LUKoil plans $ 25 bn output boost

Nov 24, 2003 01:00 AM

LUKoil, Russia's No. 2 oil producer, boosted planned investment spending for the next decade by one-fifth to $ 25 bn, in order to almost double oil and gas output as the company attempts to regain its top rank in the country. The company's board approved the development plan through 2013, the company said.
The company in April said it would invest $ 21 bn. Investors have urged LUKoil to cut costs, boost output and match profitability at rivals such as Yukos, which this year overtook LUKoil as Russia's top oil producer by using modern technologies and buying Sibneft.

Yukos, which plans to double output in seven years, continues to outpace LUKoil, analysts said.
"LUKoil's not closing the gap," said Paul Collison, an analyst at UBS Warburg. "For the next year at least, Yukos projects investment similar to LUKoil and expects faster growth. On a global basis, LUKoil is extremely efficient, but it lags some domestic rivals."

LUKoil, which pumps 1.64 mm bpd of crude and about 5.5 bn cmpy ofgas, plans to almost double its output of hydrocarbons. Yukos intends to boost output 12 % next year and as much as 10 % in 2005, to 3 mm bpd.
"While capital spending is higher than I hoped for, output targets aren't too ambitious," said Adam Landes, a London-based analyst at Renaissance Capital. "LUKoil's plans are those of a keen long-term investor, conservative and focused on steady growth."

LUKoil plans to spend $ 2.5 bn next year, about 70 % of it on exploration and production, to bring oil output to 84.9 mm tons (1.7 mm bpd) and gas production at 5.8 bn cm. It based the plan on a forecast of $ 22 per barrel of Brent crude, the company said.
It aims to cut operating expenses to $ 2.50 a barrel from $ 2.62 by selling assets unrelated to oil production and trimming borrowing costs.

In refining, the company plans to invest more in petrochemical subsidiaries, while better using the capacity of its existing refineries in Russia. It also plans to create a reserve fund to stockpile cash against declines in oil prices and to repurchase stock when market conditions are favourable, the company said.
Oil has risen 13 % during the past six months. Brent crude for January settlement is currently trading at just under $ 30.

Source: Bloomberg
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