Page 98 - RUSRptOct18

additional 405bcm of gas and 40mmt of gas condensate (in Russian classification) at the Utrenneye gas field. This discovery increases the total reserves at the Utrenneye field to around 2tn cubic metres of gas. According to Kommersant, were the discovered reserves to be approved that might increase the PRMS reserves at the Utrenneye field 270bcm, which would theoretically be enough for the construction of an additional 6.6mmt LNG train at Arctic LNG. However, the launch of three trains at the Arctic LNG plant, with total capacity of 19.8mmt in 2023-25 remains the base case for Novatek, the paper reports. Currently, Novatek is in talks with Chinese CNPC, Korean Kogas, Saudi Aramco and a consortium of Japanese companies about a stake in Arctic LNG. Novatek is to make a final investment decision about the Arctic LNG project in 4Q18.
Russia’s fourth largest oil firm by output, Surgutneftegaz, has asked buyers to sign an addendum to their contracts agreeing to pay for oil in euros instead of dollars should the need arise. Insisting buyers sign agreements to switch to euro payments in case of a problem with dollar transactions gong into 2019 is a huge sign that the company expects US sanctions pressure to tighten considerably by December. Gazprom Neft reportedly already has such contingencies for its 2019 contracts. Surgutneftegaz, Russia's most liquid company, has its money in Sberbank and VTB as well as other banks potentially exposed to risks. The question remains how banks working with customers respond, but Russian firms are starting to look more seriously for dollar alternatives and arrangements to insulate themselves from US policy.
The board of directors of Russian regional oil producer 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 spend RUB799bn in capex in the extraction and RUB194bn in refining from 2019 to 2030. As a result, Tatneft anticipated free cash flow to triple from RUB112bn in 2018 to RUB430bn, Ebitda to triple to RUB519bn, and market capitalisation to rise to $36bn by 2030. "The new targets sound very supportive of Tatneft's investment case, especially with respect to the production growth plans and substantially increased FCF outlook," Aton Equity argued on September 28. Aton reminds that "Tatneft is distinguished by its very investor-friendly dividend policy suggesting 100% of disposable FCF distribution, and making it one of the most attractive dividend stories in the Russian O&G space." "The key surprise was the company’s plans to expand into the petrochemical segment," VTB Capital commented on September 27, reiterating the view that "that this is one of the most attractive segments in the oil and gas space." VTB expects Tatneft to pay dividends based on the official dividend policy of 50% of IFRS net income or full free cash flow, whichever is higher, making a dividend per share of RUB67.5 and dividend yield of 8% and 12% for ordinary and preferred shares, respectively. The revised guidance makes 6% upside to Sberbank's CIB Ebitda forecast for 2019 and 14-20% upside to 2020-23 estimates, the bank commented on September 27. "Given the capex ramp-up, FCF could come in roughly in line with our current estimates over 2019-25 and be just enough to cover dividend payouts of 55% of IFRS net income," Sberbank believes, estimating that the new guidance provides a 1pp boost to the projected dividend yield forecasts for 2019-24, pushing it to 6-7%.
98 RUSSIA Country Report October 2018 www.intellinews.com