Lukoil Reports 35% Decrease in Sales Revenues

Russia’s Lukoil reported a 35% decrease in sales revenues to $23,190 million, explaining that revenue, EBITDA and net income suffered because of the decrease in the oil prices. The company also confirmed a deal with China’s Sinopec for the sale of its interest in Caspian Investment Resources Ltd, which controls assets in Kazakhstan.

‘Capital expenditures, including non-cash transactions, in the first quarter of 2015 decreased 24.8% y-o-y to $2,430 million. Free cash flow in the first quarter of 2015 quadrupled to $728 million. Hydrocarbon lifting cost in the first quarter of 2015 decreased by 18.9% to $4.24 per boe in total and was $3.30 per boe excluding West Qurna-2 project’ reads a note released on Wednesday.

On the other hand, in the first quarter of 2015, hydrocarbon production increased by 7% y-o-y to 2,369 thousand bow per day.  

‘The increase was mainly due to the start of commercial production from West Qurna-2 project in Iraq. Throughput at the Company’s refineries in Russia decreased by 12.3% mainly due to a decrease in refining margins as a result of changes in tax legislation.’

Lukoil also reported a downward revision for a deal with Sinopec over assets in Kazakhstan. Before the agreement was reported at $1.2 billion, while now the compensation for the Russian company decreased by around 20%.  

‘Lukoil and Sinopec signed an agreement for the sale of Lukoil’s 50% interest in Caspian Investment Resources Ltd. It will replace the previous sales and purchase contract signed on April 15, 2014. According to the agreement the sale price of the stake will be $1,067 million. The transaction’s closing is subject to requisite governmental consents and approvals and is to occur by December 1, 2015. Arbitration procedures initiated by Lukoil against Sinopec in London in February this year will be suspended for the period until completion.’ 

With the deal, Sinopec will increase hydrocarbon production by over 10 million barrels of oil equivalent.