Sibneft Warns on Profit, Mum on TNK

The nation's fifth-largest oil company, Sibneft, said Monday that it expects its net profit to shrink from $1.3 billion last year to $1 billion in 2002 because of higher taxes and low domestic oil prices.

The company's earnings doubled in 2001 as it rapidly pumped up production and kept a lid on costs. Sibneft plans to extract 42 million tons of oil per year by 2005, more than double last year's production figure of 20.6 million, said Viktor Mishnyakov, head of investor relations, and Andrei Dolgov, head of shareholders' services.

Sibneft will at first use different technologies to increase the amount of oil extractable from the fields that are under development, Mishnyakov said during an Internet press conference hosted by the Finam.ru web site.

"Further growth will come from the development of new oil fields and reserves that the company plans on acquiring during this time period," he said. Sibneft has expressed an interest in the 20 percent stake of state-owned Slavneft, which is scheduled to be privatized this fall.

Despite high growth, a domestic oil glut caused by Russia's curb on exports would hurt profitability, said Sibneft spokesman Nick Halliwell. The company also expects a higher mineral extraction tax bill.

The company's shares closed down 4.46 percent.

Sibneft has long regarded its tax planning as aggressive. Its effective tax rate for 2001 was 9 percent. That number is expected to rise slightly this year.

Sibneft has yet to report first-quarter results, but No. 1 LUKoil reported last month that its first-quarter profits had plunged $243 million from $680 million. Low international prices and the domestic glut were cited as the reason.

With production growth set to expand, Sibneft is looking for ways to make inroads in refining and distribution. Four of nine members elected Friday to the board of the Moscow refinery were Sibneft representatives. Sibneft's supplies to the refinery, which were abruptly halted by the refinery in July, have been reinstated, said Mishnyakov and Dolgov.

Both company officials declined to comment on reports that Sibneft was considering bartering for a 10 percent stake in Tyumen Oil Co., or TNK. Two years of discussions have yet to yield a permanent way to divide up Onaco and its largest operator, Orenburgneft. TNK owners Alfa Group and Renova won a privatization auction for 85 percent of Onaco in 2000 only to learn that Sibneft had bought up 42 percent of Orenburgneft in the run-up to the sale.

When plans on unifying Onaco's and Orenburgneft's share system fell through last year, managers at both companies began exploring other options. One possibility entails Sibneft receiving 10 percent of TNK in exchange for its stake in Orenburgneft, Vedomosti reported Monday.

A TNK spokesman also declined to comment on the report.