April 7 (Bloomberg) -- OAO Lukoil, Russia’s largest non- state oil producer, posted its first loss since at least 2001 and pledged to cut investment spending by 40 percent this year in response to a weaker ruble and lower crude prices.

Lukoil had a net loss of $1.62 billion in the fourth quarter, compared with net income of $3.21 billion a year earlier, the Moscow-based company said today in a statement. That was wider than the $1.07 billion loss estimated by analysts in a Bloomberg survey.

“Operating results look extremely disappointing and this follows a profit warning last week,” said Maria Radina, an oil and gas analyst at UBS AG.

The final three months of 2008 marked the “worst ever quarter in the whole history of Lukoil,” Deputy Chief Executive Officer Leonid Fedun told investors in New York. The producer cut spending to about $6 billion this year from more than $10 billion last year and will “slow down” some gas projects because of falling demand. Oil projects won’t be affected, and Lukoil will continue to pay dividends in 2009, Fedun said.

Lukoil rose 2.7 percent to 1,439.98 rubles in Moscow, bringing this year’s gain to almost 50 percent.

Lukoil is interested in buying oil refining assets in Europe for a “fair price,” Fedun said. Lukoil doesn’t have any plans to bid for Mol Nyrt, Hungary’s biggest refiner, or assets in Lithuania, he added.

Fedun predicted that U.S. oil-refining asset prices will fall this year and through 2010. Lukoil probably won’t buy U.S. assets this year, he said today in a New York interview.

‘Complicated’ Talks

Lukoil is in “complicated” talks to buy BP Plc’s 50 percent stake in Lukarco, the venture that owns 12.5 percent of the Caspian Pipeline Consortium, he said in the interview. The company has no plans to abandon the talks over the pipeline, which runs from Kazakhstan to the Russian Black Sea, he said, declining to comment further on the negotiations.

Oil companies around the world saw fourth-quarter earnings reduced or wiped out as the recession curtailed energy demand and dragged down crude prices, curbing revenue for producers. OAO Rosneft, Russia’s largest oil producer, said last month that earnings declined 64 percent to $775 million.

While crude oil prices in New York traded today for less than $50 a barrel, Fedun said he “won’t be surprised” if it rises to between $80 and $90 a barrel by the end of 2010. He predicted it won’t fall below $30 in 2009 and will climb above $60 a barrel by year end.

Currency, Writedowns

Lukoil said March 27 it would book a $950 million foreign- exchange loss for the quarter after the ruble weakened against the dollar and the euro. The company also said it would lose $850 million through writedowns and asset impairments following the decline in oil-product prices, while unsuccessful exploration drilling would cost it $170 million.

The company will hold a board meeting in Prague later this month to decide on dividend payments this year, Fedun said. Sales fell 26 percent to $18.4 billion in the fourth quarter.

“We are slowing down some gas projects, because Gazprom is faced with a sharp decline in demand, which is artificial and is caused by a gas price formula,” Fedun said. Lukoil will focus on international projects instead, he said. It also wants to reduce its dependence on Gazprom and build up its own customer base.

The gas price for OAO Gazprom’s consumers in Europe is expected to fall to $250 per 1,000 cubic meters later this year, from a current average of $500, because of the price formula, Fedun said.

Waiting for Lower Prices

“It’s just natural that consumers don’t want to buy at this high price and are waiting for the lower price,” he said. Gazprom is Russia’s natural-gas export monopoly.

Lukoil estimates Brent crude prices will trade in the region of $50 to $60 a barrel this year. The producer only started reporting quarterly results in 2001.

Lukoil said it agreed in March last year to pay a group that included Lukoil managers and board members $2.12 billion for 64.31 percent of Russian power generator OAO TGK-8.

The Moscow-based company later paid an additional 1.08 billion to increase ownership in the southern Russian power unit to 95.53 percent.

TGK-8’s capital spending program, involving the construction of plants with 890 megawatts of total capacity by the end of 2012, will require $1.23 billion in investment, Lukoil said.

Upgrades to Lukoil’s Bulgarian refinery to bring products in compliance with European Union standards will require $357 million, the company estimated. Lukoil’s Romanian refinery will require $42 million. Fedun estimated company oil output will be 98.2 million tons in 2009, up about 1.5 percent from last year.

Lukoil produced 2.19 million barrels of oil equivalent in 2008, 0.73 percent more than the previous year. Oil output fell 1.6 percent last year to 1.92 million barrels a day. Natural gas and petroleum gas output rose 21 percent to 273,000 barrels a day. Lukoil estimated hydrocarbon extraction expenses at $4.12 a barrel of oil equivalent.

To contact the reporters on this story: Stephen Bierman in Moscow at sbierman1@bloomberg.netHalia Pavliva in New York at hpavliva@bloomberg.net.

Last Updated: April 7, 2009 15:06 EDT