Lukoil recorded the charge in the fourth quarter at its OOO Narianmarneftegaz venture with ConocoPhillips, it said in a statement. Lower production at the northern Yuzhnoye Khylchuyu deposit due to “unanticipated geological reasons” resulted in estimated field reserves falling to 142 million barrels at the end of 2011 from 505 million barrels in 2008.
“It’s a paper loss reflecting the problems with the asset, which were already in the market,” Artem Konchin, an oil and gas analyst at UniCredit SpA (UCG), said by phone from Moscow.
Net income of $1.35 billion compared with profit of $2.19 billion in the same period a year earlier, the Moscow-based company said in a filing today. That missed the average estimate of $2.69 billion in a Bloomberg survey of 15 analysts.
Full-year net income at Lukoil reached a record $10.4 billion. Russian oil producers have posted record earnings for 2011 after unrest in the Middle East pushed average prices for the country’s Urals export blend to more than $100 a barrel.
Lukoil has moved to expand internationally in West Africa, Iraq, Venezuela and Vietnam, after taxes and laws limited its access to Russian resources. This may mean additional expenses as international prospects lack the benefit of geological data inherited from the Soviet era.
The company’s expenses for wells that failed to find commercial oil almost doubled to $417 million last year, Lukoil said in the statement. Dry wells, as they are called, cost $181 million in Ghana, $149 million in the Ivory Coast and $27 million in Vietnam, Lukoil said.
Revenue rose to $133.7 billion in 2011 from $105 billion in 2010, Lukoil said.
To contact the reporter on this story: Stephen Bierman in Moscow at email@example.com