Bloomberg News

Lukoil Quarterly Net Slumps 21% on Output Dip, Ghana Dry Wells

November 27, 2011

Nov. 25 (Bloomberg) -- OAO Lukoil, Russia’s second-largest oil producer, said third-quarter profit fell 21 percent on lower output, higher taxes, dry wells in Ghana and a one-off item the previous year that wasn’t repeated.

Net income dropped to $2.24 billion from $2.82 billion a year earlier, the Moscow-based company said today in a regulatory filing. Sales advanced to $34.6 billion from $26.5 billion.

Lukoil, controlled by billionaire Chief Executive Officer Vagit Alekperov, has sought expansion abroad as Russian laws limit its access to resources at home. The exploration efforts in Ghana and Ivory Coast in West Africa have yet to yield commercial results.

Two dry wells in Ghana cost the Russian oil producer $161 million in the third quarter, according to the statement.

“I don’t think they will write off the Ghana acreage,” Alexei Kokin, an oil and gas analyst at UralSib Financial Corp., said by telephone “The license area is very large and it’s an important part of their international effort.”

Lukoil’s third-quarter crude production slumped almost 6 percent to 1.82 million barrels a day versus the same period the previous year, while gas output fell 2 percent, according to the statement.

The company claimed a $438 million one-time gain in the third quarter of the previous year after it settled a dispute regarding Kazakh producer Turgai Petroleum, according to the statement. Lukoil also paid double the income tax in the quarter compared with a year earlier.

“There’s not much to be disappointed about - in fact free cash flow was very strong,” Alex Fak, an oil and gas analyst at Troika Dialog, said by e-mail today.

Lukoil free cash flow reached $3 billion in the third quarter pushing it to $7.7 billion over the first nine months of the year, Fak said.

--Editors: Alex Devine, Tony Barrett

To contact the reporter on this story: Stephen Bierman in Moscow at

To contact the editor responsible for this story: Amanda Jordan at

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