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FSUOGM INVESTMENT FSUOGM
Russia clears Saudi purchase of Novomet stake
RUSSIA
Previously US-based Halliburton had been vying for control of the equipment supplier.
RUSSIA’S commission on foreign invest- ment control has cleared a joint bid by Saudi oil giant Saudi Aramco, the Saudi Public Investment Fund (PIF) and the Russian Direct Investment Fund (RDIF) for a 30.76% stake in Perm-based oilfield equipment sup- plier Novomet.
The approval was announced by the head of Russia’s Federal Antimonopoly Service (FAS), Igor Artemyev, to reporters on November 14. The commission, set up in 2008 to vet large-scale acquisitions in Russia by international investors, also last week greenlit the purchase by Finnish energy group Fortum of a 20.5% share in Ger- man counterpart Uniper, which has assets in Russia.
The owner of the Novomet stake is Russia’s government-run Rusnano. Aramco and PIF will together take a 20.5% stake in Novomet, whose main business is the production of elec- tric submersible pumps, for RUB5bn ($78mn). The remaining 10.2% will be sold to RDIF for RUB2.5bn.
Rusnano unveiled plans to divest from Novomet in 2016, with US-based Halliburton later filing a bid to buy 100% of the equipment manufacturer from Rusnano and local private equity firms Baring Vostok and Russia Partners Management. But the deal was held up by Rus- sian regulators over the risk of potential new US sanctions that could restrict Novomet’s business activity.
Novomet is viewed by Russia as a strategic asset, given its importance to the country’s oil industry at a time when Moscow is looking to build up domestic manufacturing and substitute imports.
Aramco, PIF and RDIF then stepped for- ward with a joint offer in October last year. The commission’s clearance follows high-level talks between Russia and Saudi Arabia that took place during a state visit to the Kingdom by Russian President Vladimir Putin last month. During the visit the three buyers signed a confirmation agreement on the purchase, which Aramco expects to close early next year.
PERFORMANCE
Tatneft dividends seen as unsustainable
RUSSIA
THE board of Russian regional oil major Tatneft recommended paying RUB64.47/share in divi- dends for 9M19, including the RUB40.11/share already paid for 1H19.
Company CEO Nail Maganov said that the payout for 2019 was expected to be at least as large as the RUB84.91 per share paid for 2018.
As reported bybne IntelliNews, Tatneft has the highest share of profitable oil reserves among Russian oil companies. But the company, along with state major Rosneft, took the hardest hit from oil quality disruptions in the Druzhba pipeline that sends Russian oil to Europe over Ukrainian territory earlier this year and saw its cash flow dive in 2Q19 as a result.
Sberbank CIB on November 14 noted that Tatneft paid dividends based on free cash flow generation and the payment for 3Q19 would be financed from 1Q20 free cash flow (FCF), when it is actually paid.
The bank estimates that Tatneft will pay all of its 2018 FCF ($2.3bn) in dividends in 2018-1Q19 (for an 8.3% yield), and that Tatneft already dis- tributed more than the entire amount of its FCF
expected for this year ($2.4bn) in payments in 3Q-4Q19 (a total of $2.6bn, for a 9.4% yield).
Thus Sberbank CIB notes that “the target indicated by Tatneft’s CEO should be quite pos- itive for sentiment,” implying that the company aims to reach $3bn in dividend distribution annually (for an 11% yield) in the medium term.
As the same time, BCS Global Markets on November 14 warned that the 100% payout ratio could actually exceed the FCF and “appears unsustainable in the mid-term.”
In September 2018 Tatneft approved a 2030 strategy, which includes the construction of RUB70.6bn ($1bn) gas chemical complex by 2024, boosting oil output to 38.4mn tonnes by 2030, and spending RUB799bn in capex in the extraction and RUB194bn in refining from 2019 to 2030. As a result, Tatneft anticipated market capitalisation to rise to $36bn by 2030.
The company started implementing the strategy by reportedly acquiring petrochemical assets in the city of Tolyatti from petrochemical major Sibur for an undisclosed amount earlier in 2019.
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w w w . N E W S B A S E . c o m Week 46 20•November•2019
