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News // Oil and gas worldwide

Tyumen Oil CFO says 2001 profits to fall below 2000

15 March 2001 , 07:09443
NEW YORK, March 14
Tyumen Oil Co., Russia's fourth largest, warned on Wednesday that profits in 2001 are expected to fall below 2000 results because it believes the average price for a barrel of oil will drop to $21.

Iosif Bakaleynik, chief financial officer of Tyumen Oil, or TNK, told Reuters in an interview that in addition to the expectation of lower oil prices, rising inflation is likely to put a crimp in their bottom line for 2001.

``As of today, we are planning to make less money than last year because nobody expects the price of oil to be above $30 (a barrel) like it was last year,'' Bakaleynik said.

It costs Tyumen an average of $12 to produce, transport and sell a barrel of oil, Bakaleynik said.

TNK is controlled by the Russian Alfa Group and the U.S.-Russian Access/Renova company in a 50-50 consortium.

TNK, ranked the fourth largest in Russia by oil production and number two by the amount of proven reserves, expects to produce 41 million tons of oil in 2001, representing a five percent increase over 2000.

Bakaleynik, who will present unaudited financial results for 2000 at an investors conference in New York on Thursday, refused to say how much of a difference there will be in profitability.

Russia's budget and economy were boosted last year by strong oil sales, its main source of export revenue, while a weak rouble, a remnant of the devaluation that occurred during the August 1998 financial crisis, kept operating costs down.

However, inflation remains a concern, economists note, because of the better than 60 percent rise in Russia's money supply by the end of last year.

For TNK, these external factors, of lower oil prices and rising energy costs, Bakaleynik said, won't be fully compensated for ``through cost cutting exercises.''

Cost cutting includes the reduction in the number of employees which have ballooned to more than 94,000 from 33,514 at the start of 2000, because of acquisitions, including ONAKO Oil Co. for $1.08 billion last September.

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