Rosneft's Q1 Profit Surges to $2.56Bln

Rosneft said Monday that its net profit jumped sevenfold in the first quarter as acquisitions last year and strong cost control helped core earnings.

Analysts said investors had been "spoiled" by a string of forecast-beating results from Russian oil companies and many had priced in a strong result before the earnings release.

Addressing investor concerns about high debt, Rosneft was considering ways to refinance outstanding debt by mid-September and would choose specific instruments in the next one to two months, chief financial officer Peter O'Brien said in an interview.

Rosneft said its net profit according to generally accepted accounting principles soared more than sevenfold to $2.56 billion, while revenues almost doubled to $16.37 billion.

It attributed the rise to acquisitions, effective cost control and higher prices for oil and petroleum products.

"We are encouraged by the results. We have managed to demonstrate strong growth on all key financial indicators," O'Brien said.

He added that Rosneft's crude production rose almost 24 percent in the quarter, including 6 percent of organic growth.

Earnings before interest, taxation, depreciation and amortization more than tripled to $4.7 billion in the first three months of the year, from $1.44 billion in the same period last year.

Rosneft's net profit and EBITDA came above analysts' average forecast in a Reuters' survey, which pinned net profit at $2.5 billion and EBITDA at $4.6 billion.

Revenues were slightly below the average forecast of $16.5 billion.

Last year, Rosneft bought almost all the assets of bankrupt oil firm Yukos at state-forced auctions. The assets, which included two major production units and five refineries, helped Rosneft become the country's largest oil producer and refiner.

The company, which also became one of Russia's most-indebted firms following the acquisitions, said its net debt fell by $2.7 billion to $23.58 billion as of March 31 from $26.28 billion as of Dec. 31, 2007.

O'Brien said Rosneft, which by mid-September has to refinance around $6.5 billion in debt to Western banks, will choose the instruments in a month or two.

"We have a number of instruments ready, and we will be communicating depending on which one we choose within the next one to two months," he said.

The debt reduction in the first quarter brought the company closer to its earlier set target to reach parity in its debt/EBITDA ratio by the end of this year.

"We are making very good progress. I expect our accounts will show that we are already well below 1.5 times at mid-year, and we are confident that we will reach that target, maybe even sooner," O'Brien said.

He said effective cost control was one of the main reasons for the increase in profits, and analysts agreed.