Yukos assets give 80% boost to Rosneft profits

Russia's biggest oil company Rosneft has announced more than positive third quarter financial results. Its net profit grew 240 per cent in the first nine months of 2007 on the back of increased production and soaring global crude prices.

Net profit for the quarter came in at nearly $US 1.9 billion – up 80 per cent – making for a net profit over the first nine months of more than $US 9.8 billion – up nearly 240 per cent on the same period 2006.

Analysts say the company's strong performance is stemmed from rising oil prices and consolidation of the new assets. 

The third quarter was the first time that assets acquired from Yukos were incorporated into the bottom line. This includes production unit, Tomskneft, and three large refineries which add significant value.

“The key is refining from Yukos assets. It's a more profitable enterprise in Russia than export. Rosneft production is good, it's 5 % above the industry average,” Tom Mundy, Vice President of Renaissance Capital Group, said.

The new production capacity saw third quarter output reach 200 million barrels – up 30%, for a nine month figure of more than 512 million barrels.

Despite the figures analysts are questioning the company's future share performance pointing to the possibility of a slide in crude prices if the U.S. economy slips into recession, and also suggesting that its share price gains in recent years have pushed it to a peak.

“Company might be good in financial and production growth but it does not mean a stock is a good investment. It is very expensive now compared to what we have seen two or three year ago,” Maksim Shein, analyst of Broker Credit Service, commented.

Further factors limiting its future upside include continued hikes in crude export duties.  But with oil still well above the price it was at in the summer of 2007 analysts are tipping the company to perform well into the first half of this year, with any downturn likely to be well down the track.