LUKoil said Wednesday that it more than doubled profit in the first quarter from a year earlier after rising crude prices offset falling production from western Siberian fields.
Net income rose to $2.05 billion from $905 million, the company said in a statement.
The rise in crude prices more than compensated for a drop in LUKoil’s oil output, while the company reined in some spending. Urals for northwest Europe averaged $75.30 a barrel in the first quarter, up 71 percent from a year earlier, according to data compiled by Bloomberg.
The profit numbers were a “surprise,” Svetlana Grizan, an oil analyst at VTB Capital, said by telephone. “LUKoil exercised more efficient control over costs.”
LUKoil shares advanced 2.6 percent to 1,549.87 rubles in Moscow, their highest close since May 18.
Sales rose 62 percent to $23.9 billion, while oil output fell 0.3 percent to 24.1 million tons (1.96 million barrels a day) on flagging western Siberian fields.
“Production in west Siberia has fallen and will be falling for all companies,” LUKoil vice president Leonid Fedun said at a presentation to investors and reporters. ?
LUKoil expects its oil and gas output to increase by 1 percent to 2 percent this year, with crude figures largely depending on tax breaks and the use of technology to shore up production at western Siberian fields, Fedun said.
The producer with the most overseas assets among Russian oil companies has looked abroad for profit and expansion because of Russia’s tax burden and the preference state companies enjoy in gaining new projects.
“We focused on investments outside Russia which are more interesting by profit and productivity,” Fedun said. “Any limitation of access to fields is archaic.”
LUKoil plans to start drilling in Iraq next year, expecting to book 8 million to 10 million metric tons of crude a year from the West Qurna-2 project it develops with Statoil, Fedun said. In West Africa, LUKoil is seeking to develop reserves that exceed the initial geological reserves of the North Sea or western Siberia, he said.
Production of gas available for sale rose 24 percent to 4.72 billion cubic meters, and output of refined products at LUKoil’s plants increased 8.3 percent to 14.7 million tons.
Earnings before interest, taxes, depreciation and amortization, which is a measure of profitability, rose 54 percent to $3.7 billion. Free cash flow surged more than sixfold to $1.4 billion, as LUKoil held capital expenditures at $1.47 billion, about the same level as a year earlier, the company said.
Operating expenses rose 44 percent to $1.77 billion, while excise and export payments increased 82 percent to $4.58 billion.