Rosneft doubles profits

Russia's oil champion Rosneft beat expectations on Thursday by doubling quarterly profits to $5.8 billion in advance of its controversial $61 billion acquisition of the private rival TNK-BP. The earnings report should help boost the confidence of one of the state's two most important energy companies on the eve of its planned alliance with BP and emergence as a global super-major through a buyout of its Anglo-Russian unit.
Rosneft will be responsible for more than 40 percent of Russia's production and one-twentieth of the world's oil output by the time it takes command of both the British and Russian stakes of the country's third-biggest oil firm. "The third-quarter results reflect the beginning of broad-reaching transformations within the company to cut costs and improve efficiency, which have already yielded strong results in production and sales," said Rosneft chief executive Igor Sechin.
"This allows us to improve the company's financial standing and build a stronger foundation for efficient implementation of our strategic projects," he said in partial reference to the TNK-BP buyout. The quarterly report was being watched closely for signs of residual weakness from a bad second quarter during which Rosneft made a rare loss due to export duty fluctuations and falling energy prices.
The same export duty lag - applicable to all oil companies - was this time responsible for a jump in profit that further benefited from a 3.4-percent increase in output over the first nine months of the year. Rosneft had also attributed its gains to better cost controls and efficiency.
But analysts also warned that a large part of the third quarter result came from 65 billion ruble ($2.1 billion) in earnings the company reported from its acquisition of a 51 percent stake in the Itera natural gas supplier. Rosneft has now earned 285 billion rubles ($9.1 billion) through the first nine months of the year - a 15.4-percent increase from the 2011 figure. The company reported a loss of $250 million in the second quarter of 2012 and a $2.8-billion profit in the same third quarter of last year.