Dec. 6 (Bloomberg) -- OAO Bashneft, the Russian oil producer controlled by AFK Sistema, said third-quarter profit dropped 18 percent from the previous three-month period because of higher interest payments and a foreign exchange loss.
Net income declined to $278 million, the oil producer based in Ufa, the capital of the Bashkortostan region, said today in a statement, without giving a year-earlier comparison.
Sistema, billionaire Vladimir Yevtushenkov’s holding company, agreed last year to pay $2.5 billion to gain control of Bashneft, three regional refineries and a petrochemicals producer. The oil producer, which operates mostly aging fields in Bashkortostan, won the rights to Trebs and Titov, which were the country’s biggest undistributed deposits, on Dec. 2.
“Investors seem to be more focused currently on how the Trebs and Titov license tender victory and the potential tax reform in the Russian oil sector could affect the company’s valuation,” said Trebs and Titov, Viktor Khoroshavtsev, the head of the company, said today on a conference call. The company will make the decision after receiving the license and will have details on the project by the beginning of the second quarter, he said.
Bashneft raised its production target for this year to more than 14 million metric tons, and plans to boost output to “at least” 14.5 million tons next year, excluding acquisitions, Khoroshavtsev said. Bashneft may boost output 15 percent to 20 percent next year, board member David Yakobashvili said Dec. 3.
Bashneft sales rose 5.3 percent to $3.51 billion as oil production advanced 3.8 percent from the previous three-month period to 3.63 million metric tons, the fourth straight quarter of growth.
The producer plans to keep output at existing fields at 15 million metrics tons a year during the next four to five years without “sharp increases” in capital spending or the tax burden, Khoroshavtsev said.
Bashneft will allocate 5 billion rubles to cover increases in the excise tax on gasoline and diesel next year, he said.
The company plans to invest from $700 million to $800 million to build a hydrocracking unit at its Novoil refinery as Russia seeks to boost domestic fuel quality, Khoroshavtsev said. The upgrade is now in the design stage, he said. The oil producer will be ready to produce to Euro-3 standard motor fuel from 2011, Euro-4 from 2012 and Euro-5 from 2015, he said.
Operating income before depreciation and amortization slid 2.3 percent to $680 million because of provisions made in relation to legal proceedings involving Probusinessbank, the oil producer said, without elaborating.
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