Page 16 - FSUOGM Week 23 2021

FSUOGM NEWS IN BRIEF FSUOGM

and oil products transportation volumes, rebranding and spending on the buyback of liquidity, Fitch said.
which would imply a 9.5% DY. The analysts shares, rather than fundamental financial Another consideration for the rating
maintained a Buy call on Transneft's and operating figures that allow us to assess was a limited record of post-restructuring
preferred shares. the current and future business prospects," financial policy and governance practices –
Sberbank CIB also notes that Transneft he said. which results in uncertainty over post-2020
paid 50% of its bottom line, while its He added that subsidies for green energy dividend distributions and thus leverage
dividend policy sets the minimum at 25%, and small investors are a new threat for the profile – once Interpipe's current restrictive
but sees the payout as fully expected by the oil market, while the sales of dirty assets to covenants are lifted, according to Fitch.
market. small companies do not cut emissions. DTEK Oil & Gas will extract 1.8bn cubic
Following the presentation of the IFRS Sechin said that the growth of oil and metres of gas per year on average in 2022-
results Transneft held a conference call, gas reserves has lately been at historical 2024, down from 2.0 bcm in 2021E, Fitch
during which lowered its turnover guidance lows, which is why the world can soon assumes. The natural gas prices at European
to 439-440mn tonnes and reiterated its face serious oil deficit. Demand for oil is to hubs will amount to $159 per 1,000 cubic
capex of RUB232bn for 2021, as well as recover as long as vaccination continues. metres in 2021-2022 and $177 per 1,000
said it was still waiting on the government The oil share in the energy balance will cubic metres afterwards, according to Fitch.
to formalize the changes for correcting net decline but consumption will increase. DTEK Oil & Gas will spend on average
income for dividends, Sova Capital wrote New players can emerge on the Russian UAH2.4bn ($86mn) per year on capex, the
on June 2. oil market and medium-sized companies agency assumes.
Notably, Transneft also confirmed the can rise, the official said. Fitch reclassified UAH3,514mn
agreement with state oil major Rosneft to The CEO separately said that Russia’s ($130mn) of reversal of net impairment
settle two cases over the 2019 Druzhba environmental regulation is much stricter loss on financial assets from operating
incident. than in the U.S. and that the global market profit to non-operating items, according
Sova analysts see the conference must reject oil produced at environmentally to the report. DTEK Oil & Gas reported in
call updates as neutral, seeing the next harmful projects, such as shale. The its 2020 financial statements that the gains
important event for Transneft will be the development of economically feasible due to reversal of impairments contributed
government’s formal changing of Decree technologies cutting emissions will take UAH3,126mn ($116mn) to its total
No. 744-r, which relates to adjusting net decades. UAH8,119mn ($301mn) adjusted EBITDA
income for dividend purposes. Rosneft is discussing the launch of a for 2020.
fund cutting carbon footprint in the energy Fitch might raise its rating of DTEK
sector, Sechin said.sting net income for Oil & Gas or its outlook if the company
Rosneft CEO: Long-term dividend purposes. increases its production levels and also
if it improves its corporate governance
oil goals threatened by profile and makes its group structure more
transparent by maintaining a stable track
investors' interests EASTERN EUROPE record of a limited amount of related-party
transactions on an arms-length basis and
The long-term stability of oil supply is Fitch rates DTEK Oil & Gas adheres to a conservative financial policy,
under threat because of the lack of financing the report said. Conversely, Fitch might
due to short-spanned interests of some of B-, outlook Stable downgrade its rating or outlook for the
investors, CEO of Russian oil major Rosneft company if DTEK Oil & Gas’ corporate
Igor Sechin said at the St. Petersburg Fitch Ratings announced on June 3 it has governance profile weakens, including due
International Economic Forum on June 5. assigned a B- issuer default rating (IDR) to sizeable related-party transactions, the
"Long-term stability of oil supplies is with a Stable outlook to Ukraine’s largest agency said.
under the risk due to the lack of investment. private natural gas producer DTEK Oil & If the company’s ratio of net debt to
The companies have become dependent on Gas (DTEKOG). funds flow from operations (FFO), which
the situational interests of some groups of The rating is one notch below Fitch’s stood at 4.4x in 2020 according to Fitch,
investors," Sechin said. assessment for Ukraine’s sovereign credit. rises above 4.5x on a sustained basis, the
He added that some stakeholders force Currently, DTEK Oil & Gas has no ratings agency might lower its rating or outlook.
companies to abandon investment in oil from other credit agencies. Conversely, a drop of FFO net leverage
and gas and some majors companies raise Fitch’s rating of DTEK Oil & Gas is below 3x on a sustained basis might lead to
the shareholder value by raising dividends constrained by the company’s small scale of a positive rating action or an upgrade, Fitch
and buying back shares. As a result, the oil operations, moderately high leverage and said.
producers develop only the projects that are evolving governance practices, including “Fitch’s initiation is a reasonable starting
beneficial in the short term. a complex group structure and related point for DTEK Oil & Gas’ rating history.
According to Sechin, oil companies need party transactions, the agency said in its The company needs to establish its track
to change relations with investors. "It seems June 3 release. The rating also reflects record with the rating agencies and the
that the companies have to change the moderate production costs supporting markets. Its rating profile might prove more
mode of relations with the external world stable profitability, good 1P reserve life, dynamic than for other Ukrainian issuers
because investors pay more attention now a reserve replacement ratio above 100%, because of the volatile natural gas markets
to such aspects as environmental programs, providing the necessary basis for sustaining and the current uncertainty around its
investment in carbon neutrality, green the production profile, and satisfactory future corporate governance actions,” an

P16 www. NEWSBASE .com Week 23 09•June•2021