Lukoil (MCX: LKOH) Is one of the world's largest energy organizations with a vertically integrated business structure.
14 May, the company made public its industrial specifications for 1 Quarter 2021. Indicators do not inspire optimism: hydrocarbon production fell by almost eight percent year-on-year, up to 5 year minimum. Oilfield in the Russian Federation fell by twelve percent, and processing volumes decreased by eight percent. I suggest you figure it out, how and why did it happen.
Extraction and processing
Total hydrocarbon production «Lukoil», without taking into account the collective company in Iraq "West Qurna - 2", where Lukoil owns seventy-five percent, in the first quarter amounted to 2.15 million boe per day — against 2.33 million boe quarterly.
Hydrocarbon production for the 1st quarter, million boe per day
| 2017 | 2,21 |
| 2018 | 2,29 |
| 2019 | 2,38 |
| 2020 | 2,33 |
| 2021 | 2,15 |
2017
2,21
2018
2,29
2019
2,38
2020
2,33
2021
2,15
The main reason for the fall is the agreement between OPEC + states, in force since 1 May last year. Let me remind you, that the company then reduced oil production by approximately 0.3 million boe per day, or nineteen percent in relation to the first quarter of 2020, and then evenly increased production as restrictions were eased.
If you look at the dynamics of production in the context of regions, it seems, that the production of "Lukoil" fell into 2 And 3 areas of 2020 and has been recovering since then as the oil market normalizes.
Extraction of hydrocarbons, million boe per day
| 1 kV. 2019 | 2,38 |
| 2 kV. 2019 | 2,32 |
| 3 kV. 2019 | 2,31 |
| 4 kV. 2019 | 2,39 |
| 1 kV. 2020 | 2,33 |
| 2 kV. 2020 | 1,98 |
| 3 kV. 2020 | 1,89 |
| 4 kV. 2020 | 2,07 |
| 1 kV. 2021 | 2,15 |
1 kV. 2019
2,38
2 kV. 2019
2,32
3 kV. 2019
2,31
4 kV. 2019
2,39
1 kV. 2020
2,33
2 kV. 2020
1,98
3 kV. 2020
1,89
4 kV. 2020
2,07
1 kV. 2021
2,15
IN 1 quarter oil production was approximately 0.13 million barrels higher than May 2020, when stricter restrictions were in effect.
Main volumes of oil production belong to the Russian Federation, and only about five percent - for overseas projects. The company is working on fields in Western Siberia, Timan-Pechora, The Volga region and the Urals. Abroad, production is mainly carried out within the framework of solidarity companies.
Oil production in the Russian Federation and in foreign projects decreased by twelve percent.
Oil field for the 1st quarter, million tons
| In the Russian Federation | Abroad | |
|---|---|---|
| 2017 | 20,44 | 0,96 |
| 2018 | 20,01 | 0,92 |
| 2019 | 20,33 | 0,92 |
| 2020 | 20,37 | 1,02 |
| 2021 | 17,89 | 0,89 |
In Russia
2017
20,44
2018
20,01
2019
20,33
2020
20,37
2021
17,89
Abroad
2017
0,96
2018
0,92
2019
0,92
2020
1,02
2021
0,89
Gas production by relation to 1 quarter of 2020 increased by four percent to 8.79 billion cubic meters. Overseas volumes up 21 percent to 4.53 billion cubic meters from a low base last year. Last year, the company reduced natural gas production in Uzbekistan amid a decrease in consumption in China due to a large-scale SARS-CoV-2 epidemic.. If by August last year, the design capacities in Uzbekistan were loaded only by twenty percent, then by December, the creation was actually returned to one hundred percent in the face of increased demand from China.
In Russia, there was a decrease in gas production by 9% - up to 4.26 billion cubic meters - due to a drop in oil production. When crude oil is extracted, associated petroleum gas is released, therefore, the reduction in oil production within the framework of OPEC + hit the gas segment of Lukoil as well.
Gas production in the first quarter, billion m³
| In Russia | Abroad | |
|---|---|---|
| 2017 | 4,33 | 2,13 |
| 2018 | 4,49 | 3,5 |
| 2019 | 4,41 | 4,57 |
| 2020 | 4,67 | 3,75 |
| 2021 | 4,26 | 4,52 |
In Russia
2017
4,33
2018
4,49
2019
4,41
2020
4,67
2021
4,26
Abroad
2017
2,13
2018
3,5
2019
4,57
2020
3,75
2021
4,52
In addition to oil and gas production, the company processes hydrocarbons at its own and joint oil refineries. Lukoil has 4 refineries in Russia and more 3 abroad: In Bulgaria, Romania and Italy.
Refining volume of crude oil fell on 15% - up to 14.44 million tons - due to a decrease in hydrocarbon production. At Russian refineries, refining volumes decreased by 8% — up to 10.03 million tons, and on European collapsed on 28% — up to 4.42 million tons.
This was due to low demand for aviation fuel.. In order to assess the complexity of the situation in the aviation industry, just look at the operating results of Aeroflot, as one of the largest players in the international market. Besides, in many European countries, restrictive measures are periodically tightened or a complete lockdown is introduced due to the difficult epidemiological situation, what affects the demand for petroleum products in the region.
Processing of crude oil at refineries for 1 neighborhood, million tons
| In Russia | Abroad | |
|---|---|---|
| 2017 | 10,51 | 5,69 |
| 2018 | 10,66 | 5,46 |
| 2019 | 10,97 | 5,7 |
| 2020 | 10,934 | 6,15 |
| 2021 | 10,03 | 4,42 |
In Russia
2017
10,51
2018
10,66
2019
10,97
2020
10,934
2021
10,03
Abroad
2017
5,69
2018
5,46
2019
5,7
2020
6,15
2021
4,42
What's the bottom line?
IN 1 quarter Lukoil had to cut oil and gas production, as well as the volume of production of petroleum products due to restrictions on oil production under the OPEC + agreement.
Beginning with 4 quarter of last year, production figures are gradually recovering due to the easing of restrictions and the stabilization of the oil and gas market. But there is no need to talk about reaching pre-crisis levels yet., especially in view of that, that the OPEC+ agreement will limit Lukoil's production until May 2022, if the countries do not renegotiate the terms of the deal.
At the same time, it is worth noting, that the average price of Urals oil according to the results 1 quarter turned out to be 24% higher than the same period last year and 2 quarter is kept at a high level, which may favorably affect the financial performance of Lukoil in 1 Half.
