Lukoil: Preliminary operating results for the 9M2017.

Altynay IbraimovaNovember 16, 2017

According to preliminary production data of Lukoil, the average daily production of hydrocarbons for 9M2017 increased by 2.3% yoy to 2 218 ths boepd , while in quarterly terms it did not show any changes (2,219 ths boepd).

Since the beginning of the year, Lukoil's oil production amounted to 64 mn tons, including 21.4 mn tons (+ 0.5% qoq) in 3Q2017. In 3Q2017 there was an increase in production at the V. Filanovsky fields (+ 4.5%) and Pyakyakhinsky field (2.4%), as well as in the Yaregskoye field, where production jumped by 30% qoq.

The gas production amounted to 20.7 bn cub. m, exceeding the 9M2016 indicator by 12.4%. Positive impact on the dynamics of gas production was made by the launch of the gas field in the Pyakyakhinskoye field at the beginning of the year, as well as the commissioning of the main production facilities in the Gissar project in Uzbekistan in 3Q2017 (the project output has more than doubled compared to 2Q2017).

Refinery throughput at the Lukoil’s refineries in the 3Q 2017 increased by 5.9% qoq and amounted to 17.4 mn tons. The volume of processing in Russia increased by 3% due to the completion of repair works at the refineries in Nizhny Novgorod and Volgograd, which were conducted in 2016. Refinery throughput in Europe decreased by 1.8% yoy mainly due to the maintenance works at Petrotel and ISAB refineries in the 1H2017.

Fig. 1. Operational results

 

 

unit

9М2016

9М2017

yoy

2кв2017

3кв2017

qoq

Production:

 

 

 

 

 

 

 

 hydrocarbon

ths boepd

    2 168  

    2 218  

2%

    2 222  

    2 219   

0%

 oil

ths tons

  64 824  

  64 114  

-1%

  21 306  

  21 411  

0%

 gas

 mn cubic m

  18 383  

  20 668  

12%

    6 952  

    7 257  

4%

 refinery throughput at refineries

ths tons

  49 339  

  49 946  

1%

  16 394  

  17 356  

6%

Source: Company data

 

Our view

Production indicators for 9M2017 meet expectations and do not introduce any noticeable changes to our annual forecasts. Decrease in oil production by 1% yoy is considered acceptable, given that since January 2017, the volume and dynamics of Lukoil's oil production are mainly defined by the external limitations of Russian companies' production volumes. In general, we view the Company's results as neutral and maintain our BUY recommendation for Lukoil shares.

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