Dear shareholders & investors!

Alexey Miller Our Company gave a record-breaking performance on all fronts in 2011, leading the Russian industry by rates of growth of production, refining, and sales through premium channels. Gazprom Neft has once again proved itself to be one of the most efficient operators in the industry.

The records of 2011 cannot be attributed solely to a favourable market situation. They are also the fruits of a strong business strategy — designed, approved and successfully implemented — as well as the united efforts of the Company’s executives and employees.

In 2011 the company demonstrated record high levels in all basic financial and manufacturing indicators, taking a leading position on dynamics for extraction, refining, and realizing petroleum products via premium marketing channels.

Gazprom Neft finished 2011 in the first place in the Russian oil industry by rates of growth of operating income and by total return to shareholders. The Company proved its financial efficiency once again, keeping growth of operating costs per barrel of oil equivalent at the lowest level in the industry.

The Company has continued to raise production and expand its business geography by reaching out to new regions. Last year, Gazprom Neft began creation a new production centre in Orenburg Region, based on the eastern part of the Orenburg field. Work also continued to upgrade Company refineries: all Gazprom Neft refineries made the transition to environmentally high-grade fuels in 2011, well ahead of the statutory schedules.

The Company continues to expand its sales of petroleum products, and has become the Russian leader by product sales in premium segments (compared with the third position by refining volumes).

Foreign business has shown good progress: our Serbian subsidiary, NIS, improved its production and financial performance in 2011 and work continued on projects in Iraq, Venezuela, Cuba, and Equatorial Guinea.

Achieving these high results was possible due to advantageous market conditions and also to the successful implementation of the oil business strategy as confirmed by the Board of Directors, and to the hard work of company management and employees.

Gazprom Neft’s top priorities in the next few years are to secure high rates of hydrocarbon production growth by developing new areas in Russia and elsewhere, to raise the quality of petroleum products and achieve deeper refining levels, and to strengthen our positions on retail markets in Russia and the CIS. The Gazprom Neft filling station brand will be further promoted.

The last year once again proved that stronger vertical integration it the surest way to implement strategic plans successfully. Our Company has laid a firm foundation for its ambitious strategy, which promises to create more value for all shareholders of Gazprom Neft.

Alexey Miller
Chairman of the Management Committee,
JSC Gazprom
Chairman of the Board of Directors,
JSC Gazprom Neft

Dear Shareholders, Investors, & Partners !

Alexander Dyukov

Our achievements in 2011 are not only a reflection of the favorable macroeconomic environment and positive changes in tax law. They also reflect major progress in our operations.

The audit of our stocks by DeGolyer and MacNaughton found the Company’s proven deposits by PRMS at the end of 2011 to be 1.130 mn t of oil equivalent, with reserve replacement above 286%.

Consolidated hydrocarbon production by Gazprom Neft in 2011 reached a level of 57.3 mn t of oil equivalent, maintaining the growth trend of recent years. Main drivers were increased production at the Priobskoye Field, consolidation of assets in Orenburg Region that were purchased by the Company in 2011, and the start of operations with Cenomanian natural gas deposits at the Muravlenkovskoye and Novogodneye gas fields. The combination of these factors provided 8% growth of output compared with 2010, which is the best result in the industry..

Last year’s results can be called the best in Gazprom Neft’s entire history — all of our achievement in our operations had a significant impact on our financial indicators.

Gazprom Neft expanded its geography in the exploration and production segment last year, entering Orenburg Region, where we created a new production centre at the eastern section of the Orenburg field (reassigned to us by JSC Gazprom) and at other newly acquired fields.

International projects of Gazprom Neft progressed in 2011. Work to raise the operating efficiency of our Serbiabased subsidiary, NIS, led to substantial improvements of financial and operating performance: hydrocarbon production by NIS rose by 24% and net income increased to USD 508 million. Drilling work started in our project at the Badra field in Iraq, geological survey work continued on the continental shelf off Cuba and Equatorial Guinea, and construction went ahead in the Junin-6 project in Venezuela.

Refining volumes grew by 7% in 2011 thanks to an intensive program to upgrade our refining capacity, supported by growing demand for petroleum products on the domestic market. Gazprom Neft pursued upgrades of its refining facilities in 2011 in order to raise the quality of petroleum products and improve their environmental features. An isomerization plant was launched in 2011 at the Yaroslavl Refinery, and all of the Company’s refining units switched to production of Class-4 petroleum products.

The Company continued to increase its petroleum product sales in premium segments last year. Sales via most lucrative channels (our own filling stations and tank farms, sales of marine and aviation fuels, and lubricants) grew by 38%, and sales per filling station rose by 40%. Such results were possible thanks to our efforts to upgrade, rebrand and expand our retailing network both inside and outside Russia, to market premium-grade fuels, and to launch loyalty programs throughout our filling station network. We are the Russian leader by volumes of retail gasoline and aviation fuel sales, we are in first place by sales of marine fuel, and we became the absolute leader in supplies of bituminous materials for the first time in 2011. In the lubricant segment Gazprom Neft is now ahead of all its competitors by the number of high-tech motor oil and industrial oil brands, which it offers to the market.

Operating achievements had proportional effect on financial indicators, which were the best-ever in the Company’s history in 2011. Our revenues in 2011 grew by 34.3% to USD 44,189 mn and net income of USD 5,352 mn was 70% higher than in 2010.

Having achieved these record results, we are committed to continuing development in 2012. Even if the ‘outside support’ from the global economic situation is not as significant, the continuous improvement in key efficiency indicators will form a reliable foundation for long-term growth, and will have a positive impact on the company’s value.

The strong financials reflect an optimal ratio of hydrocarbon production to refining, improvement of the sales structure, and successfully implemented efficiency and cost-cutting programs.

The Company took further steps to optimise its loan portfolio in 2011. Debt refinancing and a well-balanced policy of borrowing enabled reduction of the effective interest rate on our debt portfolio to 3.4%, while the share of long-term loans grew by 28%. By the end of 2011 our EBITDA-to-net debt ratio was close to 0.6, which is a record level for the Company. Gazprom Neft remains committed to a balanced financial policy, using operating cash flow for further business development, while at the same time maintaining one of the highest dividend payment levels in the industry.

Having set new records in 2011, we will continue to grow our business in 2012. Even if external support from the global economy is less strong than in the reporting year, constant improvement of key efficiency indicators will provide a solid foundation for future growth, adding to the value of our Company .

Alexander Dyukov
Chairman of the Management Board of
JSC Gazprom Neft