OAO Lukoil, Russia's largest non-state oil producer, said profit fell 23 percent in the first quarter as production costs and export taxes rose and fuel prices declined, reported Bloomberg.

Net income slid to $1.3 billion, or $1.56 a share, from $1.69 billion, or $2.04 a share, a year earlier, Moscow-based Lukoil said in a statement distributed by the Regulatory News Service today. That's 5 percent less than the $1.37 billion median estimate of nine analysts in a survey.

Export taxes, transportation costs and operating expenses and falling oil prices have eaten into Russian oil-company earnings and dragged down its stock markets. Lukoil's profit fell to a 2 1/2- year low of $1.04 billion in the fourth quarter.

``These negative factors were partly offset by increased hydrocarbon production,'' Lukoil said in separate statement today. Revenue rose 4.7 percent to $15.7 billion from $15 billion a year earlier. Lukoil boosted output of oil and natural gas available for sale by 7.3 percent from a year earlier.

Lukoil shares pared gains to 1,996.90 rubles, up 0.5 percent, at 1:39 p.m. in Moscow, after rising as much as 2.2 percent earlier today.

Operating expenses advanced 56 percent to $1.44 billion, as the cost of extracting resources rose. Excise and export taxes climbed 22 percent to $3.27 billion.

``My first impression is that these numbers are neutral, they are close to consensus,'' said Igor Kurinny, an oil and gas analyst at ING Bank. ING has a``buy'' recommendation on Lukoil shares, with a target price of $90.90 a share.

``Operating cash flows came in at $2 billion, up 33 percent quarter on quarter and 54 percent year-on-year,'' analysts Maria Radina and Alex Fak of UBS AG wrote in a research note after the results were released.

``Lukoil's ability to maintain strong operating cash flows in a weak macro environment speaks well for its flexibility on costs and efficiencies,'' Radina and Fak wrote. UBS has a ``buy'' rating for Lukoil shares with a price target of $111 a share.

Lukoil plans to spend $100 billion by 2016 to almost double output and refining and triple its market value to $200 billion. The company, 21 percent owned by Houston-based ConocoPhillips, is expanding in countries with lower tax rates than Russia while state-run rival OAO Rosneft focuses on boosting output at home.

The price of Russia's benchmark blend of crude, Urals, averaged about $54.57 a barrel, more than 6 percent lower than the $58.29 average in the year-earlier period, Bloomberg data show.

Lukoil said last year it plans to spend $27 billion in the next decade to boost overseas oil and gas output sevenfold and ensure growth of about 6.7 percent a year through 2016. The company plans to sustain growth by expanding gas production.

Natural gas makes up almost 12 percent of Lukoil's total production from 11 percent last year. The government has pledged to raise gas prices for domestic industry to make sales in Russia as profitable as exports, which are controlled by state-run OAO Gazprom, by 2011.

Lukoil tripled investments in new international projects last year, not including the Caspian region, to $679 million. It has projects in Saudi Arabia, Egypt, Columbia, Venezuela and Iran and is lobbying Iraq to recognize its claim on the West Qurna field.

The Caspian region, including Kazakhstan and Turkmenistan, is key to Lukoil's plans to add reserves and increase production. Lukoil expects to pump 50 million tons of oil equivalent in the north Caspian as early as 2016, RIA Novosti reported yesterday, citing Alexander Semyanov, Lukoil's deputy director for geology.

Lukoil intends to spend $22 billion on refining and petrochemicals plants over the next 10 years, including as much as $3 billion this year. The company wants to maintain refining at 50 percent of output, Interfax reported today, citing Chief Executive Officer Vagit Alekperov.

Alekperov said in March the company plans to start building a $3 billion gas-processing plant in Kalmykia within two years.

So far, attempts to acquire new refining capacity outside of Russia haven't been successful. Lukoil is delaying plans to buy European refining capacity until asset prices drop, Leonid Fedun, the company's deputy chief executive officer, said in April. High fuel prices have driven up values.