MOSCOW - Russia's biggest oil producer, LUKOIL, on Friday posted third-quarter profits well below market expectations and did little to reassure investors that last year's restructuring was capping costs or boosting growth.
LUKOIL said it had net income of $507 million in its third quarter to September 30, up from $473 million in the same period of 2001. LUKOIL had earlier reported a net income figure of $516 million for July-September 2001 which it revised because of a one-off income tax charge.
Analysts said they were disappointed in the results.
"The results are worse than we expected, rising world oil prices should have had a positive effect, but the margins do not thrill us," said Brokercreditservice brokerage in a note to clients.
The company's shares closed 2.62 percent lower at $14.140 in Moscow at 1430 GMT.
FULL-YEAR PROFIT FORECAST
Kozyrev said LUKOIL would not revise downwards a $2 billion full-year profit forecast its president made at a news briefing in November.
"Our 2002 annual net income results are expected to be at the levels of 2001 as previously announced by our President Vagit Alekperov," he told a conference call.
Vladislav Metnyov from Trust and Investment Bank said he was both intrigued and disappointed that LUKOIL had spent $2.1 billion on crude oil and refined products purchases from January to September.
"The company has never done this in the past. Its market rival YUKOS (YUKO.RTS) spent just $70 million on the same operations in the first six months of 2002", he said.
He said the conference call did not make clear if these purchases were for further resale and what revenues or profits the firm made from them.
Russia's top oil companies have all cashed in on soaring oil prices by pumping more oil but analysts accuse LUKOIL of lagging behind more nimble rivals in turning itself into a leaner and meaner operation. Russian oil production is now running at eight million barrels per day (bpd), significantly higher than in the mid 1990s but still below record levels of 12 million bpd in the Soviet era. The company said total revenues in the third quarter increased to $4.43 billion from $3.61 billion in the same period of 2001.
REVENUES HIGHER THAN FORECAST
Revenues exceeded analysts' forecasts, which they attributed to high oil prices rather than the company's performance.
"We have a situation where revenues outpaced forecasts but the bottom line is down so the blame sits in the middle with costs," said Timerbulat Karimov, an oil and gas analyst at Aton brokerage.
Basic earnings per share rose to 62 cents from 43 cents in the third-quarter last year.
LUKOIL, a Russian stock market favourite in the mid-1990s, has been criticised by investors in the past two years for slow production growth and low profits compared with more dynamic rivals YUKOS and Sibneft (SIBN.RTS), Russia's second-and fifth-largest oil firms respectively.
LUKOIL launched an ambitious restructuring plan last year, saying it planned to catch up with competitors' growth rates.
The company produced 78 million tonnes of crude (1.57 million barrels per day) in 2002.
It has said it will ramp up production by roughly five percent a year to 105-110 million tonnes by 2010.