Bloomberg News

Lukoil Falls Most in Week on Concern Spending Plan Excessive

December 01, 2011

(Updates with closing prices in second paragraph.)

Dec. 1 (Bloomberg) -- OAO Lukoil dropped the most in a week in New York on concern Russia’s second-largest oil company will spend too much as it seeks to revive output growth.

Lukoil’s American depositary receipts declined 2.5 percent to $54.80 at the close of trading in New York, its biggest intraday slide since Nov. 21.

The Moscow-based company plans to invest $48 billion in 2012-2014 and aims to spend more than 70 percent of the $13.9 billion earmarked for next year to halt declines at West Siberian units and ramp up the West Qurna-2 project in Iraq, Vagit Alekperov, Lukoil’s billionaire chief executive officer, told reporters today in Moscow. Lukoil also aims to start projects in the Caspian Sea and Uzbekistan, Alekperov said.

“Investors are concerned that as capital expenditure will rise to gigantic levels, there will be less money left for dividends,” Sergey Vakhrameev, a senior analyst at IFC Metropol, said by phone from Moscow. “Investment of $48 billion over three years is very high for Lukoil, and foreign projects bring much lower profits compared to the Russian ones.”

Oil and gas output will rise at an average of 3.5 percent annually over the next 10 years, Lukoil said today in a statement after the board approved its strategy through 2021.

Lukoil retreated 1.1 percent to close at 1,704.50 rubles on Russia’s Micex index. One Lukoil ADR is equal to one ordinary share.

--Editors: Brendan Walsh, Marie-France Han

To contact the reporter on this story: Ksenia Galouchko in New York at kgalouchko1@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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