LUKoil's Statement Shows Solid Performance

Russia's leading oil producer LUKoil put out a confident year-end statement Monday showing a solid performance in 1996, but analysts said the figures should be looked at with caution.

LUKoil announced pre-tax profits for last year of a record 3.7 trillion rubles ($661 million), up from 2.4 trillion rubles in 1995, with oil production and refining also showing signs of healthy recovery. The numbers were unadjusted for annual inflation of 21.8 percent or ruble devaluation.

The company earlier had said it would boost net profits to at least 3.5 trillion rubles.

The price of shares in LUKoil Holding, LUKoil's parent company, was down Monday on the Russian Trading System, at $13.70 per share from Friday's $14.25. Preferred shares were up from $9.30 on Friday to $9.90 on Monday.

The company also managed to significantly reduce arrears of its subsidiaries and slimmed down its tax debt to the federal government, the statement said, without elaborating.

An analyst at a Western brokerage said the figures were unlikely to stir the market since Russian accounting standards differed significantly from Western practices and lacked transparency. He added that both the revenue increase and output growth could be attributed to a greater number of companies now involved in the LUKoil holding.

But the analyst said LUKoil's announcement of a major debt clean-up could be "a very positive development" if the company reveals exact tax payment figures.

"LUKoil is not one of the big problem companies in the oil sector. There are others that are much worse," said the analyst, who asked not to be identified. "It would be very good if they would release a precise account of their tax debt."

LUKoil has not yet had its international audit completed, but has already appointed international auditors KPMG to make the report. KPMG also prepared the company's audit last year.

The year-end figures were released in a statement to the media. Third-quarter results had been leaked to one brokerage in advance, irritating some market players.

"They're probably making a habit of leaking some of the information, which in the West would be against the law," the analyst said. "But here anything goes."

LUKoil said its proven developed non-producing reserves grew by 37 million tons after four new oil fields were discovered last year.

The statement said LUKoil's geological surveys and exploration drilling this year would add another 40.2 million tons of oil to its existing reserves to cover the current production.

LUKoil's reserves were first audited to international standards by Miller & Lents in 1995. The international audit revealed a smaller amount of reserves at 14.4 million barrels against the 16.7 million barrels rated under Russian standards.

LUKoil's oil refining picked up to 19.3 million tons last year and totaled 12 percent of Russia's total refining output.

The company launched last year an extensive $1 billion five-year program to upgrade two of its refining plants -- the Volgograd refinery in Central Russia and Permnefteorgsintez in Western Siberia.