LUKOIL: 9M2017 financial results

Altynay IbraimovaNovember 30, 2017

Lukoil’s revenue for 9M2017 increased by 12% yoy and amounted to 4,274 bn rubles. The increase in revenue was supported by higher revenues from the sales of oil (+ 16% yoy) and petroleum products (+ 13% yoy).

Positive dynamics of oil sales was achieved due to export growth of 24% yoy, while oil sales in the domestic market decreased by 63% yoy. At the same time, sales of oil products both for export (+ 11%) and for the domestic market (+ 22%) showed growth.

In the expenses structure, there was an increase in costs for the acquisition of oil, gas and processed products by 19% to 2,226 bn rubles and an increase in taxes by 34% to 434 bn rubles. At the same time, the company managed to reduce operating expenses (-0.1%), transportation costs (-13%), excises and export duties (-5%) and commercial and administrative expenses (-19%).

As a result, Lukoil's operating profit for 9M2017 was 359 bn rubles, exceeding the 9M2016 indicator by 13%. Due to a decrease in financial expenses (-34% yoy) and a lower loss on the exchange rate difference, pre-tax profit increased by 79% compared to 9M2016 and amounted to 378 bn rubles. The Company's net profit amounted to 298 bn rubles, which is higher than a year earlier by 86%.

Fig. 1. Financial indicators

mn rub

9М2016

9М2017

yoy

Revenue

       3 826 121  

  4 274 253  

12%

EBITDA, incl.

          547 453  

     607 835  

11%

  Exploration and production segment

          379 604  

     396 456  

4%

  Refinery and tradind segment

          175 704  

     214 376  

22%

Net profit

          160 195  

     298 295  

86%

Capital expenditures

          357 392  

     373 770  

5%

Free cash flow

          200 487  

     173 696  

-13%

Source: Company data

 

 

 

Our view

Despite external constraints on the volume of oil production in the framework of the agreement with OPEC and the growth of excise rates and the tax on mining operations in Russia, Lukoil's results for 9M2017 fit into our annual forecasts. We expect neutral results for this year and maintain our "Buy" recommendation.