The Company’s annual report, balance sheet, profit and loss account were presented to and approved by the shareholders, taking into consideration the conclusion of the Auditing Commission and the Independent Auditor as well as distribution of 2003 revenues.

The report showed that the Company demonstrated a substantial production growth across all areas of its activity.

Production of oil rose by 10% to 54 mn tons and associated petroleum gas by 4% to 13.9 bn cu m. With its 36% increase in gas processing the Company was able to process 27% of total annual gas output. There were 30 mn tons of oil added to the Company’s reserves via prospecting and exploration and 300 mn kWt of electricity generated (8% increase).

In 2003, the Company acquired 17 licenses for geological study and 4 licenses for prospecting and exploration. Among the most important of the Company’s acquisitions are license for exploration and development of Talakanskoye field in Republic of Sakha (Yakutia) with recoverable oil reserves of over 120 mn tons.

“Replacement of the Company’s reserves at over 280% against annual oil production was the positive result of our resource policy”, stated in his report Vladimir Bogdanov, Director General of Surgutneftegas.

Output of oil refining didn’t change since 2002 and totaled 15.2 mn tons. There were 14 mn tons of oil products produced.

Intensive investment program provided a basis for these results. In 2003, the Company invested RUR 41.3 bn including RUR 37.7 bn in upstream sector and RUR 3.4 bn in oil refining inclusive of RUR 1 bn invested in construction of deep oil refining plant.

With its 78% increase in market capitalization, a record high growth for Russian stock market, the Company’s leaves behind other Russian oil producers.

Increased production and upward price trends pushed sales revenue up by 15% to RUR 213.3 bn. Although the growth of production costs was affected by some adverse developments, sales profit increased by 11% to RUR 69 bn.

However, return on sales slightly decreased due to higher cost of sales, brought about by increased output, increase in Mineral Resource Tax, electricity and oil / oil products transportation tariffs, railroad transportation rates, as well as higher prices for tubulars and other materials.

Speaking about the 2004 outlook, Vladimir Bogdanov stated:

“With the market conditions being favorable, we reviewed our plans for the current year output. This year we expect to boost oil production by over 8% to as much as 58.6 mn tons and produce 14.5 bn cu m of associated petroleum gas.

The Company’s investment program is to exceed RUR 48 bn. Our plans call for significant growth of investment in the refining sector to carry out the deep oil refining plant construction project, which in 2004 will require
RUR 10 bn on top of RUR 3 bn invested before.

On financial side, the Company intends to exceed the 2003 level of profit as long as there are no drastic changes to raise tax burden on Russian oil producers.”

The Shareholders’ Meeting adopted a resolution to pay dividends at
16 kopecks per a preferred share and 14 kopecks per an ordinary share for 2003.

Shareholders approved “Rosekspertiza” Ltd. as the Company’s Auditor and elected the Auditing Commission and the Board of Directors.

Press Service of OJSC “Surgutneftegas”