LUKoil '07 Net Profit Surges 27% on Rising Output, Prices

LUKoil, the country's second largest oil producer, reported on Thursday a better-than-expected rise in 2007 earnings on the back of higher output and oil prices, as well as effective cost control.

LUKoil said in a statement that its net profit to generally accepted accounting principles rose by 27 percent to $9.51 billion last year, up from an average analysts' forecast of $9.14 billion.

Earnings before interest, taxation, depreciation and amortization increased by 25 percent to $15.39 billion in the year, above the analysts' forecast of $14.91 billion. Total revenues rose to $82.24 billion, up from $68.11 billion in 2006 and higher than the $80.4 billion predicted by analysts.

The firm, in which U.S. major ConocoPhillips holds a 20 percent stake, said the results were supported by increased production of oil and oil products, as well as higher global oil prices. "But ruble appreciation against the dollar, higher transportation costs and tax payments kept back the growth," the firm said.

Analysts welcomed the strong results and said LUKoil's cost control was especially impressive.

"By my calculations, LUKoil's net margin [net profit divided by revenues] approached 13 percent in the fourth quarter, compared to 11.6 percent in the whole year of 2007 and 11 percent in 2006," said Denis Borisov, from Solid brokerage.

"This means their revenues were growing faster than costs and that they have caught up with Rosneft. And this is very good news," Borisov added.

LUKoil said its operational expenses rose by 23.6 percent to $27.98 billion, mainly due to a 20 percent appreciation of the ruble against the dollar during the year and increased oil production and refining volumes.

Capital expenditure increased by 36 percent to $9.37 billion, with 40 percent of the funds spent on new projects.