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. Last Updated: 07/27/2016

Mazeikiu Profit Soars Despite Yukos' Woes

VILNIUS, Lithuania -- Yukos' Lithuanian unit, Mazeikiu Nafta, said profit more than tripled last year to a record as high refining margins offset declines in Russian crude exports through its Baltic Sea terminal.

Net income totaled 722 million litai, or $260.8 million, according to the company's own currency conversion, compared with 221 million litai, or $72.9 million, a year earlier, Mazeikiu Nafta said Monday in a statement to the Vilnius Stock Exchange. Revenue surged 43 percent to 7.6 billion litai.

Mazeikiu, Lithuania's biggest company by revenue, includes the only oil refinery in the three Baltic states, as well as a Baltic Sea crude oil terminal and pipelines. Yukos, which is struggling to pay off about $28 billion in back taxes being sought by the Russian government, owns 54 percent of the company, and Lithuania has 41 percent.

"Yukos' ability to supply additional volumes of crude above our annual plan and extraordinarily high refining margins were the crucial factors in our success," CEO P. Nelson English said in the statement.

Fourth-quarter net income, calculated by subtracting the full-year and nine-month figures reported by the company, rose to 274 million litai from 103 million litai a year earlier. Revenue rose 40 percent to 2.1 billion litai in the period, according to the same Bloomberg calculations. The company estimated in December that its full-year profit would rise to about 600 million litai.

Mazeikiu's shares rose 0.38 litai, or 8.5 percent, to close at 4.83 litai in Vilnius, valuing the company at about $1.29 billion. Yukos' shares rose 5.4 percent to 21.95 rubles in late afternoon trading in Moscow, valuing the company at 49.1 billion rubles ($1.76 billion). Yukos' shares have dropped by 94 percent in the past year.

Mazeikiu Nafta forecast in January that 2005 profit would fall to 244 million litai ($102 million), based on its plan to refine 9 million tons of feedstock this year and export 5 million tons of crude and on expectations that refining margins would shrink.

Profit may fall even lower if Yukos does not meet its supply commitments, or if Russia sends more oil to its Primorsk port and less to the Baltic countries, the newspaper Lietuvos Zinios reported last month, citing Economy Minister Viktor Uspaskich.

The company's refinery processed 8.66 million tons (173,900 barrels per day) of feedstock last year, compared with 7.16 million tons in 2003. Exports of crude through its Butinge port shrank 32 percent in 2004 to 7.24 million tons.

Lithuania has asked Yukos to give up its management rights and let the government assume the company's option to buy 9.7 percent of Mazeikiu. The government said the proposal was based on concerns Yukos could no longer ensure supplies of crude. Russian authorities in December sold Yuganskneftegaz, which had produced about 60 percent of Yukos' oil, to help collect on a back tax claim.

Mazeikiu's refinery halted operations for four days this month when it ran out of crude oil.

The refinery also had to shut down to repair an undersea hose that was damaged in a storm and a pipeline-end manifold that leaked oil into the sea.

Uspaskich said earlier this month that the government wanted to find a new supplier who could guarantee crude for Mazeikiu Nafta for at least five years before possibly taking control of the company.

"We're coordinating all our steps with the current strategic investor," he said during questions at parliament.

Yukos CEO Steven Theede agreed to start formal negotiations with Lithuania about Mazeikiu Nafta's future during a visit to Vilnius.

Besides the share option and supply alternatives, Yukos and the Lithuanian government are discussing whether Mazeikiu Nafta should distribute some of last year's profit to shareholders now that a previous ban on dividends has expired.