MOSCOW - OAO Lukoil Holdings, Russia's biggest independent oil producer, expects to reverse falling output and start increasing hydrocarbon production from 2013 or 2014, the company's vice president said Friday.
Speaking to reporters the day the company reported a slide in second-quarter profit and revenue, partly due to flagging output, Leonid Fedun said he expects to reach last year's production level in September or October.
Lukoil has long been fighting output decline, but has now managed to stabilize production in its main region of West Siberia. Output in the region grew 0.5% in the first half of 2012 compared with the same period for last year due to the introduction of new drilling technology, Mr. Fedun said.
Lukoil, Russia's second-biggest producer, said total hydrocarbon production was down 0.8% on the year in the second quarter to 2.14 million barrels of oil equivalent per day. Crude output was down 1.9%.
Ildar Davletshin, an analyst at Renaissance Capital, said the aim of reversing output declines is achievable. "The key is Western Siberia, where they have stabilized production. They are also ramping up Caspian production," he said.
Lukoil Friday reported a slide in profits for the second quarter, missing analysts' forecasts amid lower oil prices, the negative impact of a time lag in export duties and foreign exchange losses caused by the weaker Russian ruble.
Net profit was down 68.7% on the year to $1.02 billion, compared with $3.25 billion in the same period a year earlier and below a forecast of $2.51 billion from a Dow Jones Newswires survey of six analysts.
Lukoil still outperformed Russia's top oil producer, state-controlled OAO Rosneft, which swung to a net loss of $248 million in the second quarter.
"The (Lukoil) results are not as bad as they look at first glance," said Alexander Burgansky, an analyst at Otkritie Capital, noting that revenue came in just under consensus. "Lukoil has more foreign interests and so is not as sensitive to Russian export duties. They also have a stronger domestic refining business."
Mr. Fedun said export sales of oil products fell in the second quarter as the company held back some supplies in the hope of a lower export duty and higher prices, a decision that is now paying off. He also noted strong demand for gasoline in Russia due to increasing car ownership.
Revenue fell 7.2% to $32.4 billion from $34.9 billion, compared with the analyst forecast of $33.2 billion. Earnings before interest, taxation, depreciation and amortization, or Ebitda, was down 35.2% at $3.46 billion, below the consensus of $3.97 billion.
Mr. Fedun said the company may pay an interim dividend for the first half 2012, and doesn't exclude a continuation of the buyback of its own shares this year, after spending $2.5 billion on it so far.
He said the company still has plans for a secondary public offering in Hong Kong, but that the Russian parliament first needs to pass a law on information disclosure, which should happen by the end of the year.
Copyright (c) 2012 Dow Jones & Company, Inc.
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