OAO Lukoil, Russia’s second-largest oil producer, said it will increase output after profit fell 12 percent in the third quarter as gains on lower tax the previous year weren’t repeated.
Net income fell to $3.11 billion from $3.51 billion a year earlier, the Moscow-based company said today in a statement. That beat the $3.03 billion average estimate of eight analysts surveyed by Bloomberg. Sales gained 3.5 percent to $36.7 billion.
Lukoil’s $2.05 billion purchase of regional producer Samara Nafta from Hess Corp. in April helped the company reverse output declines in Russia dating to 2009. Production is set to extend gains as Lukoil starts commercial output in Iraq.
The company plans to begin commercial production from the Iraqi West Qurna-2 field in March or April, Lukoil Vice President Andrei Gaidamaka told investors today in New York. The company will reach the 120,000 barrels a day output necessary to trigger Iraqi investment reimbursements next year, he said.
Lukoil’s total spending will ease next year after acquisitions, such as Samara Nafta, added to 2013 figures, Gaidamaka said. Capital expenditures, taken alone, will be higher next year, he said.
Results in the third quarter a year earlier were “significantly influenced” by changes in income tax expense, Lukoil said in the statement. The weaker performance is largely explained by an abnormally strong quarter in 2012, Otkritie Capital analysts Alexander Burgansky and Roman Odarich wrote in research yesterday.
“Free cash flow was the major positive surprise, totaling $1.6 billion for the quarter,” Luis Saenz, head of equity sales and trading at BCS Financial Group in London, said by e-mail.
Oil and natural-gas production combined rose to 2.18 million barrels of oil equivalent a day in the third quarter from 2.16 million barrels a day a year earlier, Lukoil said. Crude volumes climbed to 1.88 million barrels a day. Gas output was little changed at 308,000 barrels a day.
The company is Russia’s largest oil producer after state-controlled OAO Rosneft.