FSUOGM: Lukoil beats expectations in Q1

Russia’s Lukoil swung to a net profit of RUB157bn ($2.14bn) in the first quarter, versus a RUB46bn loss a year earlier, on the back of higher oil prices, increased gas supply and a recovery in fuel demand. Significant devaluation of the Russian ruble since the pandemic began was also a major factor.

Revenues at the country’s second-biggest oil producer rose by 13% year on year to RUB1.9 trillion and EBITDA more than doubled to RUB314.4bn. Earnings were supported by a 5.5% growth in gas production, thanks to a rebound in supply in Uzbekistan. Lukoil slashed output at its Uzbek fields significantly last year after the coronavirus (COVID-19) took its toll on gas demand in China, where their gas is sold.

This increase, coupled with higher oil prices and a post-COVID-19 rally in fuel demand in Russia, more than offset a 11.6% slide in liquids output to 1.58mn barrels per day (bpd) as a result of OPEC+ cuts. Lukoil’s upstream EBITDA grew to RUB224bn from RUB109bn a year ago, while earnings from refining, marketing and distribution almost tripled to RUB120.2bn from RUB40.3bn.

“Lukoil’s Q1 2021 IFRS numbers handily outperformed at the EBITDA level on a resurgence in international downstream,” analysts at BCS Global Markets commented. “A strong free cash flow number, boosted by a fall in capital expenditure, bodies well for the interim dividend.”

In other Russian news, Gazprom is targeting an 11.7% growth in gas production in 2021, company executives said in a presentation on May 27.

Gazprom bore the brunt of the collapse in European gas demand last year as a result of the coronavirus (COVID-19) pandemic, in part because its oil-indexed gas supplies were uncompetitive versus spot price-based LNG. The Russian producer has got off to a good start this year, however, delivering 26.7% more gas to countries outside the former Soviet Union.

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