A Rosneft logo stands at the Russkoye heavy crude oil field, operated by Rosneft PJSC, in the Yamalo-Nenets region of East Siberia, near Novy Urengoy, in Russia, on Thursday, Dec. 8, 2016. The surprise $11 billion sale of shares in oil giant Rosneft PJSC to Qatar's sovereign wealth fund and Glencore Plc caps a 2016 that's only gotten better for the Russian President Vladimir Putin as the political tide moved in his favor. Photographer: Andrey Rudakov/Bloomberg
A Rosneft logo at the Russkoye oilfield in east Siberia © Bloomberg

Rosneft’s profit fell by almost half last year, as the world’s largest publicly traded oil producer by output struggled with low crude prices and increased costs.

State-controlled Rosneft reported on Wednesday net profit of Rbs181bn ($3.14bn) for 2016, down 49 per cent compared to 2015, following the slide in oil prices to a 12-year low.

Profit in the fourth quarter of 2016 came to Rbs52bn roubles, down 2 per cent compared to the same period one year earlier, in spite of a surge in revenue fuelled by the acquisition of smaller Russian oil producer Bashneft, which Rosneft bought in October in a contentious deal involving allegations of bribery.

The results are also the first since Russia agreed in December to sell a 19.5 per cent stake in Rosneft to Qatar’s sovereign wealth fund and Glencore, the mining-cum-trading company, for €10.2bn.

Igor Sechin, Rosneft’s chief executive, said the deal “offers opportunities in the global trading of hydrocarbons and other projects’ development”.

The world’s leading oil companies are all grappling with the effect of the plunge in oil prices since 2014, but while many have cut investment, Rosneft increased capital expenditure by 19 per cent last year to Rbs709bn.

This contributed to a 59 per cent decline in Rosneft’s free cash flow in 2016, to Rbs302bn.

Rosneft reported revenue of almost Rbs5tn for 2016, down 3 per cent, as it also struggled to contain certain unit costs. Operating expenses per barrel of oil equivalent at the company’s upstream business — responsible for exploration and production — rose 3 per cent last year.

Rosneft agreed to pay $5.2bn for Moscow’s 50.08 per cent stake in Bashneft in October, cementing its already dominant position in Russia’s oil market.

The deal attracted criticism from politicians and business figures who said that selling Bashneft to Rosneft defied Moscow’s stated intention of privatising the company.

In the fallout, economy minister Alexei Ulyukaev was charged by the Russian authorities with extorting a $2m bribe from Rosneft.

Bashneft was nationalised two years ago after officials found its original privatisation was illegal. 

Separately, Rosneft announced agreements with Libya and Kurdistan.

The company will consider investment opportunities in Libya, including exploration and production ventures with the country’s National Oil Corporation, and Rosneft will pre-finance exports of crude from Kurdistan — the first oil major to do so.

Meanwhile, on Tuesday Gazprom Neft, the oil arm of Russian gas producer Gazprom, reported net profit of Rbs200bn ($3.49bn) for 2016, up 83 per cent compared to 2015 because of increased production and lower costs.

Rosneft, Gazprom Neft and other Russian oil companies including Lukoil and Surgutneftegas are having this year to factor in a promise by the country to curb crude output under a deal reached with Opec, the producers’ cartel, in December.

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