1 
 
 
  
 
 
 
 
VOLGA GAS plc 
 
ANNUAL REPORT AND ACCOUNTS 
FOR THE YEAR ENDED 31 DECEMBER 2011 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
  Volga Gas plc 
Annual Report and Accounts 2011 
 
 
 
Volga Gas plc is an independent oil and gas 
exploration and production company focused on the 
Volga Region of Russia.  It has 100% interests in five 
oil and gas exploration and production licences in the 
Saratov and Volgograd regions. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Volga Gas plc 
Annual Report and Accounts 2011 
 
1
Review of 2011 
 
 Acquisition of Dobrinskoye gas/condensate field and processing plant 
 Steady production from the supra-salt Uzenskoye oil field in the Karpenskiy Licence Area  
 Continued successful test production on the Vostochny Makarovskoye gas/condensate field 
 Significant growth in production, revenue and EBITDA in 2011 
 Combined Russian classification C1/C2 recoverable reserves of 66.4 million barrels of oil 
equivalent on Uzenskoye, Dobrinskoye and Vostochny Makarovskoye 
 Year-end cash and cash equivalents of US$10.1 million 
 Aim to bring the Vostochny Makarovskoye field into full time production during Q3 2012 
 
Business overview 
Review of 2011  1 
Volga at a Glance  2 
Chairman’s Statement  3 
Chief Executive’s Report  4 
Operational Review 5 
Financial Review 7 
Risk Factors 9 
Corporate Governance  
Board of Directors  11 
Corporate Governance Statement  13 
Report of the Directors  16 
Directors’ Remuneration Report  19 
Financial Statements 
Independent Auditors’ Report  21 
Group Income Statement  22 
Group Statement of Comprehensive Income 22 
Group Balance Sheet 23 
Group Cash Flow Statement 24 
Company Balance Sheet 25 
Company Cash Flow Statement  26 
Group and Company Statements  
of Changes in Equity  27 
Notes to the IFRS Consolidated  
Financial Statements  28 
Notice of Meeting  46 
Glossary of Technical Terms 48 
Russian Classification of Reserves 49 
Corporate Directory 50 
 
  Volga Gas plc 
Annual Report and Accounts 2011 
 
 
2 
 
Volga at a Glance
 
Our assets are located in an established oil and gas province. The area benefits 
from the existing rail, road and pipeline infrastructure and proximity to Russia’s 
main energy markets. 
Continued steady production from the Uzenskoye oil field and the acquisition of the Dobrinskoye 
gas/condensate field enabled the Group to achieve significant increases in production, revenues and 
EBITDA in 2011.  With the expected completion of the Vostochny Makarovskoye project and further 
potential developments, the Group aims to deliver significant further growth in production in the 
short and medium term.  
 
 
 
Licence Overview 
 
2011 Progress 
 
2012 Objectives 
 
Dobrinskoye  
 
Acquisition of Gazneftedobycha in April 2011 
provided a new production stream to Volga Gas 
as well as ownership of the gas plant that will 
process gas from Vostochny Makarovskoye. 
 
Drill and complete a sidetrack to well #22 on the 
Dobrinskoye field and achieve significant increases in 
production. 
 
Vostochny 
Makarovskoye  
 
 
First two development wells successfully placed 
on extended test production. 
Completed tie-back of the field to the 
Dobrinskoye gas plant. 
Relocated sulphur treatment unit to the 
Dobrinskoye gas plant. 
Complete the upgrade to the gas plant to enable full 
time production from Vostochny Makarovskoye. 
Workover of well #30 to provide an additional production 
well on the field. 
Commence full time production of gas and condensate. 
Karpenksiy ( Supra-
Salt)  
 
Third year of production, averaging 1,178 
barrels of oil per day (“bopd”) (2010: 1,115 
bopd). 
 
Maintain/enhance production profile and maximise 
extraction of oil from existing wells. 
 
Pre-Caspian Licence 
Area 
 
Selection of a suitable exploration target, 
Mirnaya #2 to meet exploration drilling 
commitment. 
Complete drilling of the Mirnaya #2 well and commence 
drilling of one further contingent well. 
 
Urozhainoye-2 Licence 
Area 
 
Drilled Yuzhny Romanovskaya #1 exploration 
well to a secondary target at a depth of 2,885 
metres. 
Complete drilling to the primary target at a depth of 
4,100 metres. 
 
  Volga Gas plc 
Annual Report and Accounts 2011 
 
 
3 
 
Chairman’s Statement 
 
Dear Shareholder, 
 
2011 has been a transformational year for Volga Gas, with the acquisition of OOO Gazneftedobycha (“GND”) allowing the Company 
to conclude the long running legal and commercial differences with Trans Nafta and enable the Group to proceed with the final 
stages of preparation for production from the Group’s largest field, Vostochny Makarovskoye. 
The production side of the business continued to perform well in 2011 and with the additional production acquired with GND, the 
Group reported significant increases in revenues, EBITDA and operating cash flow. 
The strong cash flow has enabled the Group to repay a significant proportion of the loans that were inherited with GND, while 
maintaining a strong financial position, with cash balances of over US$10 million at the end of the year.   
The cash generating capability of the fields was also an important factor in the Group’s ability to secure its first commercial debt 
facility which was signed post the year end on 26 March 2012.  This facility will provide the necessary financial flexibility to support 
the Group’s short and medium term investment strategy which will further drive production growth in 2012 and 2013. 
The Group has significant proven reserves in its three principal fields, which form the basis of an established and rising profile of 
production.  Our fields are advantageously located and our costs are sufficiently low for us to achieve good returns at oil and gas 
prices significantly lower than those we currently enjoy.  Most importantly, these assets provide a strong platform for the Group to 
grow in the future, both through successful exploration and by selective value accretive acquisitions. 
Volga Gas has identified material exploration prospects within existing acreage that can be tested at low cost.  In addition, the 
deeper sub-salt potential of our licences remains largely untested. Based on the knowledge gained from our first well drilled in 
2009-2010, we may consider further sub-salt drilling in the future. 
During 2012, the strategic priority of the Group will be to achieve full commercial operation of the Vostochny Makarovskoye field, 
and to complete projects to enhance production from the Group’s other two fields.  The Board is also evaluating opportunities to 
extend the Group’s activities into new areas, where we have identified the potential to add significant value and incremental 
production volumes.   
The Board believes that Volga Gas has a strong asset base and the financial and operational capability to develop and extend these 
assets to provide long term value growth for our shareholders. 
 
Alexey Kalinin 
Chairman 
  Volga Gas plc 
Annual Report and Accounts 2011 
 
 
4 
 
Chief Executive's Report 
 
A significant event in 2011 was the acquisition of Gazneftedobycha (“GND”) which brought into the Group’s ownership the 
Dobrinskoye gas processing plant and the Dobrinskoye gas/condensate field.  This enabled us to proceed towards full time 
production from the Vostochny Makarovskoye (“VM”) field, which will utilize the Dobrinskoye gas plant to process its output. 
With effect of 1 April 2011, the Group acquired the equity of GND for a consideration of approximately US$1.1 million. At the time 
of the acquisition, GND had loans outstanding due to Trans Nafta amounting to approximately US$24.4 million.  By 31 December 
2011, the debt outstanding had been reduced to approximately US$4.2 million. 
On completion of the acquisition of GND in April 2011, the Group benefitted from an immediate increase of 9.3 million barrels of oil 
equivalent (“mmboe”) in C1/C2 Reserves and a new and profitable stream of production to complement the steady production from 
the Uzenskoye oil field.  This higher level of production, together with sustained healthy sales prices for oil, gas and condensate, 
enabled the Group to report a 118% increase in sales and a 256% increase in EBITDA. 
As detailed in the Operational Review below, the majority of the work done on our existing asset base was focused on 
management of our two producing fields with the aims of maintaining effective and efficient long term production and of 
maximizing the ultimate recovery of reserves.  In 2011, exploration activity was limited to the drilling of a committed exploration 
well on the Urozhainoye-2 licence area.   
Our key strategic objective now is to bring the VM field into full time production.  Much of the development work was accomplished 
before 2011.  We completed two production wells and installed intra-field pipelines in 2009, and during the second half of 2010 
and the majority of 2011, we successfully conducted extended production tests on these two wells.  
Following the GND acquisition, we completed the physical connection between the VM field and the gas plant, relocated a partly-
built H 2S processing unit from the VM field site to the gas plant site, and conducted a series of tests to establish the optimum plan 
for the necessary modifications to enable the gas plant to process the gas and condensate from VM.  In December 2011, the plans 
for the plant upgrades were finalized and the principal procurement and construction contracts issued.  Our aim is to complete the 
modifications and to commence full time production as soon as possible, expected in Q3 2012. 
While the immediate strategic objective is to bring our existing assets into production, we have also been active in seeking growth 
opportunities by acquisition.  We remain active in our search for complementary assets to expand our business. 
Finance 
To date, the Group’s investments in exploration and capital expenditure have been funded from equity and cash generated from 
operational activities.  Now that the Group’s assets have established a track record of reliable cash generation, the Board has 
decided that it is an appropriate time to bring bank debt into the capital structure of the Group.  On 26 March 2012 the Group 
arranged its first debt facility, with ZAO Raiffeisen Bank, for a sum of US$10 million, which will be utilized to fund capital 
expenditures and for general corporate purposes in our Russian operating companies. 
Current trading 
Since the beginning of 2012, production capacity from the Dobrinskoye and Uzenskoye fields has been steady at approximately 
2,500 boepd.  During January and February 2012, the domestic oil market in Russia has been constrained, with several refineries 
undertaking early maintenance shut-downs, which has reduced demand and has required the Group to produce below the full 
capacity of our wells.  Since the beginning of March 2012, we have seen more normal conditions return to the market, which has 
allowed us gradually to bring production from our fields closer to their technical capacities.   With oil, gas and condensate sale 
prices remaining firm since the start of the year and costs remaining relatively low, Volga Gas continues to enjoy positive net 
operating cash flow. 
Outlook 
Key activities for 2012 will be the ongoing management and development of existing production across the portfolio.  The Group’s 
priority is to bring the VM field into production as soon as possible.  On the VM field, an additional well, #30, is to be worked over 
and re-completed with the aim of increasing production capacity. Exploration drilling activity in 2012 includes completion of an 
exploration well on the Urozhainoy-2 Licence Area, and a shallow exploration well in the Pre-Caspian licence area.  The total capital 
expenditure budgeted for 2012 is US$16.0 million, covering exploration and development drilling and the upgrade to the 
Dobrinskoye gas plant.  This will be funded from a combination of cash flow, existing cash resources and the new bank facility. 
Certain fiscal changes have been brought into effect in Russia.  These include provisions that reduce the tax burden on crude oil 
exports and a new basis of charges of Mineral Extraction Tax (“MET”) on condensate.  The oil export tax changes may lead to 
relative increases in crude oil prices in the domestic market, in which we sell our oil and condensate.  In addition, the new rate of 
MET on condensate is significantly lower than the 17.5% charge on sales hitherto charged.  Management believes these changes 
will be of material benefit to the Group in 2012. 
We look forward to delivering a successful new stream of production and to pursuing the other growth opportunities that we see 
for the business. 
 
Mikhail Ivanov 
Chief Executive Officer  Volga Gas plc 
Annual Report and Accounts 2011 
 
 
5 
 
Operational Review 
 
Operations overview 
The Group achieved a significant increase in production in 2011 following the acquisition of the Dobrinskoye gas and condensate 
field and a third successive year of steady production from the Uzenskoye oil field.  This increase in production enabled the Group 
and to reach a significantly higher level of EBITDA and cash flow than in previous years.  Full details are discussed in the Financial 
Review below. 
Operating activities in 2011 were principally focused on management of existing oil production, integration of Gazneftedobycha into 
the Group and preparation for full time production from the Vostochny Makarovskoye field. There was also one exploration well 
being drilled during the year, in the Urozhainoye-2 licence area. 
Karpenskiy licence area (“KLA”) 
The Group has completed all of its exploration commitments on the KLA and consequently all future activity in this area is 
discretionary.  There remains significant exploration potential within the licence both within the supra-salt and the sub-salt 
horizons.  However, the Group’s priority in 2011 was to advance the development of its existing fields and to fulfill exploration 
commitments in its other licence areas. 
Supra-salt oil production 
Having reached its third year of full time production, the Yuzhny Uzenskoye oil field is the Group’s longest established field.  During 
2011, as in 2010, the focus was on managing and optimizing the output from the five established production wells on the field.  
Average production for the full year 2011 was 1,178 bopd (2010: 1,115 bopd). 
During 2011, the Group identified the potential to increase production from the field by drilling sidetracks on two currently non-
producing wells, #4 and #9.  These wells were drilled at the edge of the field and were seen as potential future water injection 
wells.  However, with clear evidence of good natural water drive in the reservoir, it was decided that water injection would not be 
required in the medium term and that the wells could be partially re-drilled into more advantageous locations and put on 
production.  These drilling operations commenced towards the end of 2011.  As announced on 13 March 2012, when the first of 
these sidetracked wells, #9, was put on stream, it produced only water.  This indicates that the oil:water contact had migrated to a 
higher elevation than had been anticipated on the basis of cumulative production of oil from the field. This higher than anticipated 
oil:water contact is likely to have implications for the remaining recoverable reserves on the Yuzhny Uzenskoye field, which will 
need to be reassessed with the new data derived from this well. 
The Yuzhny Uzenskoye field, whilst of modest scale, is very profitable to the Group.  With the field being located close to market 
and producing high quality oil, the sales prices achieved are comparatively advantageous.  Furthermore, as the oil is sold directly at 
the field facilities, the field bears no oil transportation costs.    It was developed at a cost of US$1.91 per barrel of C1 reserves and 
benefits from very low production costs, averaging US$ 2.00 per barrel in 2011 (2010: US$1.07 per barrel).  The increase in per 
barrel costs is primarily due to expensing well repair work, as well as the first time inclusion of property taxes. 
Vostochny Makarovskoye (“VM”) licence area 
The initial drilling programme was completed on the VM field early in 2009.  As previously reported, there are currently two 
completed and tested wells on the field with intra field pipelines laid between the well locations to the boundary of the Dobrinskoye 
gas facility, approximately 5km from the VM licence area, in preparation for production.  The acquisition in April 2011 of the 
Dobrinskoye gas field and plant finally provided the Group with ownership of the required infrastructure and access to the Gazprom 
trunk line which were required to commence commercial production. 
Shortly after the acquisition of GND, the Group completed the tie-in of the VM field to the Dobrinskoye plant and relocated from 
the VM field site to the gas plant certain items of equipment to be used for extraction of H 2S, from the VM gas.  As a result of this 
relocation, certain historic construction costs incurred on the VM field were written off.  This resulted in a one-off US$5.6 million 
non-cash charge in the 2011 Income Statement.  In addition, there was a successful test conducted of the chemical process 
planned to be used to extract the sulphur and the decision was taken at the end of 2011 to complete the upgrade of the gas plant.  
The cost of the required upgrade has been budgeted at US$4.5 million and full time production expected in Q3 2012. 
During 2011, the Group continued with its extended pilot production programme on the VM#1 and VM#2 wells.  The wells were 
individually flowed through a test separator installed at the field site.  Condensate was gathered in storage tanks on location for 
sale while gas produced from the wells was flared.  Although this activity was primarily a technical test programme, it provided a 
small profit contribution.  Proceeds from the sales of condensate from this operation were not included in Group revenues but 
provided an offset to the related costs, including installation of test equipment, and generated a modest surplus. 
The data gathered from the test programme has enabled the Group to develop a production plan for the field.  Initial production 
from the field will be managed to enable higher recovery of condensate from the reservoir in the early years while in the later 
years an increasing proportion of gas is planned to be produced from the wells.   
In addition to the existing production wells, a previously suspended exploration well, VM #30, is to be re-opened and completed as 
an additional producing well from the shallower Bobrikovskiy sandstone reservoir. Although the reserves in this secondary reservoir 
are a relatively minor part of the VM field’s resources, this well can make a potentially significant short and medium term 
contribution to production. 
Dobrinskoye field and gas processing plant 
Since the acquisition in April 2011, the Dobrinskoye gas/condensate field has provided a material contribution to Group production 
and operating cash flow.  During July and August 2011, the field was shut in while repairs were undertaken on the two wells in the 
Dobrinskoye field.  It was decided during this operation that a sidetrack to well #22 would be necessary to enable optimum  Volga Gas plc 
Annual Report and Accounts 2011 
 
 
6 
 
production from that well.  At the same time, it was also considered prudent to place a smaller choke on the other well, #26, which 
re-commenced production at the end of August 2011. 
Drilling operations on the sidetrack to well #22 are to commence in April 2012 and the well is expected to be back on stream 
before July 2012. 
Other than completion of tie–in and planning of modifications and upgrades in preparation for production from the VM field 
outlined above, operations on the gas plant proceeded normally. 
Urozhainoye-2 licence area exploration 
The Yuzhny Romanovskoye #1 exploration well in the Urozhainoye-2 Licence area was spudded in April 2011 and by November 
2011 had reached its initial target zone at a depth of 2,885 metres without discovering commercial hydrocarbons.  The decision 
was taken to continue drilling the well to the deeper target zones which lie at a depth of approximately 4,100 metres.  In April 
2012 the well reached a depth of 4,098 metres without finding hydrocarbons. 
Oil, gas and condensate reserves as of 1 January 2012 
Inclusion of the reserves in the Dobrinskoye field have increased the Group’s Russian category C1 recoverable oil, gas and 
condensate reserves, as approved by the State Committee for Reserves, to 57.1 million barrels of oil equivalent (2010: 45.0 
mmboe) taking into account production of 0.8 mmboe during 2011, upward revisions of 5.4 mmboe and the acquisition of 7.5 
mmboe of C1 reserves.  The reserves are presented in detail in the table below.  The changes from the previous year reflect 
volumes of oil produced and a reclassification of certain C2 category reserves into C1 category.  There was a downward revision in 
category C2 reserves on the VM field following a remapping of the reservoir.  Any revision to the reserves in Yuzhny Uzenskoye will 
be recognised during 2012. 
 
Mikhail Ivanov 
Chief Executive Officer 
 
Oil, gas and condensate reserves  
 
 Recoverable reserves category 
 C1 C2 C1/C2 
Vostochny-Makarovskoye    
Natural Gas (bcf) 189.4 16.8 206.2 
Condensate (mmbbl) 9.6 0.8 10.4 
Total (mmboe) 41.2 3.6 44.8 
    
Dobrinskoye    
Natural Gas (bcf) 32.8 8.8 41.6 
Condensate (mmbbl) 1.6 0.4 2.0 
Total (mmboe) 7.1 1.9 8.9 
    
Yuzhny Uzenskoye (Karpenskiy Licence supra salt)     
Crude Oil (mmbbl) 8.9 3.8 12.7 
Total (mmboe) 8.9 3.8 12.7 
    
All Licences    
Gas (bcf) 222.2 25.6 247.8 
Condensate (mmbbl) 11.2 1.2 12.4 
Crude Oil (mmbbl) 8.9 3.8 12.7 
Total (mmboe) 57.1 9.3 66.4 
 
   
Changes in reserves during 2011 (mmboe) C1 C2 C1/C2 
Total as at 1 January 2011 45.0 22.3 67.3 
Produced during 2011 (0.8) 0.0 (0.8) 
Acquired during 2011 7.5 1.8 9.3 
Revisions during 2011 5.4 (14.8) (9.4) 
Total as at 1 January 2012 57.1 9.3 66.4 
 
   
Conversion factors used: 6.0 mcf natural gas = 1.0 boe, 1 tonne condensate = 8.0 boe; 1 tonne crude oil = 
7.833 boe.  A B C1 C2 and C3 are official Russian classifications as approved by the State Committee for 
Reserves  Volga Gas plc 
Annual Report and Accounts 2011 
 
 
7 
 
Financial Review 
 
Results for the year 
In 2011, the Group generated US$28.6 million in turnover (2010: US$13.1 million) from the sale of 546,818 barrels of crude oil and 
condensate (2010: 407,050 barrels) and 1,348 million cubic feet of natural gas (2010: nil).   Oil and condensate sales were made 
into the domestic market during the period.  Gas sales were made to Trans Nafta and the sales proceeds were offset against 
payments of debt outstanding between Gazneftedobycha (“GND”) and Trans Nafta.  The average price realised for liquids was the 
equivalent of US$46.25 per barrel (2010: US$32.06 per barrel).   The contract price for gas sales during 2011 averaged US$2.46 
per thousand cubic feet.  With sales made exclusively into the regional market in the Volga Region at the wellhead, our oil and 
condensate sales prices closely reflect international prices, adjusted for export taxes and transportation costs.  Production activities 
generated a gross profit of US$13.0 million in 2011 (2010: profit of US$6.2 million). 
In 2011, the total cost of production increased to US$2.4 million (2010: US$0.4 million), including the operating costs of the 
Dobrinskoye gas plant and field from April 2011.  Production based taxes increased to US$9.5 million (2010: US$5.3 million) 
reflecting the increase in the Urals oil price, which determines the rate of Mineral Extraction Tax (“MET”) for crude oil, and higher 
volumes.  With relatively lower rates of MET charged on gas and condensate, MET in 2011 represented 33% of revenues (2010: 
40% of revenues).  The gross profit margin in 2011 was 45% (2010: 48%). 
Operating and administrative expenses in 2011 were US$6.7 million (2010: US$4.7 million) as a result of including GND overheads 
from April 2011. 
During 2011, the Group continued extended production testing on the Vostochny Makarovskoye gas-condensate field.  The full 
costs incurred, including installation of test equipment and operating costs, were expensed during the year.  These costs, offset by 
condensate sales from test production, were included in exploration and evaluation expenses.  
The Group experienced a significant increase in EBITDA (defined as operating profit before non-cash charges, exploration expense, 
depletion and depreciation) to US$8.9 million (2010: US$2.6 million). 
After recording a non-cash expense in 2011 of US$ 5.6 million (2010: nil) together with a small exploration and evaluation expense 
of US$0.2 million (2010: US$23.9 million), the Group recorded an operating profit for the year of US$0.5 million (2010: operating 
loss of US$22.5 million).  The non-cash expense arose from certain past construction costs and other items of Property, Plant and 
Equipment becoming redundant when a partially constructed gas processing unit was transferred from the VM field site to the 
Dobrinskoye gas plant as part of the latter’s upgrade project. In 2010 the exploration and evaluation expense was primarily an 
impairment charge relating to the unsuccessful Grafovskaya #1 well in the KLA. 
Including foreign exchange and other losses, the Group recognised a loss before tax of US$1.1 million (2010: loss before tax of 
US$22.2 million) and reported net loss after tax of US$1.1 million (2010: net loss of US$16.9 million). 
No dividends have been paid or proposed for the year (2010: nil). 
Cash flow 
Group cash flow from operating activities before working capital movements was US$7.4 million (2010: US$5.5 million).  The net 
cash flow of the Group was reduced by US$3.1 million of gas sales being applied to debt reduction (2010: nil).  Net working capital 
movements attributed to prepayments on capital expenditure contributed to a cash outflow of US$1.8 million in 2011 (2010: 
US$1.9 million inflow from working capital movements).  With lower capital expenditures in 2011, the net outflow from investing 
activities was US$5.6 million (2010: US$14.0 million).  During 2011, the majority of the net cash outflow arose from the repayment 
of debts owed by GND to its former owner Trans Nafta, amounting to US$15.7 million, with a further US$3.1 million of repayments 
by offset of gas sales (2010: nil). 
Capital Expenditure 
During 2011 a total of US$5.7 million was utilized in investing activities (2010: US$13.9million) as detailed below: 
 2011 2010 
 (US$ million) (US$ million) 
Oil & gas exploration assets    4.3 12.5 
Development & producing assets   0.8 1.5 
Acquisition net of cash acquired  0.5 - 
Total       5.6 14.0 
 
The most significant individual components of the capital expenditure were US$4.4 million on oil and gas exploration assets, 
predominantly the Yuzhny Romanovskaya #1 exploration well.  Expenditure on development and producing assets primarily relates 
to the VM field.  
GND acquisition 
On 28 April 2011, the Group acquired GND for a consideration of RUR 30 million (US$1.1 million).  At that date, GND had loans 
advances outstanding of RUR 667 million (US$24.4 million) owing to Trans Nafta and, had received an advance payment from the 
Group of RUR 600 million (US$ 21.6 million).  The total capital employed in this business combination; amounting to RUR 1,307 
million (US$47.2 million) has been subject to a provisional fair value allocation, with the significant majority of non-current assets 
being apportioned between the Dobrinskoye gas field and the Gas Plant. 
  Volga Gas plc 
Annual Report and Accounts 2011 
 
 
8 
 
Balance sheet and financing 
As at 31 December 2011, the Group held cash and bank deposits of US$10.1 million (2010: US$26.6 million) and had short term 
non-interest bearing debt outstanding of US$4.2 million (31 December 2010: nil).  The borrowings are loans due to Trans Nafta by 
GND. 
As at 31 December 2011, the Group’s intangible assets increased to US$39.5 million (2010: US$29.0 million) and the Group’s 
property, plant and equipment increased to US$60.8 million (2010: US$ 37.5  million) following the provisional fair value allocation 
of assets acquired with GND.  The prepayment of RUR 600 million, made to Trans Nafta in November 2008, shown on the Balance 
sheet as at 31 December 2010 as a US$19.7 million Security deposit, constituted part of the fair value allocation for GND assets. 
The Group intends to fund its continuing development and exploration expenditures using a combination of cash flow from 
operations, cash-on-hand and debt.  On 26 March 2012, it signed a loan agreement for a US$10 million bank facility to provide an 
additional source of funds.   
The Group's financial statements are presented on a going concern basis. 
 
Tony Alves 
Chief Financial Officer 
 
 
 
Financial and operational summary 
 
Sales volumes  2011  2010 
 
2009 
Oil & condensate (barrels)      546,818       407,050        462,455  
Gas (mcf)  1,348                -  
 
-  
Total (boe)   771,479   407,050  
 
462,455  
     
 
 
Operating Results (US$ 000)  2011  2010 
 
2009 
Oil and condensate sales  25,425   13,052   11,580  
Gas sales          3,146                   -                    -  
Revenue       28,571        13,052  
 
      11,580  
     
 
 
Production costs  (2,413)  (436) 
 
(327) 
Production based taxes  (9,537)  (5,254) 
 
(4,465) 
Depletion, depreciation and other  (2,641)  (1,037) 
 
(881) 
Other  (991)  (113) 
 
(102) 
Cost of sales  (15,582)  (6,840) 
 
(5,775) 
     
 
 
Gross profit        12,989           6,212  
 
         5,805  
Exploration and evaluation expense  (200)  (23,937) 
 
(1,466) 
Operating & administrative expenses  (6,704)  (4,733) 
 
(3,728) 
Write-off of development assets  (5,612)                  -  
 
                 -  
Operating profit/(loss)            473   (22,458) 
 
           611  
     
 
 
Net realisation   2011  2010 
 
2009 
Oil & condensate (US$/barrel)          46.50           32.06  
 
         25.04  
Gas (US$/mcf)            2.33    n.a.  
 
 n.a.  
     
 
 
Operating data (US$/boe)  2011  2010 
 
2009 
Production costs            3.13             1.07  
 
           0.71  
Production based taxes          12.36           12.91  
 
           9.65  
Depletion, depreciation and other            3.42             2.55  
 
           1.91  
     
 
 
EBITDA calculation (US$ 000)  2011  2010 
 
2009 
Operating profit/(loss)             473   (22,458) 
 
            611  
Exploration expense             200         23,937  
 
         1,466  
DD&A and other non-cash expense          8,253           1,150  
 
            102  
EBITDA         8,926          2,629  
 
        2,179  
 
  Volga Gas plc 
Annual Report and Accounts 2011 
 
 
9 
 
Principal risks and uncertainties 
 
The Group is subject to various risks relating to political, economic, legal, social, industry, business and financial conditions. 
The following risk factors, which are not exhaustive, are particularly relevant to the Group’s business activities: 
Volatility of prices for oil and gas 
The supply, demand and prices for oil and gas are volatile and are influenced by factors beyond the Group’s control. These factors 
include global demand and supply, exchange rates, interest and inflation rates and political events. A significant prolonged decline 
in oil and gas prices could impact the viability of some of the Group’s exploration activities. Additionally, the Group’s production is 
predominantly sold in the domestic Russian markets which are influenced by domestic supply and demand factors, the level of 
Russian export taxes and regional transportation costs. 
Substantially all of the Group’s revenues and cash flows come from the sale of oil and gas. If oil and gas prices should fall below 
and remain below the Group’s cost of production for any sustained period, the Group may experience losses and may be forced to 
curtail or suspend some or all of the Group’s production, at the time such conditions exist. In addition, the Group would also have 
to assess the economic impact of low oil and gas prices on its ability to recover any losses the Group may incur during that period 
and on the Group’s ability to maintain adequate reserves. 
The Group does not currently hedge its crude oil production to reduce its exposure to oil price volatility. 
Oil and gas production taxes 
The Group’s sales generated from oil and gas production are subject to Mineral Extraction Taxes, which form a material proportion 
of the total costs of sales.  The rates of these taxes are subject to changes by the Russian government.  Recently implemented 
changes to rates have reduced the effective rates on gas condensate and increased rates on crude oil. 
Exploration and reserve risks 
Whilst the Group will seek to apply the latest technology to assess exploration licences, the exploration for, and development of, 
hydrocarbons is speculative and involves a high degree of risk. These risks include the uncertainty that the Group will discover 
sufficient commercially exploitable oil or gas resources.  Unsuccessful exploration efforts may result in impairment to the balance 
sheet value of exploration assets. 
The Group has disclosed Russian category C1 and C2 reserves for its oil and gas fields, as recorded by the Russian State 
Committee for Reserves.  If the actual results of producing these fields are significantly different to expectations, there may be 
changes in the future estimates of reserves.  These may impact the balance sheet values of the Group’s Development Intangible 
Assets and the Group’s Property, Plant and Equipment. 
Environmental risk 
The oil and gas industry is subject to environmental hazards, such as oil spills, gas leaks, ruptures and discharges of petroleum 
products and hazardous substances. These environmental hazards could expose the Group to material liabilities for property 
damages, personal injuries, or other environmental harm, including costs of investigating and remediating contaminated properties.  
The Group is subject to stringent environmental laws in Russia with regards to its oil and gas operations. Failure to comply with 
such laws and regulations could subject the Group to material administrative, civil, or criminal penalties or other liabilities. 
Additionally, compliance with these laws may, from time to time, result in increased costs to the Group’s operations, impact 
production, or increase the costs of potential acquisitions.  
The Group liaises closely with the Federal Service of Environmental, Technological and Nuclear Resources of the Saratov Oblast on 
potential environmental impact of its operations and conducts environmental studies both as required by, and in addition to, its 
licence obligations to mitigate any specific risk.  The Group’s operations are regularly subject to independent environmental audit. 
The Group did not incur any material costs relating to the compliance with environmental laws during the period. 
Risk of operating oil and gas properties 
The oil and gas business involves certain operating hazards, such as well blowouts, cratering, explosions, uncontrollable flows of 
oil, gas or well fluids, fires, pollution and releases of toxic substances. Any of these operating hazards could cause serious injuries, 
fatalities, or property damage, which could expose the Group to liabilities. The settlement of these liabilities could materially impact 
the funds available for the exploration and development of the Group’s oil and gas properties. The Group maintains insurance 
against many potential losses and liabilities arising from its operations in accordance with customary industry practices, but the 
Group’s insurance coverage cannot protect it against all operational risks. 
Foreign currency risk 
The Group’s capital expenditures are predominantly in Russian Rubles (“RUR”) and its operating costs in both US dollars and RUR. 
Turnover is in RUR and funding has been raised in US dollars.  Any changes in the relative exchange rates among US dollar and 
RUR could positively or negatively affect the Group’s results. 
Business in Russia 
Amongst the risks that face the Group in conducting business and operations in Russia are: 
 Economic instability, including in other countries or the global economy that could lead to consequences such as 
hyperinflation, currency fluctuations and a decline in per capita income in the Russian economy. 
 Governmental and political instability that could disrupt, delay or curtail economic and regulatory reform, increase centralised  Volga Gas plc 
Annual Report and Accounts 2011 
 
 
10 
 
authority or result in nationalisations. 
 Social instability from any ethnic, religious, historical or other divisions that could lead to a rise in nationalism, social and 
political disturbances or conflict. 
 Uncertainties in the developing legal and regulatory environment, including, but not limited to, conflicting laws, decrees and 
regulations applicable to the oil and gas industry and foreign investment. 
 Unlawful or arbitrary action against the Group and its interests by the regulatory authorities, including the suspension or 
revocation of their oil or gas contracts, licences or permits or preferential treatment of their competitors.  
 Lack of independence and experience of the judiciary, difficulty in enforcing court or arbitration decisions and governmental 
discretion in enforcing claims. 
 Expected changes to the federal and local tax systems. 
 Laws restricting foreign investment in the oil and gas industry. 
 
Legal systems 
Russia, and other countries in which the Group may transact business in the future, have or may have legal systems that are less 
well developed than those in the United Kingdom. This could result in risks such as: 
• Potential difficulties in obtaining effective legal redress in the court of such jurisdictions, whether in respect of a breach of 
contract, law or regulation, including an ownership dispute. 
• A higher degree of discretion on the part of governmental authorities. 
• The lack of judicial or administrative guidance on interpreting applicable rules and regulations. 
• Inconsistencies or conflicts between and within various laws, regulations, decrees, orders and resolutions. 
• Relative inexperience of the judiciary and courts in such matters. 
 
In certain jurisdictions, the commitment of local business people, government officials and agencies and the judicial system to 
abide by legal requirements and negotiated agreements may be more uncertain, creating particular concerns with respect to 
licences and agreements for business. These may be susceptible to revision or cancellation and legal redress may be uncertain or 
delayed. There can be no assurance that joint ventures, licences, licence applications or other legal arrangements will not be 
adversely affected by the jurisdictions in which the Group operates. 
Liquidity risk 
At 31 December 2011 the Group had US$10.1 million of cash and cash equivalents available to fund its ongoing operations and 
associated exploration and development activities.  At 31 December 2011 the Group has committed capital expenditure of US$5.4 
million relating to licence obligations on the Urozhainoye-2 and Pre-Caspian licence areas.  Other planned capital expenditures are 
discretionary. 
Through its ordinary course activities, the Group is exposed to legal, operational and development risk that could delay cash 
generation from operations or may require additional capital investment that could place increased burden on the Group’s available 
cash resources.  
The Group’s committed and discretionary exploration drilling activities in the Karpenskiy, Urozhainoye-2 and Pre-Caspian Licence 
Areas may require additional funding.  Furthermore, should these activities lead to one or more discoveries, the Group will require 
significant further funds to appraise and develop these licence areas. 
 
 
Tony Alves 
Chief Financial Officer 
  Volga Gas plc 
Annual Report and Accounts 2011 
 
 
11 
 
Board of Directors 
Alexey Kalinin 
Non-Executive Chairman 
Appointed to the Board: 14 March 2007 
Committee membership: Remuneration 
Mr Kalinin is a Senior Partner of Baring Vostok Capital Partners. He joined Baring Vostok in 1999 from Alfa Capital, where he served 
for six years as the Director of the Department for Direct Investments. Alexei represents the interests of Baring Vostok's funds on 
the Board of Directors of a wide range of portfolio companies. He has a doctorate from the Moscow Power Engineering Institute, 
where he conducted scientific research, lectured for 12 years and served as the Director of the Youth Center for Scientific and 
Technical Creativity. Mr Kalinin is 52 years old. 
 
Mikhail Ivanov 
Chief Executive Officer, Executive Director 
Appointed to the Board: 14 March 2007 
Committee membership: n/a 
Mr Ivanov is a Partner and Director of Oil and Gas Projects at Baring Vostok Capital Partners. Mr. Ivanov brings with him a long 
history of involvement in the oil sector. Mikhail worked for over ten years at Shlumberger, the international oil services company, 
where he served as head of its Iran operations and was responsible for business development in Russia. Prior to joining 
Shlumberger, he founded and headed two companies that focused on oil production and service.  In 2009 he was appointed non-
executive director of Zhaikmunai Group Limited.  Mr Ivanov holds an M.S. degree in Geophysics from Novosibirsk State University 
and an M.B.A. from the Kellogg School of Management of Northwestern University. He is an elected member of SPE. Mr Ivanov is 
42 years old. 
 
Antonio Alves 
Chief Financial Officer, Executive Director 
Appointed to the Board: 12 January 2009 
Committee membership: n/a 
Mr Alves has had experience with the independent the oil and gas industry for over 20 years as one of the leading equity analysts covering 
the sector.  Prior to joining Volga Gas, he was head of oil and gas research for KBC Peel Hunt and was closely involved with the Company’s 
2007 IPO.  He previously held positions with Investec Securities, The Bell Group International and Schroders.  He is a Member of the 
Securities Institute and of the Petroleum Exploration Society of Great Britain.  He read mathematics at Cambridge University between 1977 
and 1983 both as an undergraduate and a post-graduate research student.  Mr Alves is 52 years old. 
 
Ronald Freeman 
Non-Executive Director 
Appointed to the Board: 14 March 2007 
Committee membership: Audit, Nomination, Remuneration 
Mr Freeman is a non-executive board director of Severstal (Cherepovets, Russia).  He is also Chairman of the Executive Committee of 
the Atlantic Council (Washington DC), a member of the International Advisory Committee of Columbia Law School (New York); and, 
co-chairman of the finance committee of the UK-US Fulbright Commission (London).  From 1973 to 1991 and from 1997 until his 
retirement from Citigroup as co-head of European Investment Banking in 2000, he was an investment banker specialising in 
financing and mergers and acquisition for companies in the oil and gas industry with Salomon Brothers, now a unit of Citigroup.  
From 1991 to 1997, he was head of the Banking Department of the European Bank for Reconstruction and Development (London). 
Prior to that, he practiced law with Baker & McKenzie (Paris) and served as a management consultant in the Paris office of McKinsey 
& Company. Mr Freeman was born in New York and has dual US and UK citizenship. He has a B.A from Lehigh University and an 
LL.B. from Columbia Law School (1964). He was admitted to the Bar of the State of New York. He is 72 years old. 
 
Stephen Ogden 
Non-Executive Director 
Appointed to the Board: 14 March 2007 
Committee membership: Audit, Nomination, Remuneration 
Mr Ogden is the Founder & Managing Partner of the First Montenegro Stone Property Fund, and the Co-Founder & Managing 
Partner of the Istanbul-based Pera Property Fund. Mr Ogden is the Chairman of the Board of MDM-Print (Russia). Mr Ogden is the 
former Chairman of the Board of Lenta, Russia's largest privately owned food retailer, and was previously a non-executive director 
of United Confectioneries (Russia), Heineken Russia and Metropolis Media (former Yugoslavia). He was Chief Financial Officer of 
the Bochkarev Brewery in St. Petersburg from 1997 to 2002. Prior to becoming Chief Financial Officer of Bochkarev, Mr Ogden was 
an auditor with KPMG and PricewaterhouseCoopers, and Financial Controller of CS First Boston (Moscow). Mr Ogden has a joint 
honours degree in economics & politics from Durham University, England, and is a qualified British chartered accountant (‘FCA’). Mr 
Ogden is active in British politics. He is a former Conservative Councillor of Altrincham, Cheshire and his name is on the approved 
list of Conservative Parliamentary candidates. Mr Ogden is a co-founder and treasurer of the charitable Rwanda Cricket Stadium 
Foundation. Mr Ogden is 43 years old.  
 
 
 
 
  Volga Gas plc 
Annual Report and Accounts 2011 
 
 
12 
 
Michael Calvey 
Non-Executive Director 
Appointed to the Board: 14 March 2007 
Committee membership: Audit, Nomination 
Mr Calvey is a Senior Partner of Baring Vostok Capital Partners and a Director of Baring Private Equity International and is on the 
Boards of several of Baring Vostok’s portfolio companies. He began working in Moscow in 1994 as one of the members of the 
consulting committee of the First NIS Regional Fund. He is a member of the investment committees of three Baring Vostok funds. He 
is also a member of the Investment Committees of the Baring Asia and Baring India funds. Before 1994, Mr Calvey lived in London 
and New York, where he worked at the European Bank for Reconstruction and Development (“EBRD”) and Salomon Brothers.  At 
EBRD he was responsible for investments in the energy sector of Central and Eastern Europe.  At Salomon Brothers Mr Calvey 
worked on mergers and acquisitions and capital market projects in the oil and gas sector. He is a member of the Boards of the 
Atlantic Council and the Emerging Markets Private Equity Association, and is a member of the Advisory Board of the Centre for 
International Business and Management at Cambridge University.  Mr Calvey is 44 years old. 
 
 Vladimir Koshcheev 
Non-Executive Director 
Appointed to the Board: 14 March 2007 
Committee membership: n/a 
Mr Koshcheev currently acts as President of Joint Stock Company “NPO POG”. Until 2009 he was President of Pervaya 
Investizionno–Stroitelnaya Company LLC, Spinaker LLC.  He has been Chairman of CJSC AKSM since 2002. Mr Koshcheev was 
President of Privolzhskaya Neftyanaya Company LLC between 2003 and 2005 and was previously a shareholder in and acted as 
President of Vesla. Mr Koshcheev received a specialist diploma from Moscow State Technical University in 1978 and he is a member 
of the Russian Academy of Natural Sciences. Mr Koshcheev is 55 years old. 
 
  Volga Gas plc 
Annual Report and Accounts 2011 
 
 
13 
 
Corporate Governance Statement 
 
Introduction 
The Board’s overriding objective is to ensure that the Group delivers long-term capital appreciation for its shareholders.  
 
Compliance 
Volga Gas plc seeks to comply with the UK Corporate Governance Code (“the Code”) albeit as an AIM-listed company it is not required 
to. The Board of Directors is committed to developing and applying high standards of corporate governance appropriate to the 
Company’s size and its future prospects. 
 
This statement sets out measures taken by the Board to apply the principles of the Code to the year ended 31 December 2011 and to 
the date of the Directors’ Report. 
 
Board of directors 
Role of the Board 
The Board’s role is to provide entrepreneurial leadership to the Group within a framework of prudent and effective controls which 
enables risk to be assessed and managed. The Board sets the Group’s strategic aims and ensures that the necessary financial and 
human resources are in place for the Group to meet its objectives, and reviews management’s performance in meeting these 
objectives. The Board sets and monitors the Group’s values and standards and ensures that the Group’s obligations to shareholders 
and other stakeholders are understood and met. 
 
The Board has a formal schedule of matters reserved for its approval, including: 
• Strategic and policy considerations 
• Annual budget, including capital expenditure 
• Interim and final financial statements 
• Management structure and appointments 
• Mergers, acquisitions, disposals 
• Capital raising 
• Significant changes in accounting policies 
• Appointment or removal of Directors or the Company Secretary 
 
Board composition 
The Board currently comprises two executive directors and five non-executive directors, of whom three are deemed to be independent 
and two non-independent: 
• Alexey Kalinin – Non-Executive Chairman 
• Mikhail Ivanov – Executive Director and CEO 
• Tony Alves – Executive Director, CFO and Company Secretary 
• Ronald Freeman – Independent Non-executive 
• Stephen Ogden – Independent Non-executive 
• Vladimir Koshcheev – Independent Non-executive  
• Michael Calvey – Non-executive 
 
There is a clear division of responsibilities between the executive and non-executive directors. 
 
Board balance and independence 
The board recognizes that Messrs Kalinin and Calvey are not independent by virtue of their direct management responsibilities for the 
limited partnerships comprising Baring Vostok Private Equity Funds III and IV, the Company’s controlling shareholder (‘Controlling 
Shareholder’). However, in light of the value, experience and contacts which they afford to the Company at this stage of its 
development and by virtue of the Relationship Agreement, which, inter alia, ensures that the Controlling Shareholder does not exercise 
undue influence over the Company or prevent it from acting independently of the Controlling Shareholder, the Board believes that the 
continued presence of Messrs Kalinin and Calvey on the board is beneficial for the Company. Mr Kalinin also serves as Chairman of the 
Board and was not considered to be independent on his appointment. 
 
Notwithstanding under the provisions of the UK Corporate Governance Code as a Smaller Company the Company meets the 
requirements to have at least two independent non-executives on the Board. 
 
All directors are permitted access to independent professional advice in the course of execution of their duties, at the Company’s 
expense. 
  Volga Gas plc 
Annual Report and Accounts 2011 
 
 
14 
 
The Board has established the following committees: 
 
Audit Committee 
The Audit Committee was appointed in March 2007 and comprises three directors:  
Mr Ogden – Chairman 
Mr Freeman 
Mr Calvey 
 
The Audit Committee is responsible for selecting the Group’s independent auditors, pre-approving all audit and non-audit related 
services, reviewing with management and the independent auditors the Group’s financial statements, significant accounting and 
financial policies and practices, audit scope and adequacy of internal audit and control systems.  
 
The audit committee meets at least twice each year. 
 
Remuneration Committee 
The Remuneration Committee was also appointed in March 2007 and comprises three directors: 
Mr Freeman – Chairman 
Mr Ogden 
Mr Kalinin 
 
The Remuneration Committee is responsible for determining compensation of the Company’s key employees, including the Chief 
Executive Officer, Chief Financial Officer, and other key personnel as may be determined from time to time by the Remuneration 
Committee. 
 
The directors’ remuneration report is set out on pages 19 to 20. 
 
Nomination Committee 
The Nomination Committee was appointed in March 2007 and comprises three directors: 
Mr Freeman – Chairman 
Mr Ogden 
Mr Calvey 
 
The Nomination Committee is responsible for reviewing the structure, size and composition of the Board, making recommendations to 
the Board concerning plans for succession for both Executive and Non-Executive Directors including the Chief Executive and other 
senior management, preparing a description of the role and capabilities required for a particular appointment and identifying and 
nominating candidates to fill Board positions as and when they arise. 
 
Board meetings 
The Board met six times during the year ended 31 December 2011 with the following attendance: 
 
 2011 2010 
Alexey Kalinin 5 7 
Mikhail Ivanov 6 7 
Tony Alves 6 8 
Ronald Freeman 6 8 
Stephen Ogden 6 7 
Vladimir Koshcheev 4 5 
Michael Calvey 6 7 
 
Indemnification of directors 
In accordance with the Company’s Articles of Association and to the extent permitted by the law of England and Wales, directors are 
granted an indemnity from the Company in respect of liabilities incurred as a result of their office. In respect of those matters for which 
the directors may not be indemnified, the Company maintained a directors’ and officers’ liability insurance policy throughout the 
financial year. This policy has been renewed for the next financial year. 
 
Re-election of directors 
The Company requires that all Directors stand for re-election at intervals of no more than three years. Accordingly Messrs Alves, Calvey 
and Ogden will retire at the forthcoming AGM and will seek re-election by shareholders. 
  Volga Gas plc 
Annual Report and Accounts 2011 
 
 
15 
 
Internal controls 
The Directors acknowledge their responsibility for the system of internal controls for the Group and for reviewing its effectiveness.  
Any system of internal control can only provide reasonable, and not absolute, assurance that material financial irregularities will be 
detected or that the risk of failure to achieve business objectives is eliminated. 
 
The Group’s risk and controls framework covers all material risks and controls including those of an operational, financial, and 
compliance nature. Internal control procedures consist, inter alia, of formal delegations of expenditure authority by the Board to 
executive management, and controls relating to key stages of transactions including supplier approval, contract signature, and 
payment release. 
 
The Directors consider that the frequency of Board meetings and level of detail presented to the Board for its consideration in relation 
to the operations of the Group provide an appropriate process to identify, evaluate and manage significant risks relevant to its 
operations on a continuous basis, and this process is considered to be in accordance with the revised guidance on internal control 
published in October 2005 (‘Turnbull Guidance’).  
 
Investor relations 
The Company places considerable importance on communication with shareholders and engages them on a wide range of issues.  
The Group has an ongoing programme of dialogue and meetings between the executive directors and institutional investors, fund 
managers and analysts. At these meetings a wide range of relevant issues including strategy, performance, management and 
governance are discussed within the constraints of the information already made public. 
 
The Company is equally interested in the views and concerns of private shareholders and to this end ensures that the executive 
directors present the Company at forums where private investors are present. 
 
Shareholders have the opportunity to meet and question the Board at the AGM which will be held on 8 June 2012, at which the 
Chairman, the Chairman of the Audit Committee and all Executive Directors will be available. 
 
By order of the Board 
 
Tony Alves 
Company Secretary 
10 April 2012 
 
  Volga Gas plc 
Annual Report and Accounts 2011 
 
 
16 
 
Report of the Directors 
The Directors present their report together with the Group’s audited consolidated financial statements for the period from 1 January 
2011 to 31 December 2011. 
 
Results and dividend 
The Group’s results are set out on pages 22 to 27 and show net loss of US$1.1 million for the year to 31 December 2011 (2010: net 
loss of US$16.9 million). The directors do not propose to pay a dividend (2010: nil). 
 
Subsequent events 
The Group has arranged a US$10.0 million debt facility to fund its continuing capital expenditure programme. 
Principal activities, business review and future developments 
Volga Gas is a public limited company registered in England and Wales with registered number 5886534, was incorporated in the 
United Kingdom on 25 July 2006 and listed on AIM on 25 April 2007. Volga Gas operates primarily through subsidiary companies as 
set out in Note 2.2 to the accounts. The principal activity of the Group is the exploration, development and production of its gas, 
condensate and oil fields in the Volga Region of European Russia. The Group owns 100% of five licence areas in the Saratov and 
Volgograd regions: Karpenskiy, Vostochny-Makarovskoye, Dobrinskoye, Pre-Caspian and Urozhainoye-2. 
 
The Group’s business strategy is to bring the Vostochny Makarovskoye field into full time production and to manage production on 
the Dobrinskoye field and on the Uzenskoye field whilst at the same time exploring the potentially prospective structures on the 
Group’s licence areas. The Group also regularly evaluates acquisition opportunities as part of its overall growth strategy.  
 
Highlights of the Group’s activities for the period ended 31 December 2011 are: 
• Acquisition of Gazneftedobycha in April 2011 which included the producing Dobrinskoye gas/condensate field and the gas processing 
facility which will be used to process gas from the Vostochny-Makarovskoye field. 
• Continued and steady production from the Yuzhny Uzenskoye oil field on the KLA and, from April, the Dobrinskoye gas/condensate 
field. 
• Successful extended production testing of the wells on the Vostochny Makarovskoye gas-condensate field. 
 
The Group’s activities are described in greater detail in the Chief Executive’s Review on page 4 and in the Operational Review on Pages 
5 to 6. The principal risks associated with the Group’s activities are set out in the Financial Review on pages 7 to 8. 
 
Key performance indicators 
Given the nature of the business and that the Group has only two operating fields, the directors are of the opinion that further analysis 
using KPI’s is not appropriate for an understanding of the development, performance or position of our business at this time.  The 
directors are of the opinion that the Operational Review on Pages 5 to 6 provides the relevant information. 
 
Directors 
The directors who served during the year were: 
 
Alexey Kalinin, non-executive Chairman Mikhail Ivanov, Chief Executive Officer 
Michael Calvey, non-executive  Tony Alves, Chief Financial Officer 
Ronald Freeman, non-executive  Vladimir Koshcheev, non-executive 
Stephen Ogden, non-executive    
  
Messrs Kalinin, Koshcheev and Freeman will retire by rotation and offer themselves for re-election in accordance with the Company’s 
Articles of Association. 
 
Directors’ interests 
The directors serving during the year had the following beneficial interests in the shares of the Company: 
 Ordinary Shares of 0.01p each 
 31 December 31 December 
 2011 2010 
Alexey Kalinin
1
 - 
Mikhail Ivanov 1,000,000 1,000,000 
Tony Alves 25,000 25,000 
Ronald Freeman 55,000 55,000 
Stephen Ogden 105,000 105,000 
Vladimir Koshcheev 600,000 650,000 
Michael Calvey
1
 - - 
1  Mr Calvey and Mr Kalinin are Co-Managing Partners of Baring Vostok Capital Partners Limited, a related party to Baring Vostok Nominees Limited and Dehus Dolmen Nominees 
Limited.  As such Mr Calvey and Mr Kalinin have an indirect beneficial interest in the Company. 
  Volga Gas plc 
Annual Report and Accounts 2011 
 
 
17 
 
Substantial shareholders 
On 10 April 2012 the following parties had notifiable interests of 3% or greater in the nominal value of the Company’s issued 0.01p 
ordinary shares: 
 Number of  Percentage 
 shares  
Baring Vostok Nominees Ltd
1
 39,620,000 48.90 
Dehus Dolmen Nominees Ltd
2
 7,906,889 9.76 
BNP Paribas Investment Partners S.A. 3,265,330 4.03 
 
1 Baring Vostok Nominees Ltd is a nominee vehicle which holds the interests of the limited partnerships which comprise Baring Vostok Private Equity Fund III. 
2 Dehus Dolmen Nominees Ltd is a nominee vehicle which holds the interests of the limited partnerships which comprise Baring Vostok Private Equity Fund IV. 
 
Options granted 
An Executive Share Option Plan was adopted by the Company in July 2008 following which options over a total of 1,706,196 shares 
were granted to Mikhail Ivanov and to Tony Alves.  During 2011 options over 432,474 shares (2010: 450,247 shares) were eligible 
for vesting.  The details of these option grants are disclosed in the Remuneration Report below. 
 
Interests in contracts 
There were no contracts or arrangements during the period in which a director of the Company was materially interested and which 
were significant in relation to the business of the Company. 
 
Creditors payment policy and practice 
The Group aims to pay all its creditors promptly. For trade creditors it is the Group’s policy to: 
(i) agree the terms of the payment at the start of the business with that supplier; 
(ii) ensure that suppliers are aware of the terms of the payment; and 
(iii) pay in accordance with contractual and other obligations 
 
Political and charitable contributions 
No political or charitable contributions were made in the year (2010: nil).  
 
Employment policies 
The Group is committed to pursuing an equal opportunities employment policy, covering recruitment and selection, training, 
development, appraisal and promotion. The Group recognizes the diversity of its employees, its customers, and the community at large 
and seeks to use employees’ talents to the fullest. This approach extends to the fair treatment of people with disabilities, in relation to 
their recruitment, training and development. Full consideration is given to staff who become disabled during employment. 
 
Employee communication 
The Group is committed to effective communications, which it maintains through regular information releases and staff briefings. 
Formal communications with employees take place through these channels. With respect to the Group’s operations in Russia and the 
recruitment of Russian employees, announcements, contracts, interviews and advertisements are conducted in the English and Russian 
languages, as applicable. 
 
Health, safety and the environment 
The Group’s policy and practice is to comply with health, safety and environmental regulations and requirements of the countries in 
which it operates, to protect its employees, contractors, assets and the environment. 
 
The Company closely monitors its environmental obligations under the terms of its licence agreements. In particular, portions of the 
Karpenskiy Licence Area are located in the Saratovskiy Federal Nature Reserve and Tulipannaya Steppe Natural Sanctuary, which are 
protected by Russian environmental law. In accordance with Russian environmental law, all economic activity within the protected area 
is approved by the Russian government. The Company has ensured that all its activities minimise the impact on this sensitive 
environment. 
 
UK Bribery Act 
The company has adopted Anti-Corruption and Anti-Bribery Policies and a framework of adequate procedures for managing the Volga 
Gas Group’s responsibilities in relation to the UK Bribery Act 2010. 
 
Share capital 
The Company has authorised ordinary share capital of 330,720,100 shares of 1p each. Under a special resolution by the shareholders 
of the Company on 13 June 2011 the directors have authority to allot shares up to an aggregate nominal value of £1,000,000 of which 
£150,000 could be issued non-preemptively, in accordance with sections 570 and 573 of the Companies Act 2006. This authority will 
expire the earlier of (i) fifteen months from the passing of the Resolution, or (ii) the conclusion of the Annual General Meeting of the 
Company to be held in 2012. 
 
Statement of disclosure of information to auditors  Volga Gas plc 
Annual Report and Accounts 2011 
 
 
18 
 
As at the date of this report the serving directors confirm that; 
• so far as the directors are aware, there is no relevant audit information of which the Company’s auditors are unaware; and 
• they have taken all steps that they ought to have taken as directors in order to make themselves aware of any relevant audit 
information and to establish that the Company’s auditors are aware of that information. 
 
Auditors 
The Company’s auditors, PricewaterhouseCoopers LLP, have indicated their willingness to continue in office and a resolution 
concerning their reappointment will be proposed at the next Annual General Meeting. 
 
Statement of directors’ responsibilities 
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to 
prepare the group and parent company financial statements in accordance with International Financial Reporting Standards (IFRSs) as 
adopted by the European Union. Under company law the directors must not approve the financial statements unless they are satisfied 
that they give a true and fair view of the state of affairs of the group and the company and of the profit or loss of the group for that 
period. 
 
In preparing those financial statements, the directors are required to: 
• select suitable accounting policies and then apply them consistently; 
• make judgements and estimates that are reasonable and prudent; 
• prepare the financial statements on the going concern basis unless it is inappropriate to presume the Group will continue in 
business; and 
• state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures 
disclosed and explained in the financial statements. 
 
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s 
transactions and disclose with reasonable accuracy at any time the financial position of the company and the group and enable them 
to ensure that the financial statements and the directors’ remuneration report comply with the Companies Act 2006 and, as regards 
the group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the company 
and the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. 
 
Electronic communications 
The maintenance and integrity of the Volga Gas plc website (www.volgagas.com) is the responsibility of the directors; the work carried 
out by the auditors does not involve consideration of these matters and accordingly, the auditors accept no responsibility for any 
changes that may have occurred to the financial statements since they were initially presented on the website. 
 
The Company’s website is maintained in compliance with AIM Rule 26. 
 
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in 
other jurisdictions. 
 
On behalf of the Board 
 
 
 
 
Alexey Kalinin 
Chairman of the Board 
10 April 2012 
  Volga Gas plc 
Annual Report and Accounts 2011 
 
 
19 
 
Directors’ Remuneration Report 
 
In common with the Board’s commitment to compliance with the Combined Code, the Company has adopted the Principles of Good 
Governance relating to directors’ remuneration. The Company discloses certain information relating to directors’ remuneration in 
this report, which is not audited. 
 
Remuneration Committee 
The Company established a Remuneration Committee in April 2007, as set out in Corporate Governance on pages 13 to 15. 
 
The Remuneration Committee advises the Board on Group compensation policy as it relates to executive directors and other key 
members of management, and may obtain advice from independent remuneration consultants appointed by the Company. The 
Remuneration Committee comprises Ronald Freeman (Chairman), Stephen Ogden and Alexey Kalinin, who are all deemed to be 
non-executive directors. Executive directors may be invited to attend meetings of the Remuneration Committee but do not vote on 
their own remuneration or incentives. The Remuneration Committee meets as required. 
 
Remuneration policy 
The Company’s policy is to maintain levels of compensation for the Group that are comparable and competitive with peer group 
companies, so as to attract and retain individuals of the highest calibre, by rewarding them as appropriate for their contribution to 
the Group’s performance. 
 
Executive Directors’ employment agreement and terms of appointment 
The terms of each executive director’s appointment are set out in their service agreements. Each executive director agreement is 
based on similar terms, with no fixed duration. Each service agreement sets out details of basic salary and share options as 
applicable. 
 
All executive director employment agreements can be terminated either by the director concerned or by the Company on giving 6 
months’ notice during the first 24 months of service and thereafter by giving 3 months’ notice. 
 
The executive directors do not participate in any Group pension scheme and their remuneration is not pensionable.  However, one 
of the executive directors has elected to receive part of his remuneration by way of contributions to a personal pension plan.  The 
executive directors are eligible for payment of cash bonuses and participation in any share-based incentive plan the Board 
implements. 
 
Basic salaries 
The basic salary of each executive director is established by reference to their responsibilities and individual performance. 
 
Non-executive Directors’ terms, conditions and fees 
The non-executive directors have been engaged under the terms of their letters of appointment. These engagements are for two 
years and can be terminated upon one month’s notice by either party. Re-appointment is subject to the Company’s Articles of 
Association which provide that one third of the directors shall be required to retire each year. 
 
Fees 
The fees paid to non-executive directors are determined by the Board and reviewed periodically to reflect current rates and 
practice commensurate with the size of the Company and their roles. 
 
The remuneration of the non-executive directors is a matter for the Chairman of the Board and the Chief Executive Officer. In the 
event of the appointment of an independent non-executive Chairman his remuneration would be a matter for the Chairman of the 
Remuneration Committee and the Chief Executive Officer. 
 
Audited Information – Directors detailed emoluments 
     Aggregate  Aggregate 
     Remuneration  Remuneration 
     for the Year for the Year  
  Pension Share Based  31 December 31 December 
 Salary Contribution Compensation Fees 2011 2010 
 US$’000 US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 
 
Executive Directors    
M. Ivanov 321 - 17 - 338 419 
A. Alves 242 66 20 - 328 412 
 
Non-Executive 
A. Kalinin - - - - - - 
R. Freeman - - - 50 50 50 
S. Ogden - - - 50 50 50 
V. Koshcheev - - - - - - 
M. Calvey - - - - - -  Volga Gas plc 
Annual Report and Accounts 2011 
 
 
20 
 
 
Directors’ interests in the share capital of the company 
 
The Directors’ interests in the share capital of the Company are disclosed in the Report of the Directors on page 16.  There has been 
no change in the interest of any director between 1 January 2012 and the date of this report. 
 
Directors’ share options 
The Company adopted an Executive Share Option Plan (“ESOP”) on 14 July 2008, which was subsequently amended on 17 
December 2008.  Under the terms of this Plan, a maximum of 2,843,661 shares (equivalent to approximately 5% of the then 
issued share capital) may be allocated and subject to performance criteria and vesting periods as specified by the Remuneration 
Committee.  
During 2008, the Company granted options to acquire 1,137,464 ordinary shares to Mikhail Ivanov under the terms ESOP.  The options 
may be exercised at a price of 405p per share and vest in equal portions on May 2010, 2011 and 2012 and will remain outstanding 
until May 2017.  On 17 December 2008, Tony Alves was granted options to acquire up to 568,732 ordinary shares in the Company at 
an exercise price of 100p per share. The options vest over a period of up to four years subject to the satisfaction of performance 
conditions related to the market price of the Company’s shares. The vested options become exercisable on a straight line, cumulative 
basis at a rate of 12.5% of the total option grant every six months (starting from the date of grant) and will remain exercisable until 
eight years from the date of grant.  During 2011, options over 432,474 shares became eligible for vesting (2010: 450,247 shares). 
 
 
By order of the Board 
 
 
 
 
Tony Alves 
Company Secretary 
10 April 2012 
 
 
 
 
 
 
 
  Volga Gas plc 
Annual Report and Accounts 2011 
 
 
21 
 
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF VOLGA GAS PLC 
 
We have audited the group and parent company financial statements (the ‘‘financial statements’’) of Volga Gas plc for the year 
ended 31 December 2011 which comprise the Group Income Statement, the Group Statement of Comprehensive Income, the 
Group and the Company Balance Sheet, the Group  and the Company Cash Flow Statement, the Group and the Company 
Statement of Changes in Shareholders’ Equity and the related notes. The financial reporting framework that has been applied in 
their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, 
as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. 
 
Respective responsibilities of directors and auditors 
 
As explained more fully in the Directors’ Responsibilities Statement set out on page 18, the directors are responsible for the 
preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the 
financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards 
require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. 
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with 
Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume 
responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save 
where expressly agreed by our prior consent in writing. 
 
Scope of the audit of the financial statements 
 
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable 
assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an 
assessment of: whether the accounting policies are appropriate to the group’s and parent company’s circumstances and have been 
consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and 
the overall presentation of the financial statements. 
 
Opinion on financial statements  
 
In our opinion:  
 the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 
December 2011   and of the group’s profit and group’s and parent company’s cash flows for the year then ended; 
 the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;  
 the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European 
Union and as applied in accordance with the provisions of the Companies Act 2006; and 
 the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.  
 
Opinion on other matter prescribed by the Companies Act 2006 
 
In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared 
is consistent with the financial statements. 
Matters on which we are required to report by exception 
 
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our 
opinion:  
 adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been 
received from branches not visited by us; or  
 the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement 
with the accounting records and returns; or  
 certain disclosures of directors’ remuneration specified by law are not made; or 
 we have not received all the information and explanations we require for our audit. 
 
 
 
 
Kevin Reynard (Senior Statutory Auditor) 
for and on behalf of PricewaterhouseCoopers LLP 
Chartered Accountants and Statutory Auditors 
Aberdeen 
10 April 2012 
 
 
 
 
 
  Volga Gas plc 
Annual Report and Accounts 2011 
 
The accompanying notes on pages 28 to 45 are an integral part of these financial statements. 
 
 
22 
Group Income Statement 
(presented in US$ 000) 
 
Year ended 31 December Notes 2011  2010 
CONTINUING OPERATIONS     
     
Revenue            28,571              13,052   
Cost of sales 5 (15,582)  (6,840) 
Gross profit          12,989               6,212   
Exploration and evaluation expense 5 (200)  (23,937) 
Operating and administrative expenses 5 (6,704)  (4,733) 
Write off of development assets 5 (5,612)  -  
Operating profit/(loss)                473    (22,458) 
     
Interest income 6                219                   144   
Other gains and losses – net 7 (1,810)                   97   
Loss for the year before tax  (1,118)  (22,217) 
     
Current income tax 8 -               1,518   
Deferred income tax 8 (18)              3,808   
Loss for the year before non-controlling interests  (1,136)  (16,891) 
Attributable to:     
Non-controlling interests  -   (22) 
The owners of the parent Company  (1,136)  (16,869) 
     
Basic and diluted loss per share (in US dollars) 9 (0.01)  (0.21) 
Weighted average number of shares outstanding  81,017,800  81,017,800 
 
The Company has elected to take the exemption under section 408 of the Companies Act 2006 to not present the parent company 
income statement. The loss for the parent company for the year was US$1,432,000 (2010: US$1,158,000). 
 
 
Group Statement of Comprehensive Income 
(presented in US$ 000) 
 
Year ended 31 December  2011  2010 
     
Loss for the year attributable to equity shareholders of the Company (1,136)  (16,891) 
Other comprehensive income:     
Currency translation differences  (6,459)  (1,007) 
Total comprehensive expense for the year  (7,595)  (17,898) 
Attributable to:     
Non-controlling interests                       -   (22) 
The owners of the parent Company 
 
(7,595)  (17,876) 
 
 
    Volga Gas plc 
Annual Report and Accounts 2011 
 
The accompanying notes on pages 28 to 45 are an integral part of these financial statements. 
 
 
23 
Group Balance Sheet 
(presented in US$ 000) 
 
At 31 December Notes  2011  2010 
      
ASSETS      
Non-current assets      
Intangible assets 10             39,522          28,965   
Property, plant and equipment 11             60,794          37,493   
Other non-current assets 12               1,855            3,578   
Security deposit on acquisition of fixed assets 12                        -         19,687   
Deferred tax assets 8               5,560            5,105   
Total non-current assets          107,731         94,828   
      
Current assets      
Cash and cash equivalents 13             10,099          26,599   
Inventories 14               1,851            1,630   
Other receivables 15               2,409            2,125   
Total current assets            14,359         30,354   
      
Total assets          122,090      125,182   
      
EQUITY AND LIABILITIES      
Equity      
Share capital 16               1,485            1,485   
Share premium (net of issue costs) 16           165,873        165,873   
Other reserves 17  (20,296)  (13,874) 
Accumulated loss  20  (31,916)  (30,780) 
Equity attributable to the shareholders of the parent         115,146      122,704   
Non-controlling interest                         -   (114) 
Total equity           115,146      122,590   
      
Non-current liabilities      
Asset retirement obligation                   330               162   
Total non-current liabilities                  330              162   
      
Current liabilities      
Trade and other payables 18               6,614            2,430   
Total current liabilities               6,614           2,430   
      
Total equity and liabilities          122,090      125,182   
 
 
Approved by the Board of Directors on 10 April 2012 and signed on its behalf by 
 
 
 
 
 
 
 
Mikhail Ivanov Tony Alves 
Chief Executive Officer Chief Financial Officer  Volga Gas plc 
Annual Report and Accounts 2011 
 
The accompanying notes on pages 28 to 45 are an integral part of these financial statements. 
 
 
24 
Group Cash Flow Statement 
(presented in US$ 000) 
 
 
Year ended 31 December Notes 2011  2010 
     
Loss for the year before tax  (1,118)  (22,217) 
     
Adjustments to loss before tax:     
Share grant expense               37               123   
Depreciation          2,714            1,114   
Work in progress expensed             456    - 
E & E expense               34          23,737   
Write off of development assets          5,322     
Charge for provision  -              130   
Loan repayment by offset of gas sales  (3,146)  - 
Other non-cash expenses             147    -  
Foreign exchange differences          1,320    -  
Decrease in long-term assets          1,678            2,612   
Operating cash flow prior to working capital         7,444           5,499   
     
Working capital changes     
Increase/(decrease) in trade and other receivables   (1,847)             730   
Decrease in payables  (20)  (770) 
Decrease in inventory               78            1,963   
Cash flow from operations         5,655           7,422   
Income tax paid  -   (92) 
Net cash flow generated from operating activities         5,655           7,330   
     
Cash flows from investing activities     
Expenditure on exploration and evaluation 10 (4,307)  (12,513) 
Purchase of intangible assets 10                -   (26) 
Purchase of property, plant and equipment 11 (784)  (1,446) 
Acquisition of subsidiary net of cash acquired  (481)                 -  
Movement in term bank deposit 13 -           1,000   
Net cash used in investing activities  (5,572)  (12,985) 
     
Cash flows from financing activities     
Loans received  -              373   
Loans repaid  (15,737)  (296) 
     
Net cash provided by financing activities  (15,737)               77   
     
Effect of exchange rate changes on cash and cash equivalents  (846)  (466) 
     
Net decrease in cash and cash equivalents  (16,500)  (6,044) 
     
Cash and cash equivalents at beginning of the year 13       26,599          32,643   
     
Cash and cash equivalents at end of the year 13      10,099         26,599   
 
  Volga Gas plc 
Annual Report and Accounts 2011 
 
The accompanying notes on pages 28 to 45 are an integral part of these financial statements. 
 
 
25 
Company Balance Sheet 
(presented in US$ 000) 
 
Company registration number: 05886534 
 
At 31 December Notes 2010  2010 
      
ASSETS      
Non-current assets      
Investments      152,134       151,034   
Intercompany receivables        15,949         15,950   
Total non-current assets    168,083     166,984   
      
Current assets      
Cash and cash equivalents 13         2,614           5,292   
Other receivables               60                38   
Total current assets         2,674          5,330   
      
Total assets    170,757     172,314   
      
EQUITY AND LIABILITIES      
Equity      
Share capital 16         1,485           1,485   
Share premium (net of issue costs) 16     165,873       165,873   
Other reserves 17         5,233           5,196   
Accumulated loss  20  (3,272)  (1,840) 
Total equity     169,319     170,714   
      
Current liabilities      
Intercompany payables   1,357  1,357 
Trade and other payables          81           243   
Total current liabilities         1,438          1,600   
      
Total equity and liabilities    170,757     172,314   
 
 
 
Approved by the Board of Directors on 10 April 2012 and signed on its behalf by 
 
 
 
 
 
 
 
 
Mikhail Ivanov Tony Alves 
Chief Executive Officer Chief Financial Officer 
  Volga Gas plc 
Annual Report and Accounts 2011 
 
The accompanying notes on pages 28 to 45 are an integral part of these financial statements. 
 
 
26 
Company Cash Flow Statement 
(presented in US$ 000) 
 
 
Year ended 31 December Notes  2011  2010 
      
Loss for the before tax   (1,432)  (1,372) 
      
Adjustments to loss before tax:      
Share grant expense               37              123   
Increase in accruals               60              130   
Operating cash flow prior to working capital   (1,335)  (1,119) 
      
Working capital changes      
Increasein trade and other receivables    (21)  (92) 
Decrease in payables   (222)  (196) 
Cash flow from operations   (1,578)  (1,407) 
Income tax paid                   -                   -  
Net cash flow from operating activities   (1,578)  (1,407) 
      
Cash flows from investing activities      
Movement in term bank deposit                   -          1,000   
Investments in share capital of subsidiaries 19  (1,100)  (6,300) 
      
Net cash used in investing activities   (1,100)  (5,300) 
      
Cash flows from financing activities      
Proceeds from the issue of shares (net of issue costs)                   -                   -  
Change in loans                   -                   -  
      
Net cash provided by financing activities                   -                   -  
      
Effect of exchange rate changes on cash and cash equivalents                  -                   -  
      
Net decrease in cash and cash equivalents   (2,678)  (6,707) 
      
Cash and cash equivalents at beginning of the year 13         5,292         11,999   
      
Cash and cash equivalents at end of the year 13        2,614          5,292   
 
  Volga Gas plc 
Annual Report and Accounts 2011 
 
The accompanying notes on pages 28 to 45 are an integral part of these financial statements. 
 
 
27 
Group Statement of Changes in Shareholders’ Equity 
(presented in US$ 000) 
 
  
Attributable to the equity shareholders of the Company 
 
 Notes Share 
Capital 
Share 
Premium 
Other 
Reserves 
Accumulated 
Loss  
Non-
controlling 
Interests 
Total 
Equity 
Opening equity at 1 January 2010 1,485   165,873   (12,990) (13,911) (92) 140,365   
Loss for the year   -   -   -  (16,869) (22) (16,891) 
Transactions with owners       -  
Share based payments 16  -   -               123    -  -  123   
Total transactions with owners  -  -               123   -  -  123   
        
Currency translation differences   -   -  (1,007)  -  -  (1,007) 
Total comprehensive income   -   -  (1,007)  -  -  (1,007) 
Closing equity at 31 December 2010 1,485   165,873   (13,874) (30,780) (114) 122,590   
        
Opening equity at 1 January 2011 1,485   165,873   (13,874) (30,780) (114) 122,590   
Loss for the year   -   -   -  (1,136)  (1,136) 
Transactions with owners       -  
Share based payments 16  -   -                37    -   -              37   
Total transactions with owners                
-  
                  
-  
               
37   
                      
-  
                     
-  
              
37   
Non-controlling interests   -   -   -   -               114             114   
Currency translation differences    (6,459)   (6,459) 
Total comprehensive income  -  -  (6,459) -                   -  (6,459) 
Closing equity at 31 December 2011 1,485   165,873   (20,296) (31,916) -  115,146   
 
 
 
 
Company Statement of Changes in Shareholders’ Equity 
(presented in US$ 000) 
 
 Notes Share 
Capital 
Share 
Premium 
Other 
Reserves 
Accumulated 
Loss 
Total Equity 
Opening equity as at 1 January 2010      1,485       165,873           5,073   (682)       171,749   
Loss for the year 
 
-  -  -  (1,158) (1,158) 
Share grant expanse 16 -  -  123   -  123   
Closing equity at 31 December 2010      1,485       165,873           5,196   (1,840)       170,714   
       
Opening equity as at 1 January 2011      1,485       165,873           5,196   (1,840)       170,714   
Loss for the year 
 
-  -  -  (1,432) (1,432) 
Share grant expanse 16 -  -  37   -  37   
Closing equity at 31 December 2011      1,485       165,873           5,233   (3,272)       169,319   
  Volga Gas plc 
Annual Report and Accounts 2011 
Notes to the IFRS Consolidated Financial Statements 
For the year ended 31 December 2011 
(presented in US$ 000) 
 
 28 
1. General information 
Volga Gas plc (the “Company” or “Volga”) is a public limited company registered in England and Wales with registered number 
5886534. The Company was incorporated on 25 July 2006.The principal activities of the Company and its subsidiaries (the “Group”) 
are the acquisition, exploration and development of hydrocarbon assets and production of hydrocarbons in the Volga Region of the 
Russian Federation. Its registered office is at Ground floor, 17-19 Rochester Row, London, SW1P 1QT.  The Company’s shares are listed 
on the Alternative Investment Market of the London Stock Exchange. 
These Group consolidated financial statements were authorised for issue by the Board of Directors on 10 April 2012. 
 
2. Summary of significant accounting policies 
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These 
policies have been consistently applied to all the years presented, unless otherwise stated. 
2.1 Basis of preparation 
The consolidated financial statements of Volga have been prepared in accordance with International Financial Reporting Standards 
(IFRSs), as adopted by the European Union (EU), International Financial Reporting Interpretations Committee (IFRIC) 
interpretations, and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements 
have been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities 
(including derivative instruments) at fair value through profit or loss. 
The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also 
requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a 
higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial 
statements are disclosed in Note 4. 
No income statement is presented for Volga Gas plc as permitted by Section 408 of the Companies Act 2006. 
The consolidated financial statements have been prepared on the going concern basis as the directors have concluded that the 
Group will continue to have access to sufficient funds in order to meet its obligations as they fall due for at least the foreseeable 
future.   
Disclosure of impact of new and future accounting standards 
(a) New and amended standards and interpretations adopted by the Group: 
There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning on 1 January 2011 
that have a material impact on the Group. 
(b) Amended standards and interpretations not relevant to the Group 
The following new standards, amendments to standards and interpretations are mandatory for the first time for the financial year 
beginning 1 January 2011, but are not currently relevant for the Group: 
•  IAS 32 'Financial instruments: Presentation'. 
•  Annual improvements to IFRSs 2010 
•  IFRIC 19 'Extinguishing financial liabilities with equity investments'. 
•  Amendment to IFRIC 14, ‘Prepayments of a minimum funding requirement’ 
•  Amendment to IFRS 1 on hyperinflation and fixed dates  
(c) Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by 
the Group. The following new standards, amendments to standards and interpretations have been issued, but are not effective for 
the financial year beginning 1 January 2012 and have not been early adopted: 
• IAS 19 (revised 2011) 'Employee benefits' (effective 1 January 2013) 
• IFRS 9 ‘Financial instruments’ (effective 1 January 2015) 
• IFRS 10 ‘Consolidated financial statements’ (effective 1 January 2013) 
• IFRS 12 ‘Disclosures of interests in other entities’ (effective 1 January 2013) 
• IFRS 13 ‘Fair value measurement’ (effective 1 January 2013) 
• IFRS 11, 'Joint arrangements'(effective 1 January 2013) 
• IAS 27 (revised 2011) 'Separate financial statements' (effective 1 January 2013) 
• IAS 28 (revised 2011) 'Associates and joint ventures' (effective 1 January 2013) 
• Amendment to IAS 12,'Income taxes' on deferred tax (effective 1 January 2012) 
• Amendment to IAS 1,'Presentation of financial statements' on OCI (effective 1 July 2012) 
• IFRIC 20 'Stripping costs in the production phase of a surface mine’ (effective 1 January 2013) 
The Group is yet to assess the full impact of these new standards and amendments but does not expect them to have a material 
impact on the financial statements. 
2.2 Consolidation 
(a) Subsidiaries 
The consolidated financial statements include the financial statements of the Company and its subsidiaries. Subsidiaries are all 
entities in which the Group directly or indirectly owns more than 50 percent of the voting stock or otherwise has the power to  Volga Gas plc 
Annual Report and Accounts 2011 
Notes to the IFRS Consolidated Financial Statements 
For the year ended 31 December 2011 
(presented in US$ 000) 
 
 29 
govern the financial and/or operating policies. Subsidiaries are fully consolidated from the date on which control is transferred to 
the Group. They are de-consolidated from the date that control ceases. 
The group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the 
acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the 
group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration 
arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities 
assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-
acquisition basis, the group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling 
interest’s proportionate share of the acquiree’s net assets.  
Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising 
from contingent consideration amendments.    
Cost also includes direct attributable costs of investment.  
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair 
value of any previous equity interest in the acquiree over the fair value of the group’s share of the identifiable net assets acquired 
is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain 
purchase, the difference is recognised directly in the statement of comprehensive income. 
Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated; unrealised 
losses are also eliminated unless the cost cannot be recovered.  
The Company and its subsidiaries outside the Russian Federation maintain their financial statements in accordance with IFRSs as 
adopted by the EU. The Russian subsidiaries of the Group maintain their statutory accounting records in accordance with the 
Regulations on Accounting and Reporting of the Russian Federation. The consolidated financial statements are based on these 
statutory accounting records, appropriately adjusted and reclassified for fair presentation in accordance with International Financial 
Reporting Standards as adopted by the EU. 
A list of the Company’s subsidiaries is provided in Note 19. 
2.3 Segment reporting 
Segmental reporting follows the Group’s internal reporting structure.  
Operating segments are defined as components of the Group where separate financial information is available and reported 
regularly to the chief operating decision maker (“CODM”), which is determined to be the Board of Directors of the Company. The 
Board of Directors which decide how to allocate resources and assesses operational and financial performance using the 
information provided.  
The CODM receives monthly IFRS based financial information for the Group and its development and production entities. There 
were two development and production entities during both 2011 and 2010. Management has determined that the operations of 
these production and development entities are sufficiently homogenous (both are concerned with upstream oil and gas 
development and production activities) for these to be aggregated for the purpose of IFRS 8, “Operating Segments”. The Group 
has other entities that engage as either head office or in a corporate capacity or as holding companies. Management has concluded 
that due to application of the aggregation criteria that separate financial information for segments is not required.   
No geographic segmental information is presented as all of the companies operating activities are based in the Russian Federation. 
Management has determined therefore that the operations of the Group comprise one class of business, being oil and gas 
exploration, development and production and the Group operates in only one geographic area - the Russian Federation. 
There is no concentration of sales with any major customer that is required to be separately disclosed. 
2.4 Foreign currency translation 
(a) Functional and presentation currency 
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic 
environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in US 
dollars, which is the Company’s functional and the Group’s presentation currency. 
The functional currency of the Group’s subsidiaries that are incorporated in the Russian Federation is the Russian rouble (“RUR”). 
It is the Management’s view that the RUR best reflects the financial results of its Cyprus subsidiaries because they are dependent 
on entities based in Russia that operate in an RUR environment in order to recover their investments. As a result, the functional 
currency of the subsidiaries continues to be the RUR. 
 (b) Transactions and balances 
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the 
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at 
year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income 
statement. Translation differences on non-monetary financial assets and liabilities are reported as part of the fair value gain or loss. 
Foreign exchange gains and losses that relate to cash and cash equivalents, borrowings and other foreign exchange gains and 
losses are presented in the income statement within “Other gains and losses”.  Volga Gas plc 
Annual Report and Accounts 2011 
Notes to the IFRS Consolidated Financial Statements 
For the year ended 31 December 2011 
(presented in US$ 000) 
 
 30 
(c) Group companies 
The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that 
have a functional currency different from the presentation currency are translated into the presentation currency as follows: 
(i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; 
(ii) income and expenses for each income statement are translated at average exchange rates (unless this average is not a 
reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and 
expenses are translated at the rate on the dates of the transactions); and 
(iii) all resulting exchange differences are recognised in other comprehensive income. 
The major exchange rates used for the revaluation of the closing balance sheet at 31 December 2011 were 
 GBP 1: US$ 1.5453 (2010: GBP 1: US$ 1. 5523) 
 US$ 1: RUR.32.196 (2010: US$ 1: RUR.30. 4769) 
2.5 Oil and gas exploration assets 
The Company and its subsidiaries apply the successful efforts method of accounting for Exploration and Evaluation (“E&E”) costs, in 
accordance with IFRS 6 “Exploration for and Evaluation of Mineral Resources”. Costs are accumulated on a field-by-field basis. Costs 
directly associated with an exploration well, including certain geological and geophysical costs, and exploration and property leasehold 
acquisition costs, are capitalised until the determination of reserves is evaluated. If it is determined that a commercial discovery has 
not been achieved, these costs are charged to expense after the conclusion of appraisal activities. Exploration costs such as geological 
and geophysical that are not directly related to an exploration well are expensed as incurred. 
Capital expenditure is recognised as property, plant and equipment or intangible assets in the financial statements according to the 
nature of the expenditure and the stage of development of the associated field, i.e. exploration, development, production. 
Once commercial reserves are found, exploration and evaluation assets are tested for impairment and transferred to development 
tangible and intangible assets. No depreciation or amortisation is charged during the exploration and evaluation phase. 
(a) Development tangible and intangible assets 
Expenditure on the construction, installation or completion of infrastructure facilities such as platforms, pipelines and the drilling of 
development wells into commercially proven reserves, is capitalised within property, plant and equipment and intangible assets 
depending on the nature of the expenditure. When development is completed on a specific field, it is transferred to producing assets 
as part of property, plant and equipment or intangible assets. No depreciation or amortisation is charged during the development 
phase. 
(b) Oil and gas production assets 
Development and production assets are accumulated generally on a field by field basis and represent the cost of developing the 
commercial reserves discovered and bringing them into production together with E&E expenditures incurred in finding commercial 
reserves and transferred from the intangible E&E assets as described above.  
The cost of development and production assets also includes the cost of acquisitions and purchases of such assets, directly attributable 
overheads, finance costs capitalised and the cost of recognising provisions for future restoration and decommissioning. 
Where major and identifiable parts of the production assets have different useful lives, they are accounted for as separate items of 
property, plant and equipment. Costs of minor repairs and maintenance are expensed as incurred. 
(c) Depreciation/amortisation 
Oil and gas properties intangible assets are depreciated or amortised using the unit-of-production method. Unit-of-production rates are 
based on proved and probable reserves, which are oil, gas and other mineral reserves estimated to be recovered from existing facilities 
using current operating methods. Oil and gas volumes are considered produced once they have been measured through meters at 
custody transfer or sales transaction points at the outlet valve on the field storage tank. 
(d) Impairment – exploration and evaluation assets 
Exploration and evaluation assets are tested for impairment prior to reclassification to development tangible or intangible assets, or 
whenever facts and circumstances indicate that an impairment condition may exist. An impairment loss is recognised for the amount 
by which the exploration and evaluation assets’ carrying amount exceeds their recoverable amount. The recoverable amount is the 
higher of the exploration and evaluation assets’ fair value less costs to sell and their value in use. For the purposes of assessing 
impairment, the exploration and evaluation assets subject to testing are grouped with existing cash-generating units of production 
fields that are located in the same geographical region. 
(e) Impairment – proved oil and gas production properties and intangible assets 
Proven oil and gas properties and intangible assets are reviewed for impairment whenever events or changes in circumstances 
indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s 
carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell 
and value in use. The cash generating unit applied for impairment test purposes is generally the field, except that a number of field 
interests may be grouped together where the cash flows of each field are interdependent, for instance where surface infrastructure is 
used by one or more field in order to process production for sale.  
  Volga Gas plc 
Annual Report and Accounts 2011 
Notes to the IFRS Consolidated Financial Statements 
For the year ended 31 December 2011 
(presented in US$ 000) 
 
 31 
(e) Decommissioning 
Provision is made for the cost of decommissioning assets at the time when the obligation to decommission arises.  Such provision 
represents the estimated discounted liability (the discount rate used currently being at 10% per annum) for costs which are 
expected to be incurred in removing production facilities and site restoration at the end of the producing life of each field. A 
corresponding item of property, plant and equipment is also created at an amount equal to the provision. This is subsequently 
depreciated as part of the capital costs of the production facilities. Any change in the present value of the estimated expenditure 
attributable to changes in the estimates of the cash flow or the current estimate of the discount rate used are reflected as an 
adjustment to the provision and the property, plant and equipment. The unwinding of the discount is recognised as a finance cost. 
2.6 Other business and corporate assets 
Property, plant and equipment not associated with exploration and production activities are carried at cost less accumulated 
depreciation. These assets are also evaluated for impairment when circumstances dictate. 
Land is not depreciated. Depreciation of other assets is calculated on a straight line basis as follows: 
 
Machinery and equipment 6 – 10 years 
Office equipment in excess of US$5,000 3 – 4 years 
Vehicles and other 2 – 7 years 
 
2.7 Financial assets 
The Group classifies its financial assets in the following categories:  
(a) Financial assets at fair value through profit or loss 
Financial assets at fair value through profit or loss are financial assets held for trading. This category comprises derivatives unless 
they are effective hedging instruments. The Group had no financial assets in this class as at 31 December 2011 or 31 December 
2010. 
(b) Loans and receivables 
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active 
market. This category comprises trade and other receivables, term bank deposits and cash and cash equivalents in balance sheet. 
2.8 Derivative financial instruments 
Derivative financial assets and financial liabilities are financial instruments whose value changes in response to an underlying 
variable, require little or no initial investment and are settled in the future.  The Company has used derivatives such as foreign 
exchange forward contracts to manage risks of changes in foreign exchange rates. The Group has not applied hedge accounting in 
respect of forward foreign exchange contracts. Consequently, movements in the fair value of derivative instruments are 
immediately recognised in profit or loss. 
2.9 Acquisitions, asset purchases and disposals 
Acquisitions of oil and gas properties are accounted for under the purchase method where the target meets the definition of a 
business combination. 
Transactions involving the purchases of an individual field interest, or a group of field interests, that do not qualify as a business 
combination are treated as asset purchases, irrespective of whether the specific transactions involved the transfer of the field 
interests directly or the transfer of an incorporated entity. Accordingly, no goodwill or deferred tax gross up arises. The purchase 
consideration is allocated to the assets and liabilities purchased on an appropriate basis. 
Proceeds on disposal are applied to the carrying amount of the specific intangible asset or development and production assets 
disposed of and any surplus is recorded as a gain on disposal in the income statement. 
2.10 Inventories 
Crude oil inventories are stated at the lower of cost of production and net realisable value. Materials and supplies inventories are 
recorded at average cost and are carried at amounts which do not exceed the expected recoverable amount from use in the 
normal course of business.  Cost comprises direct materials and, where applicable, direct labour plus attributable overheads based 
on a normal level of activity and other costs associated in bringing inventories to their present location and condition. 
2.11 Trade and other receivables 
Trade and other receivables are recorded initially at fair value and subsequently measured at amortised cost using the effective 
interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is 
objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. The 
amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash 
flows, discounted at the original effective interest rate. 
2.12 Cash and cash equivalents 
Cash and cash equivalents include cash in hand, and deposits held at call with banks. 
  Volga Gas plc 
Annual Report and Accounts 2011 
Notes to the IFRS Consolidated Financial Statements 
For the year ended 31 December 2011 
(presented in US$ 000) 
 
 32 
2.13 Share capital 
Ordinary shares are classified as equity. 
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from 
the proceeds. 
2.14 Trade payables 
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest 
method.  
2.15 Current and deferred income tax 
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the 
extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised 
in other comprehensive income or directly in equity, respectively.  
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at end of the reporting 
period in the countries where the Company’s subsidiaries operate and generate taxable income. Management periodically evaluates 
positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes 
provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.  
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and 
liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted 
for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of 
the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) 
that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related 
deferred income tax asset is realised or the deferred income tax liability is settled.  
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which 
the temporary differences can be utilised. 
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against 
current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation 
authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net 
basis. 
2.16 Employee benefits 
(a) Share-based compensation 
The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total 
amount to be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding the 
impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions 
are included in assumptions about the number of options that are expected to vest. The option plan currently in place for certain of 
the Directors is an equity settled share option plan. 
The Company measures the equity instruments granted to employees at the fair value at grant date. The fair value of fully-vested 
shares is expensed immediately. The fair value of shares with vesting requirements is estimated using Black-Scholes option pricing 
model. This value is recognised as an expense over the vesting period on a straight-line basis.  The estimate is revised, as 
necessary, if subsequent information indicates that the number of equity instruments expected to vest differs from previous 
estimates. 
(b) Social obligations 
Wages, salaries, contributions to the Russian Federation state pension and social insurance funds, paid annual leave, sick leave and 
bonuses are accrued in the year in which the associated services are rendered by the employees of the Group. 
2.17 Revenue recognition 
Revenue comprises the fair value of the consideration received or receivable for the sale of oil and gas in the ordinary course of the 
Group’s activities. Revenue is shown net of value added tax, returns, rebates and discounts and after eliminating sales within the 
Group. 
(a) Sales of oil and gas   
Revenue from the sale of oil or gas is recognised when the oil/gas is delivered to customers and title has transferred. Revenue is stated net 
of value-added tax. In 2011 , the Group’s revenue related to sales of crude oil and condensate collected directly by customers and gas sales 
made at the entry to the gas distribution system.  In 2010 all of the Group’s revenue related to crude oil sales collected directly by 
customers. 
(b) Interest income 
Interest income is recognised on a time-proportion basis using the effective interest method. 
 
 
  Volga Gas plc 
Annual Report and Accounts 2011 
Notes to the IFRS Consolidated Financial Statements 
For the year ended 31 December 2011 
(presented in US$ 000) 
 
 33 
2.18 Prepayments 
Prepayments are carried at cost less provision for impairment. A prepayment is classified as non-current when the goods or 
services relating to the prepayment are expected to be obtained after one year, or when the prepayment relates to an asset which 
will itself be classified as non-current upon initial recognition. Prepayments to acquire assets are transferred to the carrying amount 
of the asset once the Group has obtained control of the asset and it is probable that future economic benefits associated with the 
asset will flow to the Group. Other prepayments are written off to profit or loss when the goods or services relating to the 
prepayments are received. If there is an indication that the assets, goods or services relating to a prepayment will not be received, 
the carrying value of the prepayment is written down accordingly and a corresponding impairment loss is recognised in profit or 
loss for the year.  
2.19 Provisions 
Provisions for environmental restoration, restructuring costs and legal claims are recognised when: the group has a present legal or 
constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the 
obligation; and the amount has been reliably estimated. Restructuring provisions comprise lease termination penalties and 
employee termination payments. Provisions are not recognised for future operating losses.  
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by 
considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any 
one item included in the same class of obligations may be small.  
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax 
rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in 
the provision due to passage of time is recognised as interest expense. 
2.20 Business combinations 
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the fair value of 
the assets acquired, equity instruments issued and liabilities incurred or assumed at the date of completion of the acquisition. 
Acquisition costs incurred are expensed and included in administrative expenses. Identifiable assets acquired and liabilities and 
contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. If there is 
excess of the cost of acquisition over the fair value of the acquired entity's share of the identifiable net assets acquired, then the 
excess is recorded as goodwill. If the cost of the acquisition is less than acquired entity's share of the net assets required, the 
difference is recognised directly in the statement of income. 
3. Financial risk management 
3.1 Financial risk factors 
The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, price risk, and cash flow 
interest rate risk), credit risk, and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of 
financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.  
(a )Market Risk 
(i) Foreign exchange risk 
The Group is exposed to foreign exchange risk arising from currency exposures, primarily with respect to the Russian Ruble. 
Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities. 
At 31 December 2011, if the US dollar had weakened/strengthened by 5% against the RUR with all other variables held constant, 
post-tax profit for the year would have been US$24,000  (2010:US$751,000) higher/lower, mainly as a result of foreign exchange 
gains/losses on translation of RUR denominated trade payables and financial assets.  At 31 December 2011, if the US dollar had 
weakened/strengthened by 5% against the Pound Sterling (“GBP”) with all other variables held constant, post-tax profit for the 
year would have been US$41,000  (2010:US$16,000) higher/lower, mainly as a result of foreign exchange gains/losses on 
translation of GBP denominated trade payables and financial assets. 
The following table shows the currency structure of financial assets and liabilities: 
 
At 31 December 2011 Roubles US Dollars Sterling Total 
 US$ 000 US$ 000 US$ 000 US$ 000 
Financial assets :Cash and cash equivalents 6,987                     2,644   468   10,099   
Financial liabilities (before provision for UK taxes) 6,521                          83   10   6,614   
     
At 31 December 2010 Roubles US Dollars Sterling Total 
 US$ 000 US$ 000 US$ 000 US$ 000 
Financial assets: Cash and cash equivalents 6,008                   20,100   491   26,599   
Financial liabilities (before provision for UK taxes) 2,174                        244   12   2,430   
No foreign exchange forward contracts were used in 2011 or 2010. 
(ii) Price risk   Volga Gas plc 
Annual Report and Accounts 2011 
Notes to the IFRS Consolidated Financial Statements 
For the year ended 31 December 2011 
(presented in US$ 000) 
 
 34 
The Group is not exposed to price risk as it does not hold financial instruments of which the fair values or future cash flows will be 
affected by changes in market prices. 
(iii) Cash flow and fair value interest rate risk 
As the Group has no significant interest-bearing assets and liabilities, the Group’s income and operating cash flows are substantially 
independent of changes in market interest rates. 
(b) Credit risk 
The Group’s maximum credit risk exposure is the fair value of each class of assets, presented in note 3.1(a)(i) of US$10,099,000 
and US$26,599,000 at 31 December 2011 and 2010 respectively.  
The Group’s principal financial asset is cash and credit risk arises from cash and cash equivalents and deposits with banks and 
financial institutions. It is the Group’s policy to monitor the financial standing of these assets on an on-going basis. Bank balances 
are held with reputable and established financial institutions.  
The Group’s oil sales are undertaken on a prepaid basis and accordingly the Group has no trade receivables and consequently no 
credit risk associated with trade receivables. 
Rating of financial institution (S&P) 31 December 
2011 
31 December 
2010 
A+ 2,795   18,908   
BBB+ 563   1,944   
BBB- 6,387   5,727   
Other 354   20   
Total bank balance 10,099   26,599  
(c) Liquidity risk 
Cash flow forecasting is performed by Group finance. Group finance monitors rolling forecasts of the Group’s liquidity requirements 
to ensure it has sufficient cash to meet operational needs.  The Group believes it has at least sufficient liquidity headroom to fund 
its currently planned exploration and development activities. 
The Group expects to fund its exploration and development programme, as well as its administrative and operating expenses, 
through 2012using a combination of existing working capital, medium term bank borrowings and expected proceeds from the sale 
of oil and gas production.  If the Group is unsuccessful in generating enough liquidity to fund its expenditures, the Group’s ability 
to execute its long-term growth strategy could be significantly affected.  The Group may need to raise additional equity or debt 
finance as appropriate to fund investments beyond its current commitments. 
3.2 Capital risk management 
The Group’s objectives when managing the balance of equity and debt capital are (a) to safeguard the Group’s ability to continue 
as a going concern, (b) provide returns for shareholders and benefits for other stakeholders and (c) to maintain an optimal capital 
structure to reduce the cost of capital. 
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return 
capital to shareholders, issue new shares or sell assets to reduce debt.  To date the Group has been funded entirely by equity 
capital. 
3.3 Fair value estimation 
Effective 1 January 2009, the Group adopted the amendment to IFRS 7 for financial instruments that are measured in the balance 
sheet at fair value, this requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: 
 Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1). 
 Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as 
prices) or indirectly (that is, derived from prices) (level 2). 
 Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3). 
The Group has no financial assets and liabilities that are required to be measured at fair value. 
 
4. Critical accounting estimates and judgments 
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom 
equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the 
carrying amounts of assets and liabilities within the next financial year are discussed below. 
(a) Carrying value of fixed assets, intangible assets and impairment 
Fixed assets are assessed for impairment when events and circumstances indicate that an impairment condition may exist. The 
carrying value of fixed assets is evaluated by reference to their value in use and primarily looks to the present value of 
management's best estimate of the cash flows expected to be generated from the asset. In identifying cash flows management 
firstly determine the cash generating unit or group of assets that give rise to the cash flows. The cash generating unit is the lowest 
level of asset at which independent cash flows can be generated.  Volga Gas plc 
Annual Report and Accounts 2011 
Notes to the IFRS Consolidated Financial Statements 
For the year ended 31 December 2011 
(presented in US$ 000) 
 
 35 
The estimation of forecast cash flows involves the application of a number of significant judgements and estimates to a number of 
variables including production volumes, commodity prices, operating costs, capital investment, hydrocarbon reserves estimates, 
inflation and discount rates. In addition, judgement is applied in determining the cash generating unit to be assessed for 
impairment. 
(b) Estimation of oil and gas reserves 
Estimates of oil and gas reserves are inherently subjective and subject to periodic revision.  In addition, the results of drilling and 
other exploration or development activity will often provide additional information regarding the Group’s reserve base that may 
result in increases or decreases to reserve volumes.  Such revisions to reserves can be significant and are not predictable with any 
degree of certainty.  Management considers the estimation of reserves to represent a significant judgement in the context of the 
financial statements as reserve volumes are used as the basis for assessing the useful life of oil and gas assets, applying  
depreciation to oil and gas assets and in assessing the carrying value of oil and gas assets.  Decreases in reserve estimates can 
lead to significant impairment of oil and gas assets where revisions (positive or negative) can have a significant effect on 
depreciation rates from period to period.  
(c) Income taxes 
Significant judgment is frequently required in estimating provisions for deferred taxes. This process involves an assessment of 
temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in 
deferred tax assets and liabilities, which are included within the balance sheet. 
(d)  Business combination – acquisition of LLC Gazneftedobycha 
In April 2011, the Group purchased 100% of the share capital of LLC Gazneftedobycha (“GND”).  At the date of the acquisition, 
GND had loans outstanding due to its former parent, Trans Nafta as well as a payable due to the Group which had hitherto been 
classified as a security deposit (prepayment for fixed assets) in the Group's financial statements.    
IFRS 3 requires that, at the date of acquisition, all assets and liabilities, including intangible assets, of an acquired entity be 
recorded at their respective fair values.  The estimation of fair values requires significant management judgment.  To assess fair 
values of monetary assets and liabilities, management uses all information available to determine whether an asset is recoverable 
or whether it is probable that an event will result in outflows of resources from the Group, including assessment of such factors as 
the current overall economic conditions, specific customer, counterparty or industry conditions and the current overall legal 
environment.  Changes in any of these conditions may result in adjustments to fair values of monetary assets and liabilities 
recorded by the Group.  Management engaged independent experts to advise as to the fair values of acquired property, plant and 
equipment.   Changes in any of the estimates subsequent to the finalization of acquisition accounting may result in losses in future 
periods.  The allocation of the fair value of the assets and liabilities acquired is as detailed in Note 24. 
5. Cost of sales and administrative expenses - Group 
Cost of sales and administrative expenses are as follows: 
 
Year ended 31 December   2011  2010 
   US$ 000  US$ 000 
Cost of sales   15,582  6,840 
Exploration & evaluation expenses   200  23,937 
Operating and administrative expenses   6,704  4,733 
Write off of development assets   5,612                  -  
Total operating and administrative expenses   28,099  35,510 
 
Total operating and administrative expenses are analysed as follows: 
 
Year ended 31 December   2011  2010 
   US$ 000  US$ 000 
Mineral extraction tax          9,537           5,254   
Exploration & evaluation             200         23,937   
Salaries & staff benefits          2,485           1,171   
Depreciation & amortization          2,641           1,037   
Directors’ emoluments and other benefits              827              942   
Field operating expenses          2,413              436   
Audit fees             301              295   
Taxes other than payroll and mineral extraction              896              245   
Legal & consulting          1,050           1,181   
Write off of development assets          5,612                    -  
Other          2,137    1,012 
Total   28,099  35,510 
  Volga Gas plc 
Annual Report and Accounts 2011 
Notes to the IFRS Consolidated Financial Statements 
For the year ended 31 December 2011 
(presented in US$ 000) 
 
 36 
(a) Exploration and evaluation 
The principal component of the 2010 exploration and evaluation expense is the impairment charge on the carrying value of intangible 
assets relating to the Grafovskaya #1 well.  This includes the cost of seismic studies as well as costs of drilling and testing operations on 
the well. . 
(b) Staff and salaries 
The average monthly number of employees (including Executive Directors) employed by the Group was: 
 
Year ended 31 December   2011  2010 
Exploration and production   121  28 
Administration and support   26  16 
Total   147  44 
Their aggregate remuneration (excluding executive directors) comprised: 
Year ended 31 December   
2011  2010 
   US$ 000  US$ 000 
Wages and salaries   1,857  909 
Payroll taxes & social contribution   542  210 
Staff benefits   86  52 
 Total   2,485  1,171 
The average monthly number of employees employed by the Company was: 
Year ended 31    December     2011  2010 
Administration and support   2  2 
 
Only directors are employed by the Company.  
(c) Directors’ emoluments and other benefits 
Details of Directors emoluments and other benefits for the years ended 31 December 2011 and 31 December 2010 are provided in 
the Directors’ Remuneration Report.  Included in Directors’ emoluments were share grant expenses of US$37,000 (2010: US$123,000). 
(d) Audit Fees – Group and Company 
Disclosure of the fees paid to the Company’s auditors and its associates is given in Note 21. 
(e) Legal expense 
An amount of US$1,181,000 is included in legal and consultancy expenses in 2010.  The major proportion of this in this was in respect of 
the court proceedings brought by the Group against the Trans Nafta group. The costs include legal and other consultation services related 
to preparation for the court proceedings.  
(f) Depreciation  
Substantially all depreciation relates to oil and gas assets and is included within cost of sales. 
6. Finance income - Group 
Finance income comprises interest earned during the period on cash balances with different financial institutions (Note 13). 
7.  Other gains and losses - Group 
Year ended 31 December  2011  2010 
  US$ 000  US$ 000 
Foreign exchange gain  ( 1,341)  81   
Other gains  ( 469)  16   
Total other gains and losses  ( 1,810)  97   
 
   Volga Gas plc 
Annual Report and Accounts 2011 
Notes to the IFRS Consolidated Financial Statements 
For the year ended 31 December 2011 
(presented in US$ 000) 
 
 37 
8. Current and deferred income tax - Group 
Year ended 31 December  2011  2010 
  US$ 000  US$ 000 
Current tax:     
Current income tax  -  -  
Adjustments to tax charge in respect of prior periods  -         1,518   
Total current tax  -  1,518   
     
Deferred tax:  
   
Origination and reversal of timing differences  (18)         3,808   
Total deferred tax  (18)  3,808   
     
Total tax credit/(charge)  (18)  5,326   
 
The tax charge in the Group income statement differs from the theoretical amount that would arise using the weighted average tax 
rate applicable to profits of the consolidated entities as follows: 
 
Year ended 31 December  
2011  2010 
  US$ 000  US$ 000 
     
Profit/(loss) before income tax and minority interest  (1,118)  ( 22,217) 
     
Tax calculated at domestic tax rates applicable to (profits)/losses in the 
respective countries 
 153  4,367   
Tax effect of items which are not deductible or assessable for tax purposes:     
Non-deductible expenses   (238)  ( 124) 
Current tax – adjustments in respect of prior years  -  1,518   
Tax losses for which no deferred tax asset was recognised  
(512)  ( 433)  
Other tax adjustments  579  -  
Total tax credit/(charge)  (18)  5,326   
 
The weighted average applicable tax rate was 19.6% (2010: 19.6%). 
Deferred taxation is attributable to the temporary differences that exist between the carrying amounts of assets and liabilities for 
financial reporting purposes and the amounts used for tax purposes. The tax effects of temporary differences that give rise to 
deferred taxation are presented below:  
 
 31 
December  
2011 
Business 
combination 
Differences 
recognition 
and reversal 
31 
December  
2010 
Differences 
recognition 
and reversal 
31 
December  
2009 
Tax effects of taxable temporary differences:             
Exploration assets  ( 659)  -             39    ( 698)  682    ( 1,380) 
Inventories   ( 12)  -   1    ( 13)  ( 8)  ( 5) 
Total  ( 671)  -   40    ( 711)          674    ( 1,385) 
             
Tax effect of deductible temporary differences:             
Tax losses carry forward  5,716    831    ( 386)  5,271    3,154    2,117   
Trade and other receivables  323    -   ( 19)  342    2    340   
Property, plant and equipment  185    -   ( 11)  196    64    132   
Share grant expenses  7    -   -   7    -   7   
Total  6,231    831    ( 416)  5,816         3,220    2,596   
             
Net tax effect of temporary differences  5,560    831    ( 376)  5,105         3,894    1,211   
 
  Volga Gas plc 
Annual Report and Accounts 2011 
Notes to the IFRS Consolidated Financial Statements 
For the year ended 31 December 2011 
(presented in US$ 000) 
 
 38 
Deferred income tax assets are recognised for tax loss carry forwards to the extent that the realisation of the related tax benefit 
through the future taxable profits is probable.  Tax losses in respect of Cyprus and the UK do not expire.  The group has not 
recognised a deferred tax asset of $1,009k in respect of tax losses and other short term timing differences in the UK (2010: 
$750k). 
 
9. Basic and diluted (loss)/profit per share - Group 
Profit per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number 
of ordinary and diluted shares in issue during the year excluding ordinary shares purchased by the Company and held as treasury 
shares. 
Year ended 31 December  2011  2010 
Net loss attributable to equity shareholders (per share)  (0.01)  (0.21) 
Net loss attributable to equity shareholders  ( 1,136)  ( 16,869) 
     
Basic weighted number of shares 81,017,800 81,017,800 
 
10. Intangible assets – Group 
Intangible assets represent exploration and evaluation assets such as licenses, studies and exploratory drilling, which are stated at 
historical cost. 
 Work in 
progress: 
exploration and 
evaluation 
Exploration and 
evaluation 
Development 
assets 
Producing 
assets 
Total 
At 1 January 2010        14,328    6,095          18,063    1,664          40,150   
Additions        12,496    26    26    -         12,548   
At 31 December 2010        26,824    6,121          18,089    1,664          52,698   
           
Accumulated amortisation           
At 1 January 2010  -   -   -   (57)  (57) 
Impairment charge  (23,305)  -   -   -   (23,305) 
Amortisation  -   -   -   (98)  (98) 
At 31 December 2010  (23,305)  -   -   (155)  (23,460) 
Exchange adjustments  (75)  (48)  (138)  (12)  (273) 
At 31 December 2010         3,444           6,073         17,951           1,497         28,965   
 
 Work in 
progress: 
exploration and 
evaluation 
Exploration and 
evaluation 
Development 
assets 
Producing  
assets 
Total 
At 1 January 2011  3,444    6,073          17,951    1,652          29,120   
Additions  398    -   1,305          14,475          16,178   
Write offs  (99)  -   (2,193)  -   (2,292) 
Transfers  (51)  -   -   51    -  
At 31 December 2011  3,692    6,073          17,063          16,178          43,006   
           
Accumulated amortisation           
At 1 January 2011  -   -   -   (155)  (155) 
Amortisation  -   -   -   (631)  (631) 
At 31 December 2011  -   -   -   (786)  (786) 
Exchange adjustments  (205)  (324)  (881)  (1,288)  (2,698) 
At 31 December 2011         3,487           5,749         16,182         14,104         39,522   
 
The impairment in 2010 relates to the write off of the Grafovskaya exploration well on the Karpenskiy licence and associated costs.  
The Grafovskaya well was the first exploration well on the Yuzhny Ershovskoye prospect.  It did not encounter commercial 
quantities of hydrocarbons and, as a result, the well and associated costs have been written off.  Approximately $1,995,000 of 
seismic costs related to the unexplored portion of the Karpenskiy licence continue to be included within exploration and evaluation 
assets. 
  Volga Gas plc 
Annual Report and Accounts 2011 
Notes to the IFRS Consolidated Financial Statements 
For the year ended 31 December 2011 
(presented in US$ 000) 
 
 39 
11. Property, plant and equipment - Group 
Movements in property, plant and equipment, for the years ended 31 December 2011 and 2010 are as follows: 
 
Cost Development 
assets  
Work in 
progress 
 Land &  
Buildings  
Producing  
assets  
 Other    Total  
At 1 January 2010             25,821             443             764        11,474             117         38,619   
Additions               1,287   -            313   -  -          1,600   
Write offs (339) -  -  (94) -   (433) 
Transfers (1,012) -  -            982               30    -  
At 31 December 2010             25,757             443          1,077        12,362             147         39,786   
  
   
   
Accumulated depreciation   
   
   
At 1 January 2010 -  -  -  (947) (43)  (990) 
Depreciation -  -  -  (998) (18)  (1,016) 
At 31 December 2010 -  -  -  (1,945) (61)  (2,006) 
Exchange adjustments (194) (3) (7) (82) (1)  (287) 
At 31 December 2010            25,563            440         1,070       10,335               85        37,493   
 
Cost Development 
assets  
Work in 
progress 
 Land &  
Buildings  
Producing  
assets  
 Other    Total  
At 1 January 2011             25,563             440          1,070        12,277             146         39,496   
Additions               2,591          5,202             126        30,259             674         38,852   
Write offs (5,789) (456) -  (275) (78)  (6,598) 
Transfers (660)                -  -            577               83    -  
At 31 December 2011             21,705          5,186          1,196        42,838             825         71,750   
  
     
 
Accumulated depreciation   
     
 
At 1 January 2011 -  -  -  (1,942) (61)  (2,003) 
Depreciation -  -  -  (4,225) (382)  (4,607) 
Disposals -  -  -              20               52                72   
At 31 December 2011 -  -  -  (6,147) (391)  (6,538) 
Exchange adjustments (1,030) (436) (68) (2,849) (35)  (4,418) 
At 31 December 2011            20,675         4,750         1,128       33,842            399        60,794   
 
12. Non-current assets 
(a) Other non-current assets – Group 
As  at 31 December  2011  2010 
  US$ 000  US$ 000 
VAT recoverable   1,779  3,572 
Other non-current assets  76  6 
Total other non-current assets  1,855  3,578 
Management believes that it may not be able to recover all VAT specific to license and  exploration and evaluation contractors’ payments 
within the 12 months of the balance sheet date. Therefore this VAT is classified as a non-current asset. 
(b) Security deposit on acquisition of fixed assets  (2010: -US$19.7  million)  
The security deposit on acquisition of fixed assets of US$19.7 million as at 31 December 2010 relates to an advance of RR 600 
million that was paid by the Group to Trans Nafta in 2008.  The payment was for the Group’s share of costs associated with the 
construction of a Gas Processing Unit (“GPU”) to be jointly owned by the Group and Trans Nafta and was recognised as a 
prepayment received by Gazneftedobycha (“GND”).  Following the acquisition by the Group of GND in April 2011, the prepayment 
was converted into an intercompany debt between GNS and GND, which is eliminated on consolidation into the Group balance 
sheet.  The prepayment has been recognised in the provisional fair value exercise as part of the consideration paid for the 
acquisition of GND.   
   Volga Gas plc 
Annual Report and Accounts 2011 
Notes to the IFRS Consolidated Financial Statements 
For the year ended 31 December 2011 
(presented in US$ 000) 
 
 40 
13. Term deposits, cash and cash equivalents – Group and Company 
  
Group 
 
Company 
At 31 December  2011 2010 
 
2011 2010 
  US$ 000 US$ 000 
 
US$ 000 US$ 000 
Cash at bank and on hand        4,509        21,514   
 
       2,614         5,292   
Short term bank deposits        5,590        5,085   
 
             -               -  
Total cash and cash equivalents    10,099      26,599   
 
      2,614         5,292   
 
An analysis of Group deposits, cash and cash equivalents by bank and currency is presented in the table below: 
  
Group 
 
Company 
At 31 December  2011 2010 
 
2011 2010 
Bank Currency US$ 000 US$ 000 
 
US$ 000 US$ 000 
United Kingdom     
 
  
Barclays Bank PLC USD        2,327                -  
 
    2,146                -  
Barclays Bank PLC GBP 468   -  
 
468   -  
The Royal Bank of Scotland USD  -       18,417   
 
-  4,801   
The Royal Bank of Scotland GBP -  491   
 
-  491   
Russian Federation     
 
  
Unicreditbank RUR 246   261   
 
-  -  
Transcredit Bank RUR 6,387   5,727   
 
-  -  
Other banks and cash on hand RUR 354  20   
 
-   -  
Unicreditbank USD  317   1,683   
 
-  -  
    
   
Total cash and cash equivalents 10,099   26,599   
 
      2,614         5,292   
 
14. Inventories - Group 
At 31 December  
2011  2010 
  US$ 000  US$ 000 
Production & other spares            1,643              1,540   
Crude oil inventory               208                   90   
Total inventories           1,851             1,630   
 
 15. Other receivables – Group 
 
At 31 December 
 
2011  2010 
 
 
US$ 000  US$ 000 
VAT receivable  95    336   
Prepayments to contractors  2,108    1,668   
Other accounts receivable  206    121   
Total other receivables  2,409    2,125   
 
Prepayments to contractors relate to initial advances made in respect of drilling, construction and other projects. 
 
16. Share capital and share premium - Group  
The following summarises the movement in the share capital and share premium of the Company for the years ended 2010 and 2011.  
 
 Number of shares Share capital Share premium 
  US$ 000 US$ 000 
At 1 January  2010               81,017,800                           1,485                       165,873   
Issues of shares                               -                             -                                 -  
At 31 December 2010          81,017,800                    1,485                     165,873   
At 1 January  2011               81,017,800                           1,485                       165,873   
Issues of shares                                  -                               -                                   -  
At 31 December 2011          81,017,800                    1,485                     165,873    Volga Gas plc 
Annual Report and Accounts 2011 
Notes to the IFRS Consolidated Financial Statements 
For the year ended 31 December 2011 
(presented in US$ 000) 
 
 41 
The total number of authorised ordinary shares is 330,720,100 (2010: 330,720,100) with a par value of £ 0.01 per share (2010: 
£ 0.01 per share). 
Share based compensation 
Share options and other share based awards have been granted to certain directors.  There were no shares issued to directors under 
such schemes during 2011 (2010: nil). 
2008 Executive Share Option Plan  
On 15 July 2008 the Group announced a new Executive Share Option Plan (“ESOP”). During 2008, the Company granted options to 
acquire 1,137,464 ordinary shares to Mikhail Ivanov under the terms of the ESOP.  The options may be exercised at a price of 
405p per share and vest in equal portions on May 2010, 2011 and 2012 and will remain outstanding until May 2017.  In January 
2009, the Company granted 568,732 thousand share options to Tony Alves under the ESOP. The options vest in 8 semi-annual 
tranches over a period of 4 years providing certain performance conditions related to the Company’s share price are met. The 
options have an exercise price of £1.00.  Under the terms of the plan, during 2011 options over 432,474 shares (2010: 450,247 
shares) were eligible for vesting.  Share grant expenses of US$37,000 (2010 US$123,000) have been made. 
The fair value of share options granted and of restricted shares issued is measured by use of the Black-Scholes pricing model with the 
following assumptions: 
Year ended 31 December 2011 2009 Executive Share 
Option Plan 
Share price 78.5p 
Exercise price  100.0p – 405.0p 
Expected volatility 56.8% 
Expected life 0-4 years 
Risk free rate 3.0% 
Expected dividends None 
 
17. Other reserves – Group 
At 31 December 2011 2010 
 US$ 000 US$ 000 
Currency translation adjustment (25,529) (19,070) 
Share grant expense 5,233   5,196   
Total other reserves (20,296) (13,874) 
 
Currency translation adjustments represent adjustments on translation of the share capital of non-US$ subsidiaries into US$.  All 
related exchange gains and losses are charged directly to equity. 
18.  Trade and other payables – Group 
At 31 December 2011 2010 
 US$ 000 US$ 000 
Trade payables 416   860   
Taxes other than profit tax 1,553   1,074   
Customer advances 466   496   
Loans due to Trans Nafta 4,179   -  
Total 6,614   2,430   
 
In April 2011, the Group purchased 100% of the share capital of LLC Gazneftedobycha (“GND”).  At the date of the acquisition, 
GND had loans outstanding due to its former parent, Trans Nafta. 
The maturity period of the Group’s financial liabilities, comprising only trade and other payables at 31 December 2011 and 2010 is 
as follows: 
Maturity period at 31 December 2011 0 to 3 months 3 to 12 months Over 1 year Total 
Trade and other payables 2,435   4,179   -  6,614   
     
Maturity period at 31 December 2010 0 to 3 months 3 to 12 months Over 1 year Total 
Trade and other payables 2,186   244   -  2,430   
 
   Volga Gas plc 
Annual Report and Accounts 2011 
Notes to the IFRS Consolidated Financial Statements 
For the year ended 31 December 2011 
(presented in US$ 000) 
 
 42 
19. Investments – Company 
Investments in subsidiaries, comprising solely ordinary share capital, are accounted for at cost. The Company’s subsidiaries are as 
follows: 
Name Jurisdiction Nature of Operations % Owned From 
Woodhurst Holdings Ltd. Cyprus Intermediate Holding Company 100% October 2005 
Pre-Caspian Gas Company Russia Oil & gas exploration and production 100% May 2006 
Gaznefteservice Russia Oil & gas exploration and production 100% September 2006 
Shropak Investments Ltd Cyprus Dormant 100% June 2007 
Volga Gas (Cyprus) Ltd. Cyprus Intermediate Holding Company 100% August 2007 
Gazservice Russia  Special purpose entity 99% October 2008 
ZAO Gamma Russia  Joint operating company 75% January 2009 
Volga Gas Finance Ltd. UK Intermediate Holding Company 100% March 2010 
Gazneftedobycha Russia Oil & gas exploration and production 100% April 2011 
 
To avoid certain legal restrictions on land ownership in October 2008 Pre-Caspian Gas Company acquired a 99% shareholding in 
ZAO Gazservice. Subsequently, Pre-Caspian Gas Company sold an unimproved plot of land to ZAO Gazservice at cost basis. 
 
Company  31 December 
2010 
Additions Disposals 31 December 
2011 
  US$ 000 US$ 000 US$ 000 US$ 000 
Investments in Woodhurst Holdings 149,683 1,000 - 150,683 
Investments in Volga Gas (Cyprus) 1,351 100 - 1,451 
Total investments  151,034 1,100 - 152,134 
 
The Company funds its activities in the Russian Federation via Woodhurst Holdings, the Company’s Cyprus registered subsidiary.  
 
20. Accumulated loss – Group and Company 
  
Group 
 
Company 
At 31 December 
 
2011 2010 
 
2011 2010 
 
 
US$ 000 US$ 000 
 
US$ 000 US$ 000 
Retained losses brought forward 
 
(30,780) (13,911) 
 
(1,840) (682) 
Loss for the year 
 
(1,136) (16,869) 
 
(1,432) (1,158) 
Accumulated loss 31 December (31,916) (30,780) 
 
(3,272) (1,840) 
 
 
21. Audit fees – Group and Company 
During the year the Group (including its overseas subsidiaries) obtained the following services from the Company’s auditors and 
associates: 
Year ended 31 December 2011 2010 
  US$ 000 US$ 000 
Fees payable to Company’s auditor for the audit of parent company and consolidated 
financial statements 225 
242 
Fees payable to the Company’s auditor and its associated firms for other services: 
- The audit of company’s subsidiaries pursuant to legislation 76 39 
- Other services pursuant to legislation 99 120 
- Tax services - 22 
Total 400 423 
 
   Volga Gas plc 
Annual Report and Accounts 2011 
Notes to the IFRS Consolidated Financial Statements 
For the year ended 31 December 2011 
(presented in US$ 000) 
 
 43 
22. Related Party Transactions – Group and Company 
The Group is controlled by Baring Vostok Private Equity Funds III and IV, which respectively own 48.9% and 9.76% (in aggregate 
58.66%) of the Company’s shares. The Baring Vostok Private Equity Funds exercise their control through a number of nominee 
holding companies. The remaining 41.34% of the shares are widely held. 
The following transactions concerning purchases of goods and services were carried out with related parties: 
Related party Relationship Nature of transactions Year ended 31 December 
2011 
US$ 000 
2010 
US$ 000 
Baring Vostok Cyprus 
Limited 
Affiliated with controlling 
shareholder 
Rent, services 145 127 
Baring Vostok Holding 
Limited 
Affiliated with controlling 
shareholder 
Travel expenses                          3   - 
 
 (a) Other related parties 
The following transactions were carried out with companies nominally held by the Group’s employees but not controlled by the Group. 
 
Related party Nature of transactions Year ended 31 December 
2011 
US$ 000 
2010 
US$ 000 
OOO Geo Eko Long-term loan (interest rate 1%) - 36   
OOO Geopotential Long term loan (interest rate 1%) - 33   
 
 (b) Year-end balances arising from transactions with related parties  
 31 December 2011 
US$ 000 
31 December 2010 
US$ 000 
Due to related parties   
Baring Vostok (Cyprus) Limited 13 13 
 
All transactions with related parties were made on commercial basis. 
(b) Key management 
Key management is considered to be the Company’s executive directors.  Information on key management compensation is 
presented in the Directors’ Remuneration Report. 
23. Contingencies and Commitments  
23.1 Capital commitments 
(i)  Pre-Caspian Licence Area 
In accordance with the license agreement for the Pre-Caspian license area, PGK was required to commence drilling a well before 
31 December 2011.  As a result of operational delays, this requirement is overdue but is planned to be fulfilled during 2012.  
Management has budgeted a cost of US$2.4 million to drill the committed exploration well. 
(ii)  Urozhainoye-2 Licence Area 
PGK was required to complete drilling a well in the Urozhainoye-2 Licence Area which commenced in 2011. Management estimates 
the remaining cost of such a well to be US$ 3.0 million. 
As of the balance sheet date all other licence commitments have been met. 
 
23.2 Taxation  
Russian tax, currency and customs legislation is subject to varying interpretations and changes which can occur frequently. 
Management’s interpretation of such legislation as applied to the transactions and activity of the Group may be challenged by the 
relevant regional and federal authorities. Recent events within the Russian Federation suggest that the tax authorities may be 
taking a more assertive position in their interpretation of the legislation and assessments, and it is possible that transactions and activities 
that have not been challenged in the past may be challenged. As a result, significant additional taxes, penalties and interest may 
be assessed. Fiscal periods remain open to review by the authorities in respect of taxes for three calendar years preceding the year 
of review, but under certain circumstances, reviews may cover longer periods. 
At 31 December 2011, management believes that its interpretation of the relevant legislation is appropriate and the Group’s tax, 
currency and customs positions will be sustained. 
23.3 Restoration, rehabilitation, and environmental costs 
The Group operates in the upstream oil industry in the Russian Federation and its activities may have an impact on the environment. 
The enforcement of environmental regulations in the Russian Federation is evolving and the enforcement posture of government 
authorities is continually being reconsidered. The Group periodically evaluates its obligation related thereto. The outcome of 
environmental liabilities under proposed or future legislation, or as a result of stricter interpretation and enforcement of existing  Volga Gas plc 
Annual Report and Accounts 2011 
Notes to the IFRS Consolidated Financial Statements 
For the year ended 31 December 2011 
(presented in US$ 000) 
 
 44 
legislation, cannot reasonably be estimated at present, but could be material. 
Under the current levels of enforcement of existing legislation, management believes there are no significant liabilities in addition to 
amounts which are already accrued and which would have a material adverse effect on the financial position of the Group. 
23.4 Oilfield licences 
The Group is subject to periodic reviews of its activities by governmental authorities with respect to the requirements of its oilfield 
licences. Management of the Group correspond with governmental authorities to agree on remedial actions, if necessary, to resolve 
any findings resulting from these reviews. Failure to comply with the terms of a licence could result in fines, penalties, licence 
limitation, suspension or revocation. The Group’s management believes any issues of non-compliance will be resolved through 
negotiations or corrective actions without any materially adverse effect on the financial position or the operating results of the Group. 
In January 2008 the Group was issued with an amendment to its Karpenskiy Licence Agreement.  The amendments to the KLA remove 
the historical licence breaches. 
The principal licences of the Group and their expiry dates are: 
Field Licence Holder Licence expiry date 
Karpenskiy OOO Pre-Caspian Gas Company 2021 
Pre-Caspian OOO Pre-Caspian Gas Company 2031 
Urozhainoye-2 OOO Pre-Caspian Gas Company 2032 
Vostochny-Makarovskoye OOO Gaznefteservice 2026 
Dobrinskoye OOO Gazneftedobycha 2026 
 
Management believes that in practice the relevant authorities rarely suspend or restrict the licences, especially at the exploration stage, 
and tend to terminate licences only in the event of continuous non-compliance and the failure of the licence holder to remedy breaches. The 
Group has not received any official warnings or notifications about continuous non-compliance or any risk of suspension, restriction or 
termination. 
 
24. Business combination 
 
Effective 1 April 2011, the Group obtained control of OOO Gazneftedobycha (“GND”) by acquiring 100% of its equity share capital from 
Trans Nafta. GND owns the producing Dobrinskoye gas and condensate field and the related gas processing and transportation 
infrastructure.  
The acquisition has been classified as a business combination and the Group’s consolidated financial statements are now inclusive of GND.  
The accounting for the GND business combination was incomplete on the basis that certain potential liabilities, arising from the acquisition, 
are subject to final determination and have been provisionally estimated as at 31 December 2011.    
The recognised amounts determined for the fair values of the assets acquired and liabilities assumed are as follows: 
  US$ 000 
Property, plant and equipment  
                  31,078   
Intangible assets – licence acquisition costs 
                   14,310   
Other non-current assets 
                     288   
Cash and cash equivalents 
                        554   
Inventory 
                        631   
Trade and other receivables 
                        520   
Deferred tax assets 
                        831   
Other current assets 
                         17   
Trade payables 
(946) 
Other current liabilities 
(112) 
    
Total provisional identifiable net assets acquired 47,171 
 
There was no goodwill arising from the business combination based on the provisional accounting.  As a part of the provisional accounting 
for the business combination the excess amount of the consideration paid over the provisional net fair value of the other assets and liabilities 
acquired has been attributed to the fair value of the Dobrinskoye production license, which is owned by GND. 
   Volga Gas plc 
Annual Report and Accounts 2011 
Notes to the IFRS Consolidated Financial Statements 
For the year ended 31 December 2011 
(presented in US$ 000) 
 
 45 
The fair value of the consideration paid plus liabilities assumed in the acquisition of GND was: 
  US$ 000 
Cash purchase of GND equity 1,082 
Debt outstanding to Trans Nafta 24,440 
GNS receivable (note 12(b)) 21,649 
Total 47,171 
 
There is no contingent consideration due upon the acquisition of GND. 
 
The fair value of trade and other receivables is US$520,000 and includes trade receivables with a fair value of less than US$100. 
The revenue included in the consolidated income statement from 1 April 2011 to 31 December 2011 contributed by GND was $9,262,000. 
GND also contributed profit of US$1,083,000 over the same period. 
Had GND been consolidated from 1 January 2011, the consolidated income statement for the year ended 31 December 2011 would show 
revenue of US$13,035,000 and profit of US$4,319,000. 
Subsequent to the acquisition and between 28 April 2011 and 31 December 2011, GND made repayments to Trans Nafta totalling 
US$18,883,000, including US$3,146,000 of repayments by way of offset of gas sales made to Trans Nafta. 
 
25. Post-Balance Sheet Events 
On 26 March 2012, the group entered into a loan agreement to provide up to US$10 million of debt by way of a 2 year amortising 
credit facility.  
 
  Volga Gas plc 
Annual Report and Accounts 2011 
 
 
 46 
Notice of Meeting 
Notice is hereby given that the annual general meeting (the “AGM”) of Volga Gas plc (the “Company”) will be held at the London 
office of Akin Gump Strauss Hauer & Feld at Ten Bishops Square, London E1 6EG on 8 June 2012 at 10.00 a.m. for the following 
purposes: 
Ordinary Business 
1. To receive and adopt the Company’s accounts for the year ended 31 December 2011 and the directors’ report. 
 
2. To reappoint Antonio Alves, who retires by rotation, as a director. 
 
3. To reappoint Michael Calvey, who retires by rotation, as a director. 
 
4. To reappoint Stephen Ogden, who retires by rotation, as a director. 
 
5. To reappoint PricewaterhouseCoopers LLP as auditors of the Company until the conclusion of the next general meeting at 
which accounts are laid before the Company. 
 
6. To authorise the directors to determine the remuneration of the auditors of the Company. 
Special Business 
To consider and, if thought fit, to pass resolution 7 as an ordinary resolution and resolution 8 as a special resolution. 
 
7. That the directors be and they are hereby generally and unconditionally empowered to exercise all the powers of the Company 
to allot shares in the Company and/or to grant rights to subscribe for or to convert any security for shares in the Company 
(together “Relevant Securities”) up to a maximum aggregate nominal amount of £1,000,000 to such persons and at such 
times and on such terms as they think proper, provided that this authority shall expire the earlier of (i) fifteen months from the 
passing of this resolution, or (ii) the conclusion of the AGM of the Company to be held in 2013 (unless renewed, varied or 
revoked by the Company prior to or on such date), save that this authority shall allow the Company to make offers or 
agreements before the expiry of such authority which would or might require Relevant Securities to be allotted after such 
expiry and the directors shall be entitled to allot Relevant Securities pursuant to any such offer or agreement as if this authority 
had not expired; and all unexercised authorities previously granted to the directors to allot Relevant Securities be and are 
hereby revoked. 
 
8. That the directors be and they are hereby empowered pursuant to Sections 570 and 573 of the Companies Act 2006 (the 
“Act”) to allot equity securities (as defined in Section 560 of the Act) for cash; pursuant to the authority conferred by 
resolution 7 set out in this Notice convening the AGM (the “Notice”) as if Section 561 of that Act did not apply to any such 
allotment, provided that this power shall be limited to: 
 
(a) the allotment of equity securities in connection with a rights issue, open offer or other offer of securities in favour of the 
holders of ordinary shares on the register of members at such record date(s) as the directors may determine where the 
equity securities respectively attributable to the interests of the ordinary shareholders are proportionate (as nearly as may 
be) to the respective numbers of ordinary shares held by them on any such record date(s), subject to such exclusions or 
other arrangements as the directors may deem necessary or expedient to deal with fractional entitlements or legal or 
practical problems arising under the laws of any overseas territory or the requirements of any regulatory body or stock 
exchange or by virtue of shares being represented by depositary receipts or any other matter; and  
 
(b) the allotment (otherwise than pursuant to sub-paragraph (a) above) to any person or persons of equity securities up to an 
aggregate nominal amount of £150,000. 
 
 And the power conferred hereby shall expire upon the expiry of the general authority conferred by resolution 7 set out in this 
Notice (unless renewed, varied or revoked by the Company prior to or on such date), save that the Company shall be entitled 
to make offers or agreements before the expiry of such power which would or might require equity securities to be allotted 
after such expiry and the directors shall be entitled to allot equity securities pursuant to any such offer or agreement as if the 
power conferred hereby had not expired.  
 
Registered Office: BY ORDER OF THE BOARD 
Ground Floor Antonio Maria Alves 
17-19 Rochester Row Company Secretary 
London 10 April 2012 
SW1P 1QT 
 
 
  Volga Gas plc 
Annual Report and Accounts 2011 
 
 
 47 
Notes: 
1. Resolutions 1-7 are ordinary resolutions. For these resolutions to be passed, a simple majority of the votes cast at the 
Company’s  AGM must  be in favour of the resolutions. Resolution 8 is a  special resolution. For this resolution to be passed, at 
least three-quarters of the votes cast at the AGM must be in favour of the resolution. 
2. A member entitled to attend, speak and vote at the meeting convened by the notice set out above is entitled to appoint a 
proxy to attend, speak and, on a poll, to vote in his place. To appoint more than one proxy you may photocopy this form. 
Please indicate the proxy holder’s name and the number of shares in relation to which they are authorised to act as your proxy 
(which, in aggregate, should not exceed the number of shares held by you). Please also indicate if the proxy instruction is one 
of multiple instructions being given. All forms must be signed and should be returned together in the same envelope. 
3. A form of proxy is enclosed. To be effective, it must be deposited at the office of the Company’s registrars (Capita Registrars) 
so as to be received not later than 48 hours before the time appointed for holding the AGM. Completion of the proxy does not 
preclude a member from subsequently attending and voting at the meeting in person if he or she so wishes. 
4. To change your proxy instructions simply submit a new proxy appointment using the methods set out in Notes 2 and 3 above. 
Note that the cut-off time (in Note 3 above) for receipt of proxy appointments also apply in relation to amended instructions; 
any amended proxy appointment received after the relevant cut-off time will be disregarded.  
 Where you have appointed a proxy using the hard-copy proxy form and would like to change the instructions using another 
hard-copy proxy form, please contact the Company’s registrars. If you submit more than one valid proxy appointment, the 
appointment received last before the latest time for the receipt of proxies will take precedence.   
5. In order to revoke a proxy instruction you will need to inform the Company using one of the following methods: 
(a) by sending a signed hard copy notice clearly stating your intention to revoke your proxy appointment to the Company’s 
registered office address. In the case of a member which is a company, the revocation notice must be executed under its 
common seal or signed on its behalf by an officer of the company or an attorney for the company. Any power of attorney 
or any other authority under which the revocation notice is signed (or duly a certificated copy of such power of authority) 
must be included with the revocation notice; or  
(b) by sending an email to info@volgagas.com. 
In either case, the revocation notice must be received by the Company’s registrars no later than the cut-off time set out in Note 
3 above.  
6. The register of interests of the directors and their families in the share capital of the Company and copies of contracts of 
service of directors with the Company or with any of its subsidiary undertakings will be available for inspection at the registered 
office of the Company during normal business hours (Saturdays and public holidays excepted) from the date of this notice until 
the conclusion of the AGM. 
7. To appoint a proxy or to give or amend an instruction to a previously appointed proxy via the CREST system, the CREST 
message must be received by the issuer’s agent RA10 no later than forty eight hours before the meeting date. For this 
purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the 
CREST Applications Host) from which the issuer’s agent is able to retrieve the message. After this time any change of 
instructions to a proxy appointed through CREST should be communicated to the proxy by other means. CREST Personal 
Members or other CREST sponsored members, and those CREST Members who have appointed voting service provider(s) 
should contact their CREST sponsor or voting service provider(s) for assistance with appointing proxies via CREST. For further 
information on CREST procedures, limitations and system timings please refer to the CREST Manual. We may treat as invalid a 
proxy appointment sent by CREST in the circumstances set out in Regulation 35(5) (a) of the Uncertificated Securities 
Regulations 2001. In any case your proxy form must be received by the Company’s registrars no later than forty eight hours 
before the meeting date. 
8. Only those members entered on the register of members of the Company at 6.00 p.m. on 6 June 2012 or, in the event that 
this meeting is adjourned, in the register of members as at 6.00 p.m. on the day two days before the date of any adjourned 
meeting, shall be entitled to attend and vote at the meeting in respect of the number of ordinary shares registered in their 
names at that time. Changes to the entries on the register of members after 6.00 p.m. on 6 June 2012 or, in the event that 
this meeting is adjourned, in the register of members after 6.00 p.m. on the day two days before the date of the adjourned 
meeting, shall be disregarded in determining the rights of any person to attend or vote at the meeting. 
9. Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of its 
powers as a member provided they do not do so in relation to the same shares.  
10. Under section 319A of the 2006 Act, the Company must cause to be answered any question relating to the business being dealt 
with at the Annual General Meeting put by a member attending the meeting unless answering the question would interfere 
unduly with the preparation for the meeting or involve the disclosure of confidential information, or the answer has already 
been given on a website in the form of an answer to a question, or it is undesirable in the interests of the Company or the 
good order of the meeting that the question be answered.  
Members who have any queries about the Annual General Meeting should contact the Company Secretary by email on 
info@volgagas.com.  Members may not use any electronic address or fax number provided in this notice or in any related 
documents (including the Form of Proxy) to communicate with the Company for any purpose other than those expressly 
stated. 
11. Information regarding the Annual General Meeting, including information required by section 311A of the 2006 Act, and a copy 
of this notice of Annual General Meeting is available from www.volgagas.com. 
 
  Volga Gas plc 
Annual Report and Accounts 2011 
 
 
 48 
Glossary of Technical Terms 
2-D seismic geophysical data that depicts the subsurface strata in two dimensions 
3-D seismic geophysical data that depict the subsurface strata in three dimensions. 3-D seismic typically provides a more 
detailed and accurate interpretation of the subsurface strata than 2-D seismic 
abandonment application of a cement plug to close a well and welding of a steel plate to the top of the well; the well is 
then plugged and abandoned 
bbl the standard barrel of crude oil or other petroleum product is 42 US gallons (approximately 159 litres) 
bcf billion cubic feet 
bcm billion cubic metres 
 
Best estimate the term ‘best estimate’ is used here as a generic expression for the estimate considered to be the closest 
to the quantity that will actually be recovered from the accumulation between the date of the estimate 
and the time of abandonment 
boe barrels of oil equivalent, being for natural gas the energy equivalent on one barrel of oil.  The usual ratio 
is to equate 6,000 cubic feet to one barrel of oil equivalent 
condensate liquid hydrocarbons associated with the production from a primarily natural gas reservoir 
field means an area consisting of either a single reservoir or multiple reservoirs, all grouped on or related to the 
same individual geological structural feature and/or stratigraphic condition 
gas natural gas 
gas processing 
facilities 
together with the laboratory, gathering pipelines and storage facilities (if any), a plant comprising one or 
more units such that after conditioning the gas will be of pipeline quality as, specified by Gazprom, such 
units may include dehydration, sweetening and separation of natural gas liquids 
gas-water contact bounding surface in a reservoir above which predominantly gas occurs and below which predominantly 
water occurs 
hydrocarbons compounds formed from the elements hydrogen (H) and carbon (C) and existing in solid, liquid or gaseous 
forms 
Kungurian Salt a layer of salt laid down during the lower Permian age which occurs in the Northern Caspian Petroleum 
Province 
licence area the particular subsoil plot specified in the subsoil licence issued by the applicable Russian federal authority, 
which the licence holder has the right to use for the purpose and on the terms specified in the subsoil 
licence. A licence area may contain one or more fields or may encompass only a portion of a field 
liquidation Abandonment 
mmbbls million barrels 
mcm thousand cubic metres 
mmBOE million barrels of oil equivalent 
natural gas hydrocarbons that are gaseous at one atmosphere of pressure at 20°C. It can be divided into lean gas, 
primarily methane but often containing some ethane and smaller quantities of heavier hydrocarbons (also 
called sales gas) and wet gas, primarily ethane, propane and butane as well as smaller amounts of heavier 
hydrocarbons; partially liquid under atmospheric pressure 
petroleum naturally occurring liquids and gasses which are predominantly comprised of hydrocarbon compounds 
possible reserves  are those unproven reserves that, on the available evidence and taking into account technical and 
economic factors, have a 10.0 per cent. chance of being produced 
probable reserves  are those reserves in which hydrocarbons have been located within the geological structure with a lesser 
degree of certainty because fewer wells have been drilled and/or certain operational tests have not been 
conducted. Probable reserves are those reserves that, on the available evidence and taking into account 
technical and economic factors, have a better than 50.0 per cent. chance of being produced 
prospective 
resources 
Are those quantities of hydrocarbons which are estimated, on a given date, to be potentially recoverable 
from undiscovered accumulations 
proved reserves  include reserves that are confirmed with a high degree of certainty through an analysis of development 
history and/or volume method analysis of the relevant geological and engineering data. Proved reserves 
are those that, based on the available evidence and taking into account technical and economic factors, 
have a better than 90.0 per cent. chance of being produced 
proved plus 
probable reserves 
sum of the proved reserves and the probable reserves calculated in accordance with SPE standards 
reserves quantities of petroleum which are anticipated to be commercially recoverable from known accumulations 
from a given date forward  Volga Gas plc 
Annual Report and Accounts 2011 
 
 
 49 
reservoir a porous and permeable underground formation containing a natural accumulation of producible natural 
gas and/or oil that is confined by impermeable rock or water barriers and is separate from other reservoirs 
risk factor for contingent resources means the estimated chance, or probability, that the volumes will be 
commercially extracted; for prospective resources means the chance or probability of discovering 
hydrocarbons in sufficient quantity for them to be tested to the surface, this, then, is the chance or 
probability of the prospective resource maturing into a contingent resource 
SPE standards reserves definitions consistent with those approved in March 1997 by the Society of Petroleum Engineers 
and the World Petroleum Congresses 
sub-salt below the Kungurian salt layer 
supra-salt  above the Kungurian salt layer 
 
 
Russian Classification of Reserves 
 
The Russian reserves system is based solely on the analysis of geological attributes. Explored reserves are represented by 
categories A, B, and C1; preliminary estimated reserves are represented by category C2; and potential resources are represented 
by category C3. 
 
Category A reserves are calculated on the part of a deposit drilled in accordance with an approved development project for the oil 
or natural gas field. They represent reserves that have been analyzed in sufficient detail to define comprehensively the type, shape 
and size of the deposit; the level of hydrocarbon saturation; the reservoir type; the nature of changes in the reservoir 
characteristics; the hydrocarbon saturation of the productive strata of the deposit; the content and characteristics of the 
hydrocarbons; and the major features of the deposit that determine the conditions of its development. 
 
Category B represents the reserves of a deposit (or portion thereof), the oil or natural gas content of which has been determined 
on the basis of commercial flows of oil or natural gas obtained in wells at various hypsometric depths.  Category B reserves are 
computed for a deposit (or a portion thereof) that has been drilled in accordance with either a trial development project or an 
approved development scheme. 
 
Category C1 represents the reserves of a deposit (or of a portion thereof) whose oil or natural gas content has been determined on 
the basis of commercial flows of oil or natural gas obtained in wells and positive results of geological and geophysical exploration of 
non-tested wells. Category C1 reserves are computed on the basis of results of geological exploration work and production drilling 
and must have been studied in sufficient detail to yield data from which to draw up either a trial development project or a 
development scheme. 
 
Category C2 reserves are preliminary estimated reserves of a deposit calculated on the basis of geological and geophysical 
research of unexplored sections of deposits adjoining sections of a field containing reserves of higher categories and of untested 
deposits of explored fields. Category C2 reserves are used to determine the development potential of a field and to plan geological, 
exploration and production activities. 
 
Category C3 resources are prospective reserves prepared for the drilling of (i) traps within the oil-and-gas bearing area, delineated 
by geological and geophysical exploration methods tested for such area and (ii) the formation of explored fields which have not yet 
been exposed by drilling. The form, size and stratification conditions of the assumed deposit are estimated from the results of 
geological and geophysical research. The thickness, reservoir characteristics of the formations, the composition and the 
characteristics of hydrocarbons are assumed to be analogous to those for explored fields. Category C3 resources are used in the 
planning of prospecting and exploration work in areas known to contain other reserve bearing fields. 
 
In accordance with the Law on Subsoil mineral reserves in Russia are subject to mandatory state examination, a precondition of 
the granting of a production license. The state examination of reserves is conducted by subsidiary organizations of the Federal 
Agency on Subsoil Use, including the State Reserve Commission, Central Reserve Commission and its regional departments. Once a 
subsoil user is granted an exploration, development or production license, it is required to file annual reports reflecting changes in 
reserves. Subsoil users’ reserve reports are submitted annually for examination and approval by the Central Reserve Commission 
or, if there has been a substantial change in reserves, by the State Reserve Commission. 
 
 
  Volga Gas plc 
Annual Report and Accounts 2011 
 
 
 50 
Corporate Directory  
 
Registered Office 
Ground Floor, 17-19 Rochester Row 
London SW1P 1QT 
United Kingdom 
 
Company Secretary 
Tony Alves 
of the registered office 
 
Nominated Adviser and Joint Broker 
Oriel Securities Limited 
150 Cheapside 
London EC2V 6ET  
United Kingdom 
 
Auditors  
PricewaterhouseCoopers LLP, Chartered Accountants and Statutory Auditors 
32 Albyn Place, Aberdeen AB10 1YL 
United Kingdom 
 
Lawyers and Solicitors to the Company as to English and Russian Law 
 
As to English law: 
Akin Gump Strauss Hauer & Feld 
8
th
 Floor, Ten Bishops Square 
London E1 6EG 
United Kingdom 
 
As to Russian law: 
Akin Gump Strauss Hauer & Feld LLP 
Ducat Place II, 7 Gasheka Street 
123056 Moscow 
Russia 
 
Registrar 
Capita Registrars 
The Registry 
34 Beckenham Road, Beckenham 
Kent BR3 4TU 
United Kingdom 
 
Corporate Communications/PR 
FTI Consulting 
26 Southampton Buildings 
London WC2A 1PB 
United Kingdom 
 
Joint Broker 
Renaissance Securities (Cyprus) Limited 
4 Archbishop Makarios III Avenue 
Capital Center, 9th Floor 
Nicosia  1505 
Cyprus 
volgagas.com