Lukoil's quarterly numbers came in much better than what traders were expecting, but the real news was that this truly independent Russian oil giant is looking overseas for growth.
OTCPK:LUKOY earned a net $2.8 billion in the third quarter on $26.5 billion in revenue -- well above the $2.1 billion and $25.3 billion numbers analysts had expected.
The company is now generating $7 billion a quarter as it curtails investment in its native Russia. Instead, it now sees West Africa as the best area to expand its business, and will be spending a total of $900 million in the region over the next two years.
In particular, the company is drilling less in its known Siberian fields because, according to long-time industry observers, Russia's current tax environment means every ruble can be more effectively spent buying or developing assets in other countries.
A strong ruble is also hurting LUKOY's dollar-denominated export business, so the more diversification the company can get in its overall currency exposure, the better.
Either way, investors seem more than satisfied with the results. The stock is up quite a bit today, and with crude already up 10% over the average level at which LUKOY booked its sales last quarter, it is likely that double-digit growth should continue into the current quarter as well.
Disclosure: No position