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19.11.2009 Results of BoD Meeting

Results of BoD Meeting  

A meeting of OAO LUKOIL Board of Directors dedicated to approval of the LUKOIL Group Strategic Development Program for 2010-2019 (the ‘Program’) was held inMoscow today. The Program is a revised version of the LUKOIL Group Strategic Development Program for 2008-2017 approved by the Board of Directors in 2007. The main prerequisite for updating the macroeconomic and marketing forecasts in the RF and foreign countries for 2010-2019 was the global financial and economic crisis. As a result of the crisis and the ensuing drop in demand for feedstock, uncertainties at financial and consumer markets the Company decided to reset its strategy focus from production growth to growth of free cash flow. Ensuring competitive return rate due to selection of the most efficient projects is considered top-priority objective of the Program.
The Program envisages the following top-priority tasks and objectives for LUKOIL Group:
- steady growth of free cash flow;
- growth of hydrocarbon production;
- full production offset with reserves increment at costs below the competitive level;
- geographical diversification of hydrocarbon production;
- spin-off of low-efficient assets of the Exploration and Production business segment into a specialized company;
- monetization of gas reserves, including utilization of associated gas,    synergy with the power and petrochemical sectors;
- modernization of oil refining capacities, primarily in Russia, aiming to increase complexity of refining processes and maximize light petroleum products output;
- selective development of sales networks in priority regions, efficiency enhancement in traditional regions due to assets modernization and brand promotion.
Enhanced labor productivity, energy efficiency growth, implicit discipline of capital investments, deployment of the potential of the Company’s  research and engineering complex, further simplification of the organizational structure and spin-off of non-core activities are considered as basic tools for reaching the objectives set by the Program. 
The return on capital employed, which should comply with that of the leading global oil companies remains a top-priority financial indicator for progress evaluation of the Company’s strategy implementation.
The Company intends to employ the increased free cash flow for ensuring growth of dividends and buyback of shares.
The Company will announce details of the Strategic Development Program upon expiration of the period when applied international law requirements restrict disclosure of LUKOIL Group’s plans and outlooks. The Company will make a respective statement in December 2009.
The Board of Directors also discussed measures aimed at consolidation of the Company’s raw material base for 2010-2019. These measures are focused on implicit implementation of geological exploration programs by LUKOIL Group companies in 2010-2019 which ensure a 100% production offset.
Among others, the following measures are identified as viable in this regard:
- Ensuring the volume of geological exploration works under the current geological exploration projects in Russia and overseas envisaged by the Sector Development Program;
- Implementation of new projects in Russia and overseas, including:
- Participation in the bidding for the right to subsoil use of the fields prepared for development, which are part of the RF unallocated pool, conduct of works under the licenses to exploration in promising regions;
- Purchase of assets from the allocated pool. 
In order to solve these tasks, the main efforts of the respective subdivisions and subsidiaries of the Company will be concentrated upon selection of highly efficient projects in the Russian Federation and abroad aimed at achievement of target values as to full offset of production with hydrocarbon reserves increment.
The Board of Directors also approved the Shareholder Relations Policy of OAO LUKOIL. According to the Policy, the Company guarantees protection of shareholders’ rights established by the RF effective legislation, internal regulations of OAO LUKOIL stipulated by the Company’s obligations resulted from trading of its securities at Russian and international stock exchanges, as well as those voluntarily granted by the Company to its shareholders within the framework of OAO LUKOIL’s adherence to the best standards of the international corporate governance practice. The full version of OAO LUKOIL interaction strategy with shareholders can be found at the Company’s website at http://www.lukoil.ru/static_6_5id_2230_.html or http://www.lukoil.com/static_6_5id_2176_.html .
The Board of Directors also resolved to elaborate the Shareholder Relations Program of OAO LUKOIL for 2010-2014.
Forward-looking statements
Some statements of this press release are not historical facts, but rather represent expectations or forecasts of future events. Such statements among other things refer to forecasted or expected incomes, revenues (losses), earnings (losses) per share, dividends, capital structure, other financial indicators and rates;  statements pertaining to our plans, goals and objectives, including those related to products and services; statements pertaining to future economic indicators; and statements pertaining to assumptions for such statements. Such terms as “anticipate”, “expect”, “suppose”, “plan”, “intend” and “predict” and other words with similar meaning are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that the predictions, forecasts, projections and other forward-looking statements will not be achieved. One should be aware that a number of important factors could cause actual results to differ significantly from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements regarding the future, including the option to carry out restructuring and expense reduction program. When relying on forward-looking statements, you should carefully consider the foregoing factors and other uncertainties and events, especially in light of the political, economic, social and legal environment in which we operate. Such forward-looking statements speak only as of the date on which they are published and the Company does not undertake any obligations to update or revise any of them, whether as a result of new information, future events or otherwise. We do not make any representation, warranty or prediction that the results anticipated by such forward looking statements will be achieved, and such forward-looking statements represent, in each case, only one of the many possible scenarios and should not be viewed as the most likely or standard scenario.