate for income Oil Company, acquisitions of equity interests in Transpetrol
received from ordinary activities was reduced from 35 per- and Rospan, and the acquisitions of Arcticgas, Urengoil,
cent to 24 percent, the tax rate for dividends received from Sakhaneftegas and Mazeikiu Nafta. In 2002, our capital
domestic companies was reduced from 15 percent to 6 per- expenditures increased from USD 954 million in 2001
page
cent and the tax rate for dividends received from foreign to USD 1,263 million as we invested heavily in our explo-
companies was reduced from 35 percent to 15 percent. ration and production development activities, refinery
These reductions resulted in a net credit of USD 525 million upgrades to enhance light product output and on renova-
to income related to the adjustment to our deferred tax tions of gas stations.
asset and liability balances.
During 2001, our net cash used for investing activities was
Liquidity and Capital Resources USD 2,962 million, compared to USD 1,633 million in
The following table summarizes our statements of cash 2000. Of the net cash used for investing activities in 2001,
flows for the periods indicated. USD 954 million (2000: USD 589 million) was used for
capital expenditures, primarily oil and gas development, to
(In millions of U.S. Dollars) increase production volumes and improve the operational
efficiency of our refineries. We made net purchases of mar-
Net cash provided by ketable securities, primarily U.S. Dollar-denominated Russian
operating activities 2,967 3,114 3,310 government and corporate debt, of USD 678 million
Net cash used for
investing activities (2,349) (2,962) (1,633)
Net cash used for
2002
financing activities (360) (639) (217)

YUKOS Oil Company
Annual Report 2002
(2000: USD 509 million). In addition, USD 653 million borrowings under our agreements with the Ministry of
(2000: USD 368 million) was used to acquire or increase Finance of the Russian Federation and the International
our ownership in various subsidiaries and equity investees, Bank for Reconstruction and Development. In 2001, we
including Angarsk Petrochemical Company and a number made dividend payments of USD 473 million, representing
of marketing companies in Eastern Siberia, two of Kvaerner’s interim and final dividends for 2000 results and an interim
businesses and Urengoil. dividend for 2001 that our board of directors declared in
October 2001. In 2000, our dividend payments totalled
Net cash used for financing activities USD 103 million, representing dividends for 1999 results.
During 2002, our net cash used for financing activities was
USD 360 million compared to USD 639 million in 2001. In Capital expenditures
2002, we returned USD 60 million in share subscriptions Our business requires a significant amount of capital expen-
to other shareholders of our subsidiary, East Siberian Oil ditures. We have established procedures in place to evalu-
Company, after a planned share issuance was cancelled. ate all potential projects involving capital expenditures.
We repaid, net, USD 36 million of our long-term debt in The following table sets forth our capital expenditures for
2002 and USD 256 million in 2001. Dividend payments 2002 and our current approved capital budget for 2003,
of USD 280 million and USD 473 million were made in exclusive of any amounts for strategic acquisitions and
2002 and 2001, respectively. Shareholder approval of our additional capital expenditures relating to such acquisi-
interim dividend for 2002 was delayed until the end of tions. The capital expenditures for 2003 set forth in the
December 2002 as changes to the Law on Joint Stock table below are only estimates and are subject to change
Companies during 2002 originally permitted only annual depending upon changes in factors such as crude oil
dividends. Subsequent changes to the law which came into prices, the economy, the general business environment,
effect in late 2002 allowed us to obtain shareholder competition and management approval of new projects.
approval of our interim dividend on December 31, 2002. The primary funding source for our capital expenditures in
2002 has been, and for 2003 is expected to be, internally
During 2001, we made net repayments of USD 256 million generated funds. Our 2003 capital expenditure estimates
(2000: USD 399 million) of long-term debt, including are based upon a forecasted Brent price of USD 22.00 per
94.
our borrowings under our facility syndicated by Credit barrel and may need to be revised should Brent fall to
Lyonnais, Goldman Sachs and Merrill Lynch and our USD 15.00 per barrel or less.

page
2002 Estimated 2003

Capital Capital
Segment Expenditures % Expenditures %
Exploration and Production 932 72.7% 1,436 78.1%

Refining and Marketing 268 20.9% 335 18.2%
Corporate and Other 82 6.4% 67 3.7%
Total 1,282 100.0% 1,838 100.0%
2002
and Analysis
Related Party Transactions account for the fair value of the guarantee as a liability. The
We have entered into transactions with related parties and initial recognition and measurement provisions of FIN 45
affiliates. See Note 16 “Related Parties” of the consolidated should be applied on a prospective basis for guarantees
financial statements. issued or modified after December 31, 2002. The disclo-
sure requirements of FIN 45 are effective for financial state-
Recent Accounting Pronouncements ments of both interim and annual periods ending after
In June 2001, the Financial Accounting Standards Board December 15, 2002, and are included in Note 19 to the con-
(“FASB”) issued Statement of Financial Accounting Standards solidated financial statements.
No. 143, Accounting for Asset Retirement Obligations
(“SFAS 143”). This new statement is effective for fiscal years In January 2003, the FASB issued Interpretation No. 46,
beginning after June 15, 2002. The Company will adopt Consolidation of Variable Interest Entities (“FIN 46”). FIN 46
SFAS 143 effective January 1, 2003. SFAS 143 addresses the amended Accounting Research Bulletin No. 51,
accounting and reporting for obligations associated with Consolidated Financial Statements (“ARB 51”), and estab-
the retirement of tangible long-lived assets and the associ- lished standards for determining under what circumstances
ated asset retirement costs. The adoption of this statement a variable interest entity (“VIE”) should be consolidated
primarily affects the Company’s accounting for oil and gas with its primary beneficiary. FIN 46 also requires disclo-
producing assets. SFAS 143 differs in several significant sures about VIEs that an entity is not required to consoli-
respects from current accounting under Statement of Financial date but in which it has a significant variable interest. The
Accounting Standards No. 19, Financial Accounting and consolidation requirements of FIN 46 apply immediately
Reporting by Oil and Gas Producing Companies (“SFAS 19”). to VIEs created after January 31, 2003. The consolidation
Under SFAS 143, the Company will recognize a liability for requirements apply to older entities in the first financial
the fair value of an asset retirement obligation in the period year or interim period beginning after June 15, 2003.
in which it is incurred if a reasonable estimate of fair value Management does not expect that adoption of FIN 46 will
can be made. If a reasonable estimate of fair value cannot have a significant impact on the financial position or
be made in the period the asset retirement obligation is results of operations of the Company.
incurred, the liability is recognized when a reasonable esti-
95.
mate of fair value can be made. In periods subsequent to Qualitative and Quantitative Disclosures
initial measurement, the Company recognizes period-to- About Market Risk
period changes in the liability for an asset retirement obliga- In the normal course of business, we are exposed to a
tion resulting from (a) the passage of time and (b) revisions number of external factors and market risks. We are
page
to either the timing or the amount of the original estimate of exposed to market risk from changes in foreign currency
undiscounted cash flows. Upon initial recognition of a liabil- exchange rates relating to our continuing operations as
ity for an asset retirement obligation, the Company capital- well as security price risk relating to our portfolio of mar-
izes an asset retirement cost by increasing the carrying ketable securities. We are not currently engaged in hedging
amount of the related long-lived asset by the same amount activities or other derivative trading to manage oil price risk
as the liability. Management is currently completing its or to hedge against foreign currency exchange fluctuations.
assessment of the effect of the adoption of SFAS 143 on
the Company. We are exposed to movements in the Russian Ruble to
U.S. Dollar exchange rate with respect to our Ruble-
In November 2002, the FASB issued Interpretation No. 45, denominated monetary assets and liabilities. Generally,
Guarantor’s Accounting and Disclosure Requirements for as the value of the Ruble declines, a net Ruble monetary lia-
Guarantees, Including Indirect Guarantees of Indebtedness of bility position results in currency exchange gains and a
Others (“FIN 45”). FIN 45 requires that upon issuance of net Ruble monetary asset position results in currency
certain types of guarantees, a guarantor recognize and exchange losses.
2002
Shareholder Information
Share Price Stock Administration
YUKOS shares are traded on the Moscow Interbank Currency Registrar

Exchange (MICEX), the Russian Trading System (RTS), M-Reestr
and the Moscow Stock Exchange (MSE). YUKOS Level 1 Ul. Vavilova, 23
American Depositary Receipts (ADRs) are traded in the Moscow 117312 Russia
United States, Great Britain and continental Europe. Share Telephone: + 7 095 719 0945
price information is published in most Russian business Facsimile: + 7 095 719 0937
newspapers and is available on the corporate website.
ADR Program Administration
Deutsche Bank:
Quarterly share price range Moscow: + 7 095 797 5035
(RTS closing price), 2002 London: + 44 207 547 65 00
New York: + 1 212 250 8500
U.S. Dollars per share
High Low
Auditor
1st quarter 8.37 5.23 PricewaterhouseCoopers
2nd quarter 11.38 8.28 52 Kosmodamianskaya Embankment, Building 5
3rd quarter 10.63 8.45
Moscow 115054 Russia
4th quarter 9.75 8.45
Telephone: + 7 095 967 6000
Facsimile: + 7 095 967 6001
Dividend Information
Contact Information
Dividend for indicated fiscal year
Russian Rubles per share

Company Headquarters
31a Dubininskaya Street
96.
2002 2001 2000 1999
Interim 5.70 (1) 2.64 1.26 –

Moscow 115054 Russia
Final (2) 4.19 (3) 4.18 2.58 1.34 Telephone: + 7 095 232 3161
Total 9.89 (3) 6.82 3.84 1.34 Facsimile: + 7 095 232 3160
(1) For 9 month e-mail: info@yukos.ru
page
(2) Final dividend is the total dividend for the year less interim dividend or dividend for
9 month. Legal Address
(3) Proposed by the Board of Directors April 24, 2003, subject to AGM approval.
Ul. Lenina, 26
Nefteyugansk
Dividend payment notification, with payment procedure
Khanty-Mansiysk Autonomous District
details, is sent out separately to each shareholder.
628309 Russia
Investor Relations
Annual General Meeting
(for inquiries by institutional investors)
Alexander Gladyshev
YUKOS’ Annual General Meeting of Shareholders will be
Telephone: + 7 095 788 0033
held on June 18, 2003, at 11:00 am (Registration starts at
e-mail: investors@yukos.ru
9:30 am). Address: Moscow, 6, Ilyinka Street (Congress
Design by Addison www.addison.com
Center of the Russian Chamber of Commerce).
Corporate Websites
www. yukos.com (English)

2002
www.yukos.ru (Russian)
www.yukos.sk (Slovak)
www. yukos.lt (Lithuanian)
www.yukos.pl (Polish)
www.yukos.hu (Hungarian)

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YUKOS

To the Board of Directors and

Moscow, Russian Federation

YUKOS Oil Company consolidated balance sheets

YUKOS Oil Company consolidated statements of cash flows

Balance at December 31, 1999 2,237 9 854 917 – (1) 1,779

YUKOS Oil Company notes to consolidated financial statements

March 31 31.12 28.74 28.46

Accounts receivable. Accounts receivable are presented at

Environmental liabilities. Liabilities for environmental

costs of proved oil and gas properties is calculated using

(Note 16) and Bank MENATEP Saint Petersburg (Note 16)

solidated financial statements.

Prepaid and recoverable value-added and

includes value-added tax from purchases that will be

Note 9: Equity Investees and Long-Term Investments

Income (loss) from equity

Trust and Investment Bank 37.2 37.2 61 47 14 6 3

Acquisition of Kvaerner businesses. In November 2001, the

In the fourth quarter of 2002, the Company analyzed its

Other long-term borrowings 104 12 2004 22

and Development. At December 31, 2002 and 2001, the

for statutory tax purposes. Deferred income tax assets and

reduce its effective tax rate on such remittances by 5 percent.

the amount disclosed.

result of the bankruptcy proceedings of Bank MENATEP

Entity Nature of relationship Nature of transactions/balances

Purchases of petroleum products – – 4

per share 2,163 2,145 2,212

The Company has elected to account for employee stock

Conditional The Company provides bid and performance-related bonds

any particular customer.

Exploration Refining Corporate Intersegment

Sales and other operating revenues

Total income tax expense (benefit) (88) 366 468 – 746

Exploration Refining Corporate Intersegment

Sales and other operating revenues

Exploration Refining Corporate Intersegment

Sales and other operating revenues

Total income tax expense (benefit) (68) 649 626 – 1,207

Year ended December 31, 2002 2001 2000

Net proved reserves of crude Net proved reserves of

Net proved reserves of natural gas are presented below.

Net proved reserves of Net proved reserves of

Reserves at December 31, 1999 1,193 34 1,077 30 2,270 64

At December 31, 2001 991 28 778 22 1,769 50

Net proved reserves of crude oil, Net proved reserves

Reserves at December 31, 2002 48 6 990 28

Future cash flows Future cash flows Future cash flows

Future cash inflows from production 96,718 75,207 171,925

Future cash flows Future cash flows Future cash flows

Future cash inflows from production 61,239 53,467 114,706

Future cash flows Future cash flows Future cash flows

Future cash inflows from production 67,610 57,372 124,982

Changes in Standardized Measure of Discounted Future Net Cash Flows

Future cash flows Future cash flows Future cash flows

Standardized measure of discounted

Future cash flows Future cash flows Future cash flows

Standardized measure of discounted future net

Accretion of discount 2,159 289 2,448

Net change in income tax expense (507) (805) (1,312)

Future cash flows Future cash flows Future cash flows

Standardized measure of discounted future net