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Russneft 2017 sees oil output growth of at least 2.5% if OPEC cut deal not extended

Moscow — Russneft expects to at least match last year's 7 million mt (140,171 b/d) crude output and potentially exceed it if the state of oil markets improves and the OPEC/non-OPEC output cut deal is not extended, the Russian company said in a statement Monday.

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Russneft is planning various measures "to optimize" production in order to improve its efficiency and increase volumes after crude output limits under the current OPEC/non-OPEC production cut deal are lifted.

"If supply and demand balance restores on the world oil market, the company plans to increase output by at least 2.5% year on year," it said.

Privately-owned Russneft is among the top 10 oil producers in Russia that will play key role in the country's obligation to gradually reduce production by 300,000 b/d by May, under the six-month agreement with OPEC and other non-OPEC countries.

Russneft will achieve production growth through higher drilling rates, with plans for 128 new wells in 2017, up 21% year on year.

To reach the goal, Russneft envisages 2017 investments at Rb25.7 billion (around $441 million), up 50.3% from the last-year level.

The new 2017 output target is lower than the 7.84 million mt target it announced in November.

The company at the time said it planned to focus on development of hard-to-extract reserves and achieving organic growth to around 200,000 b/d in 2019 and further to 221,000 b/d by 2025.

Russneft's crude output showed signs of stabilizing late last year from the downward trend seen in the previous four years as the company has reconsidered its production strategy, primarily in drilling. In 2016, the company's output fell 5% year on year.

In January, Russneft's production grew by 4% year on year to 142,462 b/d but was down 1.1%, or 1,584 b/d, from October's level, the month used as the base comparison for most participants in the production cut deal.

Russneft is controlled by founder Mikhail Gutseriyev and his family, with a combined stake of 55%. Switzerland-based trader and commodities company Glencore owns a 25% interest.

The remaining 20% was floated on the Moscow stock exchange in November. The company said it raised around $504 million through the initial public offering, the first IPO by an oil company in Russia in more than a decade.

--Nadia Rodova,
--Edited by Alisdair Bowles,