Page 80 - RusRPTJune18

first quarter of 2018 from RUB2.2 trillion ($35.7bn) to RUB1.1 trillion, while total debt inched up by 1% to RUB5.5 trillion, Vedomosti daily said on May 14 citing the report by the company. Cutting the short-term debt was achieved by refinancing short maturities and pushing those 3-5 years forward, unnamed sources told Vedomosti . This was attributed mostly to repo deals from the central bank, with the debt on repo deals cut from RUB1.3 trillion to RUB562bn. As the central bank is not expected to keep rapidly cutting the key interest rate, a decision was reportedly made to shift most of the short-term debt to longer maturities.
Russia's independent oil major Lukoil and Iraqi Basra oil company signed an extraction plan for major West Qurna 2 oil field , cutting the original 1.8mn barrels daily output target to 0.48mn by 2020 and 0.8mn by 2025, Vedomosti daily said May 11. Lukoil recently caught up with state behemoth Rosneft in terms of capitalisation and pleased investors with the cash-flow minded strategy presented in March in London. West Qurna is one of the largest oil fields in the world, located in South Iraq with reserves of 1.8bn tonnes on oil, with Lukoil and South Iraq oil company holding a 75% stake in the project. Lukoil has another project in Iraq Block 10 developed with Japanese Inpex Corporation (60% and 40% stakes, respectively). Previously the head of the company Vagit Alekperov claimed that margins on the project would be significantly higher than on Qurna, which could be the reason for the downwards output revision for the latter.
Russia's largest oil company Rosneft said it will launch a $2bn share buyback program running from the second quarter of 2018 to 2020 -- the first share buyback since its IPO in 2006. The company’s capitalisation of $64.4bn as of May 1 makes $2bn worth 3.1% shares or about 25% of the freefloat of Russia’s largest crude producer. The announcement is part of Rosneft’s recently announced 2022 strategy that aims to increase the investment attractiveness of the company and will reduce it debt. In April the company pledged to cut its record-high debt burden to investors in an effort to improve its valuation as compared to global peers. The share buyback would be attractive for investors, but the company and the company’s stock jumped on the news. It only has 11% of shares as a freefloat, as compared to much higher free floats among other Russian blue chips such as Sberbank (48%) and Lukoil (46%), analysts surveyed by Vedomosti daily believe. Rosneft plans to finance the buyback through "organic free cash flow and sales of non-core assets", with the free cash flow [FCF] and cash accounts estimated by Vedomosti at about $9.7bn. The announcement pushed share prices up by 2.4% in London and 5.4% in Moscow as of May 2. "This [buyback announcement] comes on top of its recently proposed 2018 dividend payment of $1.8bn (this should double in 2019, say analysts), with the new buy-back therefore representing a material part of future cash distribution to shareholders," Renaissance Capital commented on May 1.
Surgutneftegaz reported its 2017 IFRS and the first quarter of 2018 RAS results on April 30.The 2017 IFRS P&L numbers came in very close to our estimates, with revenues moving in step with the oil prices and EBITDA in sync with changes to upstream sector profitability. The most interesting was the net cash line, which broke $1 per diluted share, or $44bn (RAS net cash at end the first quarter of 2018 was almost $40bn). The net cash position is now more than twice as high as the market cap, which means that were Surgutneftegaz to declare that it is paying out the cash as a special dividend, the shares would be yielding 200%. Of course, the market does not believe this scenario, but nor
80 RUSSIA Country Report June 2018 www.intellinews.com