Lukoil's Q3 profit drops 20 pct to $2.2 billion

AP News
Posted: Nov 25, 2011 5:57 AM
Lukoil's Q3 profit drops 20 pct to $2.2 billion

Russia's second-largest oil producer Lukoil said Friday that its third-quarter profit dropped 20 percent because of higher taxes and a slump in the ruble.

The Moscow-based company said Friday that the $570 million decline to $2.2 billion had been caused by the depreciation of the Russian ruble. This includes $340 million it spent on tax on foreign currency translation gain.

The Russian ruble, battered by turmoil on European markets, lost about 15 percent of its value against the U.S. dollar between June 30 and September 30 at the MICEX stock exchange.

Lukoil said its net income was affected by writing down the costs of drilling exploratory wells.

The decline in profit stands in contrast to a 26 percent hike in revenues between July and September, to $34.6 billion from $26.5 billion.

The company said its strict financial discipline and efficient costs management helped them generate a cash flow of $7.7 billion in the nine months of the year against slightly under $7 billion a year ago.

Oil analysts at the Moscow-based UralSib investment bank said in a note to investors earlier this week that it expected the results to be worse that of other Russian oil companies, but said it does not expect Lukoil to underperform in the future.

"Compared to its Russian peers, Lukoil is much more exposed to international product markets where product prices are more flexible than on domestic market," UralSib said in the note.

Lukoil's shares were up 2.3 percent at the MICEX, outperforming the market.