Lukoil Fourth-Quarter Net Tripled on Oil Prices, Refining

April 10 (Bloomberg) -- OAO Lukoil, Russia's biggest independent oil producer, said profit tripled in the fourth quarter as higher prices for crude and refined products offset a decline in production, beating expectations.

Net income advanced to a record $3.21 billion from $1.04 billion a year earlier, based on the Moscow-based company's financial results, which were distributed by the U.K. Regulatory News Service today. Profit beat analysts' estimates. Revenue jumped 53 percent to $24.9 billion.

Urals, Russia's benchmark export blend of oil, gained 53 percent in the period from a year earlier, averaging $86.18 a barrel, according to Bloomberg data. Lukoil's output fell 0.3 percent to 1.81 million barrels a day in the final three months of the year.

Rising export taxes helped make refining more attractive. Companies with domestic production, refining and retail operations such as Lukoil also benefited from an increase in foreign-car purchases, which boosts demand for higher-quality fuels and pushes up prices.

``Lukoil, with its sector-leading refining portfolio, was particularly well placed to benefit from this trend,'' Merrill Lynch analysts led by Hootan Yazhari said in a note to clients before the results were released. They recommend buying the stock.

Lukoil's flagging output and the rising costs of field services raised concerns about spending. Chief Executive Officer Vagit Alekperov last week slashed the company's target for production growth this year to as little as 1.8 percent.

Rosneft, Yukos

Bigger rival OAO Rosneft is the only major Russian producer to maintain production growth this year. The state-run company plans to raise output 11 percent in 2008. Rosneft said two days ago that fourth-quarter profit increased fivefold to $2.98 million after it bought OAO Yukos Oil Co. fields and refineries at bankruptcy auctions last year and surpassed Lukoil in output.

Rosneft Chief Executive Officer Sergei Bogdanchikov is among oil executives who have called for tax breaks to help fund new developments. Natural Resources Minister Yuri Trutnev said last month that national production may decline for the first time in a decade as suppliers struggle with rising costs and harder-to-reach fields. Soviet-era developments in Russia's west Siberian oil country have peaked and are going into decline.

Export, extraction and other taxes must be cut or companies won't have any incentive to develop new fields, including in the Arctic, OAO Gazprom Neft CEO Alexander Dyukov said on Feb. 4.

Russia revises its export taxes on crude and oil products every two months based on an average price for Urals with a one- month delay. World oil prices outpaced export taxes in the fourth quarter, as opposed to the year-earlier period, when prices fell and taxes continued to increase.