Russia's Lukoil to reduce capex to conserve cash

Company declared a $669m loss for the first quarter of 2020

Russia's Lukoil still expects oil prices to trade above $50 per barrel within 18-24 months, said chief financial officer Alexander Matytsyn. EPA

Russia's Lukoil said on Thursday it had cut its capital expenditure guidance for this year to 450-500 billion roubles (Dh23.8bn-Dh26.4bn, or $6.5bn-$7.2bn) from 550 billion roubles due to adverse market conditions and an output reduction deal.

Lukoil's chief financial officer Alexander Matytsyn also told a conference call with investors that the company, the country's second-largest oil producer, still expected global oil prices to exceed $50 per barrel in 1-1/2 to 2 years.

Lukoil on Wednesday reported a first-quarter net loss of 46 billion roubles ($669 million), hurt by lower oil prices, a weaker rouble currency and asset impairment losses.

The company had to cut its oil output in Russia by 310,000 barrels per day (bpd) in May from the first quarter due to the pact on output curbs agreed by OPEC producers and others including Russia, a group known as OPEC+.

A company official told the conference call that Lukoil fully achieved its output cuts goal in May.

He added that Lukoil would quickly be able to restore production and mothballed wells once the global output reduction deal is over.

Pavel Zhdanov, a company vice president, said Lukoil's natural gas output in Uzbekistan could halve to 7 billion cubic metres this year on the back of a slump in demand in China.

He also said it had already made a return of some $8bn (Dh29.4bn)  on investments in projects in Uzbekistan, out of the $9.9bn it has invested there.