OAO Lukoil, Russia’s second-largest oil producer, will sell a retail and storage network in Ukraine as fighting between the government in Kiev and pro-Russian separatists in the east eroded sales.
The company agreed to sell Lukoil-Ukraine CFI, owner of 240 filling stations and six tank farms to Austria’s AMIC Energy Management GmbH, the Moscow-based said today in a statement, without disclosing financial terms.
“Our sales fell sharply,” Lukoil Chief Executive Officer Vagit Alekperov told reporters in Moscow today. “There were and continue to be problems linked to specific revolutionary personages blocking our filling stations, including blocking them with cars.”
Lukoil had begun to exit assets in Ukraine, selling a refinery in Odessa before Russia’s relationship with Ukraine deteriorated. Even as conflict continues, AMIC Energy has found value in the acquisition.
The “purchase is a strategically important step to improve AMIC’s investment portfolio in Central and Eastern Europe,” Managing Director Günter Maier said in the statement.
The sale comes amid Lukoil’s push to cut costs, including in refining and marketing, as the company prepares a long-term “optimization” plan, Alekperov said.
“We decided to speed up the process,” he said. “This isn’t only our Ukrainian assets. We are considering a number of our Eastern European assets.”
Political instability in Ukraine has also hurt Lukoil’s petrochemical unit Karpatneftekhim, leading to a $411 million write-off in the fourth quarter, according to Lukoil’s website.
Sanctions on Russia over the Ukraine crisis will make access to funds more expensive and harder to acquire, Alekperov said. The company paid an interim dividend and will continue with the payouts, and is preparing an annual long-term strategy assessment for cost cutting and lower spending, he said.