Yukos cuts output to save money

Yukos is to reduce the amount of oil it produces and cut other expenditure in an effort to keep its operations going.

The Russian oil company said it was having to introduce some "stringent" cost-saving measures in order to continue its "normal operations".

It will slash expenditure by $700m (£385m), cut annual oil output by 4.5%, and defer payment of current taxes.

Yukos said the government's seizure of money from company accounts to pay taxes had halved its monthly income.

Shares tumble

Yukos shares fell 7%, as investors digested the output cut as well as reports the government may lodge an additional $3bn tax claim against its key subsidiary Yuganskneftegaz.

Bailiffs have so far seized around $800m from Yukos accounts to pay a $3.4bn tax bill from 2000 which the government says was not paid.

Yukos has warned several times that its dispute with the Russian government could force it into bankruptcy, particularly if production is halted or key assets sold.

In order to save money, Yukos is to reduce its oil output target for 2004 from 90 million to 86 million tonnes.

The company will also reduce capital and operating expenditure, cutting social programmes.

Steven Theede, Yukos's chief executive, said the measures were necessary because the company could not gain access to cash stored in frozen bank accounts.

No option

"Half of our monthly revenue is not available to us to meet our day-to-day operating costs," he said.

"The management has considered all options open to it and concluded that there is no other choice than to effect, immediately, a reduction in our capital and operating expenditures."

By the end of August, half of the $3.4bn sought by the government will have been paid, Yukos said, leaving $1.7bn in penalty interest and fines outstanding.

Bailiffs acting for the Russian Ministry of Justice have previously indicated that Yukos would have until the end of August to pay the entire sum.

Yukos said it would continue to challenge the legal validity of the government's tax claim.

High-profile trial

The government is also pursuing a similar claim from Yukos for taxes from 2001.

Many within Russia believe that the government's pursuit of Yukos is politically motivated.

Mikhail Khodorkovsky, Yukos's founder and former chief executive, has funded opposition parties.

Mr Khodorkovsky has been behind bars since October.

He is currently standing trial on charges of fraud and tax evasion relating to privatisation deals in the 1990s.


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