UPDATE: Lukoil Sees $2 Billion In 4Q 2008 Write-offs

Russia's biggest independent oil producer OAO Lukoil (LKOH.RS) said Friday it expects almost $2 billion in write-offs for the fourth quarter of 2008, but operations and cashflow have picked up in the first months of this year.

The company said it will make a loss of around $950 million due to a weakened ruble and a $170 million write-off in exploration costs, as no commercial reserves were discovered at some projects.

Lukoil expects to write off around $850 million due to crude oil and products inventory write-offs at refineries and retail networks.

The company said the losses were mainly caused by commodity prices and currency volatility during the period.

"All of these impairments and write-downs are connected with a series of simultaneous unfavorable financial and price factors, which do not have an analog in the contemporary history of the oil industry," Lukoil said in a statement.

The company said preliminary operating and financial results in the first months of this year indicate a "stabilization and a strengthening trend in the operations of the company and its cash flow."

Company Web site: www.lukoil.com

-By Jacob Gronholt-Pedersen, Dow Jones Newswires; [phone]; [e-mail]