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. Last Updated: 07/27/2016

Surgutneftegaz Revenues Fall 2%

No. 3 oil major Surgutneftegaz posted less-than-stellar financials for the first six months of this year, a result that analysts say is due to lower crude prices and rising costs.

Revenue came in at $2.54 billion, a decrease of 2 percent compared with the first half of 2000, according to results released last week audited to Russian accounting standards. The numbers were not consolidated but they do account for 90 percent of the company's operations.

An official at Surgutneftegaz declined to comment on the figures, saying they were not released publicly, and responsibility for accuracy lies with the brokerages that circulated them.

Even though it is impossible to compare Surgutneftegaz's figures with those of other oil companies because of variations in reporting policies, it is likely that No. 1 LUKoil, No. 2 Yukos and No. 6 Sibneft will see revenue and profit increases, said Gennady Krasovsky, an analyst at the NIKoil brokerage.

"It is tied to their growth," Krasovsky said. "Of course, this growth is through acquisitions and not organic, but nonetheless, it is more than Surgutneftegaz has."

Revenues decreased despite a 7 percent increase in production. So far this year, Surgutneftegaz posted production of 155.7 million barrels per day compared with 145.1 million bpd in the first half of 2000.

Krasnovsky expects LUKoil to post a 16 percent production increase.

"Although the figures are a little disappointing, they are not unexpected given the decline in oil prices, the increase in the export tax burden and the inflation of operating costs over the past year," said Renaissance Capital in a research note. "We expect these trends to be reflected across the industry this year."

During the first half of last year, the average price for the Russian-benchmark Urals blend was $25.83. This year, it was $24.45.

Surgutneftegaz has been heavily criticized for holding much of its capitalization — $3.8 billion of it, to be exact — as cash in the bank. This is by far and away the largest amount of cash held by a Russian company. With a 16 percent increase from last year, Surgutneftegaz may soon rival the Central Bank, which has $28 billion in net reserves.

Excluding the gain in the ruble's exchange rate, Surgutneftegaz registered a net profit of $1.1 billion, a 14 percent decrease from last year. Russian accounting standards — which, unlike international standards, don't take depreciation into account — tend to inflate the profit figure