Russia’s LUKOIL released its condensed interim consolidated financial statements for the three and nine month periods ended 30 September 2020, prepared in accordance with International Financial Reporting Standards (IFRS), corporate website reports.
Since the start of COVID-19 pandemic, LUKOIL has been undertaking necessary measures to rule out the direct impact of the pandemic on its operating activity, prioritizing proper protection of its employees, contractors personnel, and clients, as well as continuity of production processes. Meanwhile, weaker global economic activity amid the pandemic followed by an unprecedented slump in hydrocarbon demand and prices had a negative impact on its operational and financial performance in the third quarter and the first nine months of 2020 with persisting negative effect in the fourth quarter of 2020.
The consequences of the pandemic for the company’s operating results include crude oil production cut (-9.3% year-on-year) at the fields in Russia and certain international projects due to the new OPEC+ agreement; gas production cut (-18.9% year-on-year) in Uzbekistan due to lower demand for Uzbek gas from China; reduction of refinery throughput volumes (13.1% down year-on-year) due to lower refining margins owing to lower demand for refined products; and lower sales volumes of motor fuels through corporate filling stations because of lower demand. The main impact of the pandemic on the financial performance is attributed to decline in prices for oil and refined products as well as lower production volumes.
On April 12, 2020 a number of oil-producing countries, including OPEC members and Russia, entered into an agreement valid until the end of April, 2022 that aims to reduce their collective crude oil output by 9.7 mio barrels per day starting from May 1, 2020 with subsequent gradual increase. Under the agreement, starting from May 1, 2020 LUKOIL cut its crude oil production in Russia by approximately 310K barrels per day as compared to the average daily production in the first quarter of 2020. In July, it increased crude oil production in Russia by approximately 20K barrels per day followed by an increase in August by approximately 60K barrels per day. Crude oil production was also reduced at certain international projects. In particular, production at the West Qurna-2 project in Iraq decreased by approximately 70K barrels per day starting from May 1, 2020 and by further 50K barrels per day starting from mid-June. Production was then increased by approximately 30K barrels per day in the middle of October.
In the third quarter of 2020, corporate sales amounted to RUR 1,456.7 bln ($19.2 bln), up by 47.7% quarter-on-quarter. For the first nine months of 2020, sales of RUR 4,109.1 bln were down 30.7% year-on-year. EBITDA for the first nine months of 2020 (RUR 497.5 bln) was down by 48.1% year-on-year. In the third quarter of 2020, profit attributable to shareholders amounted to RUR 50.4 bln as compared to a loss of RUR 18.7 bln in the previous quarter.
For the first nine months of 2020, LUKOIL booked a loss in the amount of RUR 14.3 bln ($188 mio). The reason of the net loss amid positive operating profit was impairment loss booked in the first half of 2020, as well as non-cash foreign exchange loss. Free cash flow more than quadrupled quarter-on-quarter to RUR 114.6 bln in the third quarter of 2020, while for the first nine months of 2020 it totaled RUR 195.6 bln (down by 62.2% year-on-year).