Bloomberg News

Lukoil Leads Worst Start Since 2008 on Ruble: Russia Overnight

January 10, 2013

OAO Lukoil (LUKOY:US) retreated for a fourth day in New York, leading the worst start to a year since 2008 for Russian crude producers, on concern that a strengthening ruble will cut profitability and oil will extend its drop.

American depositary receipts of Lukoil, Russia’s second- largest oil company, slipped 0.4 percent to $66.11 in New York yesterday, extending its slump this year to 2.1 percent. OAO Gazprom Neft (GZPFY:US) dropped 1.5 percent in the first 10 days of 2013, the worst performance in three years, and OAO Surgutneftegas (SGTPY:US) has added 2.7 percent, the poorest start since 2011. The Bloomberg Russia-US Equity Index (RUS14BN) rose 0.2 percent to 100.46 yesterday and RTS stock futures expiring in March held at 157,290.

Russian oil stocks have been sliding as the ruble surged to an eight-month high versus the dollar yesterday. A stronger currency boosts producers’ domestic costs and reduces earnings when converted from dollars. Oil, which together with natural gas accounts for about 50 percent of government revenue, is up 2.2 percent this year, the worst start to a year since 2011, and may drop as stockpiles rise, Otkritie Financial Corp. said.

“There is no reason to expect any significant increase in Russian oil companies’ profits this year,” Vladimir Tikhomirov, the chief economist at Otkritie, said by phone from Geneva yesterday. “A stronger ruble doesn’t help exporters.”

Urals crude, Russia’s chief export oil blend, will probably average $105 a barrel in 2013, Tikhomirov said. Urals mean price was at $110.3 a barrel in 2012 and $109.5 in 2011, data compiled by Bloomberg show.

‘Bad for Oil’

The Market Vectors Russia ETF (RSX:US), the largest dedicated Russian exchange-traded fund, increased 0.8 percent to $30.05, gaining for the first time in four days. The RTS Volatility Index, which measures expected swings in the stock futures, rose 0.6 percent to 20.88.

The ruble added 0.6 percent to 30.1910 yesterday, the highest level since May 11. Ruble futures showed the currency strengthening 0.1 percent to 30.508 per dollar.

“We may be forced to revise our forecast for stronger- than-initially-expected ruble this year,” Slava Smolyaninov, the chief strategist at UralSib Capital in Moscow, said in a telephone interview yesterday. “A stronger ruble is particularly bad for oil companies.”

The ruble gained 5.4 percent against the dollar last year, rising for the first time since 2007. Oil dropped 7.1 percent in 2012, the first decline in four years.

Board Meeting

ADRs of Moscow-based Lukoil settled at a 0.6 percent discount to the company’s Moscow-listed shares, the widest since Dec. 24. The Moscow-listed stock slipped 0.8 percent to 2,008.90 rubles, or $66.53, yesterday.

Lukoil’s board meets today to review the company’s plans for 2013, Deutsche Bank AG said in an e-mailed report yesterday.

Natalia Zinina, a spokeswoman at Lukoil, didn’t reply to an e-mailed request to confirm that the company’s board of directors is meeting today. The request was sent after normal business hours in Moscow.

The country’s second-biggest producer saw output decline in Russia in 2012, according to data from the Energy Ministry. Lukoil’s crude output fell 0.8 percent last year, while Surgutneftegas’s production advanced 1 percent and Gazprom Neft’s output increased 4.7 percent, the biggest rise compared with other domestic oil companies, the data show.

Surgutneftegas, Russia’s fourth-largest oil producer, dropped 0.1 percent to $6.82. The Moscow-listed preferred shares declined 1.1 percent to 20.51 rubles, or 67.9 U.S. cents. One ADR equals 10 shares.

Oil Climbs

Gazprom Neft, the oil unit of Russia’s natural gas export monopoly, lost 0.1 percent to $23.41 yesterday, settling at a 0.8 percent discount to the company’s Moscow-listed shares, the biggest gap since Dec. 26. Its Moscow shares retreated 0.5 percent to 142.51 rubles, or $4.72 yesterday. One ADR is equal to five ordinary shares.

Crude oil for February delivery advanced 0.8 percent to $93.82 a barrel on the New York Mercantile Exchange yesterday, the highest level since Sept. 18. Brent oil for February settlement increased 0.1 percent to $111.89 a barrel on the London-based ICE Futures Europe exchange, while Urals crude, Russia’s chief export blend, added 0.4 percent to $110.35.

CTC Media Inc. (CTCM:US) rose 0.1 percent to $8.1 yesterday, extending a 4.1 percent advance this year.

CTC TV television channel, the company’s biggest source of revenue, saw its share of viewers rise in the first week of this year, TNS Global researcher said in a report yesterday.

United Co. Rusal, the world’s largest aluminum producer, rose 0.2 percent to HK$5.08 in Hong Kong trading as of 10:31 a.m. local time. The MSCI Asia Pacific Index lost 0.1 percent.

To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net


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Companies Mentioned

  • LUKOY
    (Lukoil OAO)
    • $50.05 USD
    • -0.84
    • -1.69%
  • GZPFY
    (Gazprom Neft OAO)
    • $18.94 USD
    • 0.00
    • 0.0%
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