Page 15 - FSUOGM Week 47

FSUOGM PERFORMANCE FSUOGM

Lukoil returns to profit in Q3,

beats expectations

RUSSIA RUSSIA’S Lukoil swung back to a RUB50.4bn crude from the super-giant West Qurna-2 (WS2)
($664mn) profit in the third quarter, on the back project in Iraq fell 18% q/q to 0.6mn tonnes.
The company enjoyed of higher oil prices. Total gas production slipped 6.7% q/q, as
a surge in free cash The result beat expectations and marks a sig- Russian output was flat and extraction in Uzbek-
flow, as higher oil prices nificant change in fortunes compared with the istan saw a 20.9% decline, owing to cuts in pur-
more than offset Opec+ second quarter, when the company reported a chases by China.
cuts and a steep fall in RUB18.7bn net loss. Sova described Lukoil’s results as “solid”, not-
Uzbek gas sales. Revenues came to RUB1.46 trillion ($19.8bn) ing that they boded well for the company’s sec-
in the third quarter, down 25% year on year ond-half dividend.
but up 48% quarter on quarter. The result beat
the estimate of BCS Global Markets (GM) by Iraq
8%, with the brokerage noting that revenue Production at WQ2 fell by 70,000 barrels per day
surprises from Lukoil were usually caused by in May and a further 50,000 bpd in June, as per a
trading activity. It exceeded the forecast of Mos- request from Baghdad’s Ministry of Oil (MoO).
cow-based Sova Capital by 11%. Output now stands at around 310,000 bpd, down
EBITDA amounted to RUB202.2bn ($2.7bn), from a 2019 average of 400,000 bpd, with work
beating BCS GM’s forecast by 5% and Sova’s by ongoing to drill new wells as part of the field’s
7%, and up from RUB144.4bn in Q2 2020 but phase two development.
down from RUB327.8bn in Q3 2019. The q/q In late October, Lukoil Mid-East’s managing
improvement came from stronger upstream director Egor Zubarev told Bloomberg: “The
performance, while downstream earnings were current situation forces us and our partners to
stable. revise our plans to see how they correspond to
Free cash flow (FCF) also surged to the needs of the time.”
RUB114.6bn ($1.6bn) from a mere RUB25.5bn The company had intended to raise produc-
in Q2 2020. tion from WQ2 to 480,000 bpd by the end of
As a key oil producer in both Russia and the year. However, Baghdad called on IOCs to
Iraq, Lukoil’s earnings have been hit this year by cut output from their southern fields by 350,000
OPEC+ output constraints. Another factor has bpd, while Basrah Oil Co. (BOC), which
been a reduction in gas supply from its fields in is responsible for the southern region, was
Uzbekistan to China. directed to reduce output by a further 300,000
Lukoil’s overall hydrocarbon output aver- bpd. Despite Iraq’s intended compliance with
aged 1.927mn barrels of oil equivalent per day the OPEC+ restrictions, production rose by
in Q3 2020, versus 2.064mn boepd in Q2 2020. more than 240,000 bpd in October compared
Its oil production in Russia was down 2.6% q/q to September.
at 17.3mn tonnes (1.38mn barrels per day), with Lukoil is also expected to submit proposals
decline driven by losses in the Western Siberian soon to the Iraqi authorities for the development
and Timan-Pechora basins. Compensation of its Block 10 concession. ™

Week 47 25•November•2020 www. NEWSBASE .com P15