Bloomberg News

Lukoil Second-Quarter Net Falls 69% on Tax, Missing Estimate

August 31, 2012

OAO Lukoil, Russia’s second-largest oil producer, said profit slid 69 percent last quarter, missing analyst estimates as it paid more taxes and crude prices fell. The shares dropped the most in three months.

Net income slumped to $1.02 billion from $3.25 billion a year earlier, the Moscow-based company said in a statement. That compares with the $2.4 billion average of nine analyst estimates compiled by Bloomberg.

Russian oil companies paid a larger share of sales in export duties in the quarter as crude prices fell. OAO Rosneft, the country’s largest oil producer, reported a loss and TNK-BP a 63 percent drop in net income. The tax rate is set at the start of each month, raised or cut according to the average price for Urals, Russia’s biggest source of export revenue. Lukoil said it won’t change its investment or dividend plans.

“Unless something dramatic happens, the board will decide at the end of the third quarter to pay out interim dividends for the first time,” Deputy Chief Executive Officer Leonid Fedun told analysts and reporters in Moscow today.

Sales declined 7.2 percent to $32.4 billion, according to the company’s statement. Urals lost more than 6 percent compared with the second quarter of last year, according to Lukoil. The price fell more than 19 percent to $96.69 a barrel from the start of April to the end of June, according to data compiled by Bloomberg.

Lukoil’s shares slumped 2 percent to 1,836.10 rubles by the close in Moscow, the biggest decline since May 17 and the lowest price since Aug. 3.

Higher Tax

Lukoil’s units also paid higher tax rates as dollar earnings were inflated when reported in rubles after the Russian currency weakened in the quarter, Alexei Kokin, an oil and gas analyst at UralSib Financial Corp., said today by phone.

Oil production fell 1.9 percent to 1.84 million barrels a day, while gas rose 6.5 percent to 4.69 billion cubic meters.

First-half investments jumped 50 percent to $5.4 billion because of development of the Filanovsky project in the Caspian region, drilling in Siberia and Iraq and Uzbekistan development, according to a separate statement after a board meeting. CEO Vagit Alekperov said March 14 that he plans to spend $150 billion in the next decade to increase output by 50 percent while raising dividends fourfold.

Lukoil paid about $600 million to ConocoPhillips (COP:US) to buy its share of an Arctic oil venture and related assets, the company said. It recognized a $178 million gain from the disposal of 10 percent of the Karachaganak Petroleum Operating group and paid $148 million in income tax to the Kazakh government for the deal.

The company began production drilling at its West Qurna-2 field in Iraq in the second quarter, Fedun said. Several companies are interested in joining the project after Lukoil’s former partner Statoil ASA (STL) withdrew earlier this year, he said.

To contact the reporters on this story: Stephen Bierman in Moscow at sbierman1@bloomberg.net; Jake Rudnitsky in Moscow at jrudnitsky@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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Companies Mentioned

  • COP
    (ConocoPhillips)
    • $70.13 USD
    • -0.92
    • -1.31%
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