May 29 (Bloomberg) -- OAO Lukoil, Russia’s second-largest oil producer, said net income dropped 33 percent in the first quarter because of losses on the expected sale of Kazakh assets and write-offs for African projects.
Profit fell to $1.73 billion from $2.58 billion a year earlier, according to the Moscow-based company. Net income adjusted for the loss and dry wells was $2.25 billion, beating the average estimate of $2.1 billion of 10 analysts surveyed by Bloomberg. Sales rose 5.7 percent to $35.7 billion.
While Lukoil is focusing on expanding output, it agreed to sell its share of Caspian Investment Resources Ltd., which operates in Kazakhstan, to China Petroleum & Chemical Corp. for $1.2 billion in April. The company recognized a $358 million loss on the expected disposal. It also wrote off $162 million on exploration projects in Africa.
“The results aren’t as bad as they looked at first glance,” Alexei Kokin, an oil and gas analyst at UralSib Financial Corp said by phone from Moscow. “The write downs are mainly irrelevant and capex was down, which is a positive.” Capital expenses fell 6 percent, he said.
The shares rose as much as 1.5 percent in Moscow trading and were up 1.1 percent at 1,966 rubles at 3:44 pm local time, in line with the benchmark MICEX Index.
Lukoil posted $179 million in free cash flow in the first quarter even as it continues to invest in projects in Iraq and Uzbekistan and Siberia to bolster production.
“Free cash flow is a small positive,” said Ildar Davletshin, an oil and gas analyst at Renaissance Capital Ltd. in Moscow.
Crude oil and liquids output rose 1.8 percent to 1.885 million barrels a day in the first quarter from 1.85 million a year earlier. Natural gas for sale declined 4.4 percent to 5.03 billion cubic meters. Urals prices in the first quarter fell about 3.8 percent from a year earlier.
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