Russia has a high excise tax on globally priced crude oil exports while low, controlled prices on domestic natural gas and oil are gradually being increased. As a result, the tax collector takes the hit on export price while profits continue to expand for rapidly growing domestic operations.
Results for the quarter ended September 30, 2006, reported on Jan. 12, exceeded our expectations in volume and cash flow thus strengthening our projection for the year 2007. One of the largest tax payers in Russia, Lukoil enjoys a positive political position. Estimated net present value of $110 a share reflects a modest multiple of cash flow considering that Russia has richer natural gas and oil resources than any single country.
Lukoil stock has a double weighting in the illustrative McDep Energy Portfolio concentrated on real assets that promise a high return providing clean energy to support global growth.