U.K. oil major BP PLC's (BP) Russian joint venture TNK-BP Ltd.'s net profit more than halved in the first quarter due to lower oil prices and despite an increased in production, the company said Thursday.
Net income for the period fell by 58% to $747 million from $1.77 billion in the same period a year earlier, while revenue halved to $6.33 billion from $12.71 billion.
TNK-BP's interim Chief Executive Tim Summers said revenues declined alongside the price of Russia's Urals export blend crude oil, which fell to $43.7 a barrel in the first quarter from around $90 a barrel in the same period last year.
"This is a strong performance, despite a very challenging environment compared to last year," Summers said.
TNK-BP, Russia's third-biggest oil producer, which is owned 50-50 by BP and a group of Russian billionaires, said the launch of new fields at Uvat in the Tyumen region of northern Russia and increased output from the Verkhnechonskoye and Kamennoye fields in East and West Siberia helped to raised output by 3.9% to 1.67 million barrels of oil equivalent a day. The company is targeting flat output in 2009, as output from some of its West Siberian fields is declining.
Last year, BP was involved in a bitter dispute with its Russian partners, in which a wave of administrative pressure led the BP-appointed chief executive Robert Dudley to flee Russia. BP said its Russian partners - headed by tycoon Mikhail Fridman's conglomerate Alfa Group - was behind the squeeze that led to BP ceding some of its control, an allegation Alfa denied.
The row came to an end in September, when a new shareholder agreement was signed, but the parties have still to appoint a permanent CEO.
People close to the matter say shareholders have agreed to extend the contract of interim CEO Summers and that Denis Morozov - former head of mining giant Norilsk Nickel (GMKN.RS), who was long considered the lead candidate for the job - is now out of the running.
The dispute raised questions over property rights in Russia. Fridman's Alfa Group is now involved in a long-running battle with Norway's Telenor A/S (TELN.OS) over OAO Vimpelcom (VIP), Russia's No. 2 mobile-phone company. The row may see Telenor lose its 30% stake in the company, after it was ordered to pay $1.7 billion in damages following a law suit by Alfa.
TNK-BP's earnings before interest, taxation, depreciation and amortization, or Ebitda, halved to $1.49 billion in the first quarter from $2.97 billion a year earlier, while operating expenses fell 23% to $855 million from $1.15 billion.
The company's net debt by the end of the quarter was down 20% to $5.97 billion compared to $7.41 a year earlier.