Russian oil producer OAO Lukoil Holdings said its first-quarter net profit more than doubled and called for heftier tax cuts for the industry.
Lukoil, 20%-owned by Houston-based ConocoPhillips, said recent government proposals to reduce the tax burden on Russia's oil industry are enough to stabilize the country's declining output but won't result in growth.
"It's up to the government to decide what it wants -- flat output or growing output," Deputy Chief Executive Leonid Fedun said, adding that as much as $2 trillion in investment could be required in coming years to boost output through developments in East Siberia and offshore.
A prime example is Lukoil and gas monopoly OAO Gazprom's Caspian Sea discovery in the Tsentralnaya field, announced last week, which could contain two billion barrels of oil equivalent, split 55%-45% between liquids and gas.
A bigger cut in taxes would encourage producers to reinvest in new fields such as Tsentralnaya, Mr. Fedun said. "It would create a new impetus," he said.
Lukoil said quarterly net income was $3.16 billion, compared with $1.3 billion a year earlier, driven by higher oil prices, healthy refinery margins and an increase in refinery throughputs, though the increase missed analyst expectations.
Analysts said Lukoil's profit miss was likely a result of the market overestimating company revenue from non-Russian operations such as those in Uzbekistan.
Revenue rose 59% to $25.08 billion. Operating costs increased 32%, mainly on higher refining and extraction costs and a strengthening ruble. Total hydrocarbon production fell 2.1% to 2.19 million barrels a day.
For the full year, Lukoil expects production to rise between 1.8% and 2%, followed by a 2.3% increase in 2009, Mr. Fedun said.
Lukoil's local shares, which had surged almost 70% since January amid record crude-oil prices and the expected tax cuts, closed down 6.3% at $102.50 following a drop in oil prices.
"Any further news on tax cuts could become a catalyst for the stock," said an analyst for ING, Igor Kurinnyy.