Yukos Boosts Profit at Rosneft by 80%

Rosneft's profits jumped by 80 percent following its purchase of assets of the bankrupt Yukos oil firm, the state-owned company said Wednesday in its first statement concerning the effect of the acquisitions.

Net income rose to $1.89 billion in the third quarter of last year, as the new assets enabled the company to more than double its refining output and significantly increasing oil production over the same period the year before, the company said in the statement.

"It was a good set of numbers," said George Lilis, an oil analyst at MDM Bank. But he added that the company performed largely in line with analysts' expectations.

Rosneft has described itself as Russia's top company in terms of both production and refining capacity since it spent $27 billion to buy Yukos assets at bankruptcy auctions in the first half of last year. The latest results, however, show that its refining numbers still trailed behind those of LUKoil.

Rosneft's seven refineries handled 11.9 tons of oil, up from the 5.7 million tons they took in during the third quarter of 2006, the company said. It bought five refineries from Yukos in May.

LUKoil refined 13.2 million tons at its seven refineries -- four in Russia and three in Ukraine, Bulgaria and Romania -- in the third quarter of last year, according to financial statements.

Rosneft's investment in refining is now paying off well, Lilis said.

"Refining margins in Russia are very good because of heavy taxes on crude exports," he said. "It's more profitable to refine domestically and export oil products."

Crude export duties will rise from $275.40 per ton to a record $333.80 a ton on Feb. 1, the government announced Wednesday.

Rosneft's crude output was up as well, with new acquisitions Samaraneftegaz and Tomskneft accounting for most of the 29 percent increase, Rosneft said. The company sold half of Tomskneft to Gazprom Neft in December. Yuganskneftegaz, another former Yukos unit, which Rosneft bought in 2004, raised its production by 6 percent, Rosneft said, at a time when most major producers are struggling to maintain output.

Sales grew 53.5 percent to 13.7 billion, driven by higher production and refining volumes. Oil prices in the third quarter last year were only 10 percent higher quarter on quarter, said Yevgenia Dyshlyuk, an oil analyst at UralSib bank.

Net earnings per share increased to 20 cents in the third quarter from 11 cents a year earlier. Natural gas production increased by 16 percent.

Dyshlyuk raised the alarm over production and operating expenses, which more than doubled to $1.33 billion. "It's understandable that the company is in a transition period [consolidating new assets], but that was considerable growth," she said. "It's a bit frightening."

Rosneft's increased profit will help it service its huge debt, Dyshlyuk said. Rosneft vice president Peter O'Brien said Wednesday that the debt was less than $28 billion at the end of the third quarter, Bloomberg reported.

Despite the strong results, Rosneft slipped 4.2 percent on MICEX on Wednesday afternoon, falling with international markets and the world oil price.