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. Last Updated: 07/27/2016

Oil Giants Post Record Profits

Tale of the Tape*
YukosLUKoil
Sales$3,898$5,098
Net Profit$1,267$820
*Millions of dollars
Source: Company data
Carefully timing each other's moves, the nation's two largest oil companies issued their first-quarter results Monday -- and both blew market expectations away.

Boosted by sky-high global oil prices that averaged more than $30 per barrel in the first three months of the year, both Yukos and LUKoil tripled their net profits in the first quarter of the year under U.S. generally accepted accounting principles, beating analysts' expectations.

The two giants have been competing for years to lay claim to the title as Russia's biggest producer. Longtime No. 1 LUKoil was recently overtaken by fast-growing Yukos, but while Yukos is more profitable and the nation's largest company by market capitalization, LUKoil claims it is the largest private company in the world in terms of oil reserves.

The tale of the tape was equally split Monday, as LUKoil boasted higher revenues -- $5.1 billion versus $3.9 billion -- but the leaner, meaner Yukos took home the higher profit, $1.27 billion versus $820 million.

But both posted a threefold rise in profit on the year.

"The gap between the two companies remains with Yukos being on top in terms of profitability by a margin of roughly 50 percent," said Ivan Mazalov, oil and gas analyst with Commerzbank in London.

Seeing its main rival take the lead, LUKoil mapped out a cost-cutting program last year, but it has thus far failed to narrow the gap.

In 2002, LUKoil reported sales of $15.4 billion, more than a third higher than Yukos' $11.4 billion. However, Yukos cleared $2.7 billion in profit, while LUKoil's was $1.8 billion.

Oil companies worldwide have been riding high as the war in Iraq and output disruptions in a number of oil producing countries, including Nigeria and Venezuela, have kept prices unusually high.

But analysts said the soaring profits posted by LUKoil and Yukos were due to more than just luck.

"The fact that LUKoil managed to keep costs at bay despite 6 percent ruble appreciation in real terms is particularly impressive," said Konstantin Reznikov, oil and gas analyst with Alfa Bank.

According to Reznikov, both companies are likely to report lower profits in the second quarter of the year due to a drop in oil prices and increase in taxes, which usually follow price changes with a two-month lag.

LUKoil's stock edged up 2.1 percent Monday to $20.53 per share, which translates into a market cap of $17.5 billion.

Yukos, meanwhile, jumped 4.85 percent to $14.04, implying a market cap of $31.2 billion.

"Yukos is more efficient, but it is almost twice as expensive as LUKoil," Reznikov said.

Alfa Bank recommends to hold both stocks.

"There is probably a tiny, 10 percent, upside left on LUKoil, while Yukos' price is close to its fair value," Reznikov said.