With independent auditor’s report

Exploration and evaluation costs
Subsoil use rights for geological activities
In accordance with Uzbekistan law, if geological activities are approved by the Government or financed with
government grant, subsoil use rights are considered granted by the competent government authorities upon
the receipt of Government approved cost estimates. Such subsoil use rights are granted with no substantial
cost to the Group.
Exploration and evaluation cost or drilling activities
The Group recognizes exploration and evaluation costs using the successful efforts method as permitted by
IFRS 6
Exploration for and Evaluation of Mineral Resources
. Under this method, costs related to exploration
and evaluation (exploration and appraisal drilling) are temporarily capitalized in cost centers by wells until the
drilling program results in the discovery of economically feasible oil and gas reserves.
The length of time necessary for this determination depends on the specific technical or economic difficulties
in assessing the recoverability of the reserves. If a determination is made that the well did not encounter oil
and gas in economically viable quantities, the well costs are expensed to Exploration expenses in the
consolidated statement of profit or loss.

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JSC “Uzbekneftegaz”
Consolidated financial statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
16
3. 
Significant accounting policies (continued)
Exploration and evaluation costs (continued)
Expenditures related to drilling of exploration and evaluation wells are capitalized. Costs of seismic,
topographical, geological, geophysical research are expensed as incurred. Exploration and evaluation assets
are recognized at cost less impairment, if any, until the existence (or absence) of commercial reserves has
been established. The initial cost of exploration and evaluation assets acquired through a business
combination is formed as a result of purchase price allocation. The cost allocation to mineral rights to prove
properties and mineral rights to unproved properties is performed based on the respective oil and gas reserves
information. Exploration and evaluation assets are subject to technical, commercial and management review
as well as review for indicators of impairment at least once a year. This is to confirm the continued intent to
develop or otherwise extract value from the discovery. When indicators of impairment are present, an
impairment test is performed.
If, subsequently, commercial reserves are discovered, the carrying value, less losses from impairment of the
respective exploration and evaluation assets, is classified as oil and gas properties. However, if no commercial
reserves are discovered, such costs are expensed after exploration and evaluation activities have been
completed.