Lukoils Net Profit Plummets by 26.5% in 2024 as Asset Impairments and Taxes Take a Toll

Russia’s second-largest oil company, Lukoil, reported a 26.5% decline in net profit for 2024, attributing it to asset impairment losses and higher deferred taxes.

The company’s net profit for last year was 848.5 billion rubles ($10.1 billion), down from 1.1 trillion rubles ($13.7 billion) in 2023. Conversely, revenue increased by nearly 9% to 8.6 trillion rubles ($102.1 billion), compared to 7.9 trillion rubles ($93.9 billion) the previous year.

Lukoil announced on Monday that it recognized an impairment loss totaling 93.3 billion rubles in fixed assets, which included 50.4 billion rubles linked to exploration and production assets and 31.1 billion rubles for processing, trading, and sales assets overseas.

Analysts from Moscow-based financial services company Finam characterized Lukoil’s results as “satisfactory” given the difficult circumstances the company encountered, such as low refining margins, OPEC+ production restrictions, refinery shutdowns caused by “external factors,” and the need to evaluate deferred taxes ahead of Russia’s corporate tax increase to 25% in 2025.

“External factors” likely refer to Ukrainian drone attacks on oil facilities, which have, in several instances, necessitated repairs and shut down operations.

Additionally, analysts pointed out that rising expenses contributed to a 16.5% year-on-year decrease in operating profit, which fell to 1.19 trillion rubles. They noted that one-time costs, such as year-end asset write-offs and tax adjustments, were significant contributors to the drop in Lukoil’s profits.

Following the release of the earnings report, Lukoil’s shares dropped by almost 1% for three consecutive days on the Moscow Stock Exchange (MOEX).

On Tuesday, Lukoil’s board recommended a dividend distribution of 541 rubles per share based on the results for 2024, with June 3 suggested as the date for determining which shareholders are eligible.