Rosneft came in slightly below forecasts with a 7% rise in 2012 net profit on Friday while free cash flow halved ahead of its $55 billion takeover of TNK-BP, sending shares in Russia's top oil producer lower.
Rosneft's shares fell 2.2% to lag a 0.1% rise in the Moscow market as the oil firm joined gas export monopoly Gazprom in delivering weak cash flow numbers symptomatic of heavy investment.
"The results were bad, I'm surprised. Everything that could have missed expectations did indeed miss expectations," Uralsib energy analyst Alexei Kokin said.
Rosneft also announced several deals to supply customers in Europe directly via the Druzhba pipeline as it aims to reduce the influence of traders in its sales schemes and cut costs.
Rising costs have prompted Chief Executive Igor Sechin, a close ally of Russian President Vladimir Putin, to seek to exercise more control over the company's trading operations by cutting out intermediaries.
Rosneft said it had agreed several deals to supply its European customers, such as Total and Shell directly via the Druzhba (Friendship) inland pipeline.
Rosneft expects to agree a similar deal with Eni.
According to trading sources, after taking the helm at Rosneft last May, Sechin ordered a purge of the trading department and launched a revamp of oil and product sales by Rosneft to boost operational efficiency.
"It is a political move, just to show that we (Rosneft) have direct contracts at no matter what price," one trader said.
Profit below expectations
Rosneft reported a 54.5% drop in free cash flow to 45 billion roubles ($1.5 billion) in 2012, although its forthcoming takeover of cash-generative TNK-BP will bolster its ability to repay $30 billion in loans to pay for Russia's largest takeover.
The deal to buy TNK-BP from BP and the AAR consortium of Soviet-born billionaires is expected to close in the first half of the year.
Rosneft's 2012 net income increased to 342 billion roubles ($11.4 billion) thanks to a rise in production and oil prices, but missed analyst forecasts.
Analysts polled by Reuters expected full-year net income of 347 billion roubles.
Revenues increased 13% to 3.1 trillion roubles, the company said in a statement, in line with expectations, while capital expenditure rose by almost a fifth to 466 billion roubles.
Last year, Brent crude hit a record average price of $112 per barrel, but some global majors, including ConocoPhillips, reported a fall in core earnings as oil has become harder to find and more expensive to extract.
Rosneft's earnings before interest, taxation, depreciation and amortisation (EBITDA) fell 8% to 609 billion roubles in 2012 though topped a Reuters poll forecast of 596 billion.
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