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. Last Updated: 07/27/2016

Yukos Reports $1Bln Profit for 1999

The nation's second-largest oil company, Yukos, reported on Friday a 1999 net profit of more than $1 billion in its first international standard accounts and saw continued strength this year.

The results surprised the market, which is still skeptical about the company. Yukos has a history of problems with investors and is often seen as a high-risk, potentially high-reward share even among its peers in the wilds of the Russian market.

Yukos net income under U.S. Generally Accepted Accounting Principles was $1.15 billion on sales of $4.18 billion in 1999 after a loss of $640 million on sales of $2.40 billion in 1998.

Earnings per share were 14.06 rubles (50.48 cents) compared to a loss of 7.84 rubles in 1998.

Officials credited cost cutting as well as high oil prices for the good results and said it would focus on keeping costs low rather than simply increasing output.

Chief financial officer Michel Soublin said the main question for this year was oil prices, but the company planned in 2000 to increase capital spending fourfold, which was about half the $500 million total investment of 1999.

"In the first part of 1999, there were still pretty low prices. We are halfway through 2000 with good prices," he said.

"Rather than drilling like mad and spending a lot of money, we spend the money extremely widely, which is quite a change in attitude compared to the past and what some other oil companies are still doing," he said.

Sales for the first half of this year rose to $3.4 billion from $1.3 billion last year as crude oil output rose to 23.65 million metric tons from 21.64 million metric tons. Some of that was due to the consolidation of the Tomskneft subsidiary.

Yukos shares, which are very thinly traded, were up 2.56 percent to 20 rubles (71.76 cents) at Friday midday, near its level three weeks ago on the Moscow Interbank Currency Exchange.

Caution reigned among analysts despite the results.

The oil company is packed with reserves but has been accused of transferring profits away from subsidiaries, which analysts said was reflected in the 1999 accounts. Yukos has denied the charges.

"In 2000, this item will play a smaller role, since approximately 90 percent of the share capital of subsidiaries was consolidated recently," United Financial Group brokerage said in a Friday note reaffirming its sell recommendation.

The company is cheap by many comparisons at a 1999 price/earnings of about 1.3 compared to UFG's 1999 averages of 6.8 for Russian liquid oil companies, 3.9 for emerging market oils and 26.7 for integrated internationals.