Lukoil Q2 net income down 2% to $962 million
Second-quarter revenues dropped 9.3 percent to 1.34 trillion roubles, while core earnings - before interest, taxation, depreciation and amortisation (EBITDA) declined 8.3 percent to 189.57 billion roubles.
In the second quarter 2016, Lukoil's sales revenues increased by 13.7% compared to the previous quarter, EBITDA remained practically unchanged and profit grew by 1.5 times.
Such dynamics was primarily driven by higher average hydrocarbon prices, which was partially offset by lower compensation from the West Qurna-2 project, ruble appreciation to US dollar and euro, as well as decrease in refining margins, which was partially due to the increase in excise rates on refined products in Russia.
Profit dynamics was substantially impacted by non-cash foreign exchange effect due to high volatility of exchange rates.
In the second quarter 2016, Lukoil's free cash flow increased by 56.5% quarter-on-quarter and by 3.4 times compared to the second quarter 2015. As a result, Lukoil's free cash flow for the first half 2016 increased to 93 bln RUB.
In the first half 2016, Lukoil's financial results decreased year-on-year, which was mainly due to lower average hydrocarbon prices, increase in the oil extraction tax base rate, lower compensation from the West Qurna-2 project, as well as decline in refining margins.
This was partially offset by positive effect of ruble depreciation to U.S. dollar and euro. Among other positive factors were higher refinery throughput volumes, substantial improvement in the refined product slate, increase in sales via high margin channels and effective cost control.
EBITDA excluding West Qurna-2 increased by 7.1% quarter-on-quarter and remained practically unchanged compared to the first half 2015.
In the second quarter 2016, Lukoil's capital expenditures decreased by 3.0% compared to the previous quarter, and in the first half 2016 the year-on-year decrease in capital expenditures amounted to 20.8%.
The decrease was mainly driven by completion of the main refinery upgrade program in Russia, transition to production maintenance stage at the West Qurna-2 project, decrease in exploration drilling expenditures at Lukoil's international offshore projects and general optimization measures.
At the same time the company increased investments into Lukoil's strategic growth projects in Timan-Pechora and Caspian regions. ■