LUKOIL concluded an agreement to sell its 100% stake in JSC “ARKHANGELSKGEOLDOBYCHA” to “Otkritie Holding” Group for $1.45 bln in cash. The transaction is expected to close in the first quarter of 2017 subject to approval by the relevant government authorities.
JSC “ARKHANGELSKGEOLDOBYCHA” develops V.P. Grib diamond mine located in Arkhangelsk region of Russia.
“LUKOIL successfully developed a major diamond project from its very early stage and brought the Grib diamond mine to almost full capacity on time and within budget. Spinning-off of this non-core asset allows us to effectively monetize the significant shareholder value that we have created over the past five years,” said Alexander Matytsyn, Senior Vice President for Finance of LUKOIL.
“The acquisition of a 100% stake in ARKHANGELSKGEOLDOBYCHA is a strategic investment in an attractive asset with potential for further development. This acquisition diversifies Otkritie’s range of business interests as the largest privately-owned financial company in Russia,” commented Dmitry Romaev, member of Otkritie Holding’s Board of Directors.
Note to editors:
V.P. Grib diamond field was discovered in 1995 and has been actively developed since 2011.
Goldman Sachs acted as exclusive financial advisor to LUKOIL.
LUKOIL PRESIDENT DISCUSSES FUTURE COOPERATION WITH IRAN PETROLEUM MINISTER
Minister of Petroleum of Iran Bijan Namdar Zangeneh and President of LUKOIL Vagit Alekperov have had a working meeting as part of the OPEC summit in Vienna. They discussed potential involvement of the company in projects in Iran, provided that the economic situation and the legal environment are favorable, and some other issues, critical for the development of hydrocarbon production in the Islamic Republic of Iran.
PJSC LUKOIL (”LUKOIL” or “Company”) today released its condensed interim consolidated financial statements as of and for the three and nine months ended 30 September 2016 prepared in accordance with International Financial Reporting Standards (IFRS).
*- profit from operating activities before depreciation, depletion and amortization.
In the third quarter of 2016, our sales decreased by 2.2% compared to the second quarter of 2016 resulting primarily from lower international trading volumes.
EBITDA decreased by 12.5% quarter-on-quarter mainly because of negative crude oil export duty time lag effect, which was partially offset by higher refining margins in Russia. Profit attributable to shareholders was 54.8 bln RUB, down 12.4% from the second quarter of 2016.
Free cash flow increased by 83.4% compared to the second quarter of 2016 to 104.5 bln RUB. As a result, free cash flow for the nine months of 2016 amounted to 197.9 bln RUB.
In the third quarter of 2016, our capital expenditures were almost flat compared to the previous quarter. As a result, capital expenditures for the nine months of 2016 amounted to 362.1 bln RUB, which is 19.1% lower compared to the corresponding period of 2015. This decrease was mainly a result of completed major upgrade program at our Russian refineries, moving to the maintenance oil production stage at West Qurna-2 project in Iraq, decrease in exploration drilling at our international offshore projects and overall cost optimization program. Investments into our growth projects in Timan-Pechora and the Caspian Sea were increased.
Our nine months 2016 financial results were impacted by lower average international hydrocarbon prices, an increase in mineral oil extraction tax base rate, a decrease in compensation amount from West Qurna-2 project, a decline in refining margins as well as an increase in transportation tariffs. These factors were partially offset by positive effect of ruble depreciation to US dollar and Euro on our sales and EBITDA. Among other positive factors were higher refinery throughput volumes, substantial improvement in the refined product slate, an increase in sales via high margin channels and effective cost control.
Our EBITDA for the nine months of 2016 excluding West Qurna-2 project remained practically unchanged compared to the nine months of 2015.
Significant decrease in profit attributable to shareholders for the nine months of 2016 was mainly due to the negative non-cash impact from ruble appreciation during the nine months of 2016 compared to the positive impact from ruble depreciation during the nine months of 2015.
In the nine months of 2016, our hydrocarbon production was 606.0 mln boe (2.2 mln boe per day), which is 6.4% lower compared to the same period of 2015. The decline was mainly due to lower volumes of compensation crude oil from the West Qurna-2 project, disposal of our share in Caspian Investment Resources Ltd in 2015, as well as natural production decline at our brownfields in West Siberia.
We achieved oil production growth in Timan-Pechora and the Urals region of 3.7% and 1.5%, respectively, and our marketable gas production increased by 2.0% mainly driven by our projects in Uzbekistan, Kazakhstan and Azerbaijan and commencement of marketable gas production at the Yu. Korchagin field in the Caspian Sea. Oil production dynamics in Russia was positively influenced by start of pilot production on offshore V. Filanovsky and onshore Pyakyakhinskoe fields during the third quarter of 2016.
In the first nine months of 2016, production of refined products at our refineries increased by 2.8% compared to the corresponding period of 2015. We achieved substantial improvement of our product slate due to the launch of new facilities in 2015 and 2016. Refining depth at our Russian refineries in the third quarter of 2016 increased by 3.3 percentage points to 85.1% compared to the third quarter of 2015. We also undertook measures on optimizing capacity utilization at our refineries in Russia, which resulted in additional efficiency gains.
Full set of condensed interim consolidated financial statements prepared in accordance with IFRS as of and for the three and nine-month period ended 30 September 2016 is available on the Company’s web sites:www.lukoil.com and www.lukoil.ru
These condensed interim consolidated financial statements have been prepared by the Company in accordance with IFRS and have not been audited by our independent auditor. If these financial statements are audited in the future, the audit could reveal discrepancies, and we cannot give any assurance that any such discrepancies would not be material.
Minister of Oil of Iraq Jabbar Ali Hussain Allibi and President of LUKOIL Vagit Alekperov have had a meeting as part of the OPEC summit. The discussion centered on prospects of the joint projects in Iraq, including West Qurna-2 fields, and on coordination of efforts of the oil market players to ensure the market balance in the medium term. As Mr. Alekperov emphasized, the company would support the decisions of the Russian Ministry of Energy for the purpose of delivering the agreements reached at the OPEC summit to stabilize oil prices.
The production rate at West Qurna-2 reached its peak at Phase I in 2015 and equaled 400 thousand barrels a day. As of today, LUKOIL has recovered all the costs incurred in prior periods. Negotiations are now underway of the economic parameters required for the company to continue investments in Iraq.
LUKOIL has put in operation the first stage of the power generation facility at the Usinskoye field in the Republic of Komi. The startup ceremony was attended by President of LUKOIL Vagit Alekperov and Head of the Republic of Komi Sergey Gaplikov.
The first stage of the facility has the installed capacity of 100 MW.
The new facility will provide for independent power supply to the Usinskoye field and fields of the Denisovskoye license area operated by LUKOIL-Komi. The operation of the facility will also increase volumes of associated petroleum gas utilization to generate electrical power for own needs.
The project was designed and executed by LUKOIL-Energoengineering, LUKOIL's wholly-owned subsidiary. Major equipment for the facility was supplied by Russian vendors. Innovative technologies were used at all stages of the construction process.