OREANDA-NEWS. October 13, 2010. Surgutneftegaz CEO Vladimir Bogdanov revealed to journalists in Novy Urengoy yesterday that the company plans to boost crude production to 61MMt (1.22MMBD) next year, after achieving output of 59.5MMt -60.0MMt (1.19-1.20MMBD) in 2010, reported the press-centre of OTKRITIE Financial Corporation.

View: Judging by Surgut’s monthly production performance YTD, we find Bogdanov’s guidance for 2010 oil production credible. We expect 2010 volume to slightly exceed the lower edge of the indicated output range (59.5MMt or 1.19MMBD), thus basically representing no change on the previous year.

Importantly, this would follow the 3.3% output decline seen in 2009. The stabilization of oil production achieved by Surgut this year was mainly thanks to the ongoing development of the Talakanskoye field, where crude output has nearly doubled. That said, it should be also noted that the company slowed the rate of decline at its brownfields from approximately 5% in 2009 to 3% in 2010. In light of these recent achievements, the company’s plan to increase output to 61MMt (1.22MMBD) next year clearly looks positive for the stock, implying output growth of about 2.5% (on our estimates).

Valuation and Action: Although we still maintain our SELL rating on the stock, our view on the company could be subject in the near future, especially if Surgut wins the pending Trebs and Titov oil field license tender.