TNK-BP International Ltd., the Russian oil venture owned by BP Plc (BP/) and a group of billionaires, said first-quarter profit fell 17 percent as taxes and costs rose amid production gains at new fields.
Net income dropped to $2.18 billion from $2.62 billion a year earlier, Moscow-based TNK-BP said today in a statement. The loss of tax breaks at the Verkhnechonsk oil field in eastern Siberia in May last year, higher costs and unrepeated items cut into profit, Chief Financial Officer Jonathan Muir said.
Russian oil producers face declining profit in the first quarter amid higher export duties while seeking to stem declines at traditional fields. OAO Rosneft, the country’s biggest oil producer, reported a 7.4 percent drop in profit in the period. The state-run company also lost tax exemptions in May last year, at its Vankor field.
Revenue rose 16 percent to $16.1 billion, TNK-BP said. Production climbed to 2.04 million barrels of oil equivalent a day from 1.96 million barrels in the first quarter of last year, according to the statement. New projects, which carried higher costs, contributed 16 percent of total liquids output, compared with 11 percent a year earlier, TNK-BP said.
Increased production was “thanks to highly effective greenfield operations in Uvat and Verkhnechonsk, as well as contributions from our international assets,” Mikhail Fridman, TNK-BP chief executive officer and a billionaire shareholder, said in the statement.
TNK-BP’s shareholders aim to hold a board meeting by the middle of the year after filling vacancies left when independent directors Gerhard Schroeder, the former German Chancellor, and Corus Group Plc’s ex-Chairman James Leng resigned in December, Muir told reporters today in Moscow.
Operations haven’t been affected by the inability to gather the board, and the shareholders have made progress in their search for board candidates, Muir said.
The directors face taking sides on whether TNK-BP may seek damages relating to BP’s failed bid to explore the Arctic and swap shares with Rosneft. The AAR group, which represents the billionaire shareholders, had challenged BP and Rosneft’s planned alliance, saying the venture had the right to pursue new opportunities for the U.K. explorer in Russia.
Profit was also hurt by an unrepeated loss of $200 million in the first quarter, compared with an unrepeated gain of $200 million in the same period last year from the sale of the Kovykta gas field, according to a company presentation.
The Moscow-based company has discussed the possibility of offtaking cargoes of crude from Petroleos de Venezuela SA to compensate for payment arrears at their Petromonagas venture, Muir said.
TNK-BP estimates it is owed just less than $200 million by PDVSA, as the Venezuelan state company is known, which has been selling a portion of the venture’s output on its own, said a TNK-BP official who declined to be identified, citing company policy. A spokesman for PDVSA, who cannot be named because of company policy, said he didn’t have information on the situation with TNK-BP.
OAO TNK-BP Holding (TNBP), the traded unit of TNK-BP International, will close the shareholder register on May 14 before a May 21 board meeting that will consider dividends, Vice President Gennady Shulenko said.
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