Page 14 - FSUOGM Week 19 2020

FSUOGM PERFORMANCE FSUOGM
Russian oil and gas dividends to fall 25% in 2020: Goldman Sachs
RUSSIA
The bank expects Urals to average $30 per barrel in 2020.
GOLDMAN Sachs sees the dividends paid by Russian oil and gas companies down by 25% in 2020 on adverse market conditions, bouncing back by 40% in 2021, Vedomosti daily reported on May 7 citing the estimates of the investment bank.
As reported by bne IntelliNews, after Tat- neft regional oil major and TMK pipe producer cancelled their guided dividends for 2020, ana- lysts feared that large state oil majors (Rosneft, Gazprom Neft, Gazprom, Transneft) might fol- low suit, theoretically opting to use the right to postpone the FY19 dividend payout for several months.
Looking forward, Goldman Sachs believes free cash flow (FCF) of the sector could decline by 50% from RUB2.3 trillion ($31.4bn) to RUB1.1 trillion, with the average dividend yield decreasing to 7% in 2020 as a result.
The bank sees the Urals price in 2020 at $30 per barrel, recovering to $45-50 per barrel in 2021. Ebitda of Russian oil and gas sector is seen shrinking by 30%, with capital expenditures down by 20%, allowing partial support of the cash flows.
Goldman Sachs improved the recommen- dation on state gas and oil majors Gazprom and Rosneft to Buy, as both are expected to deliver on their dividend policies. Gazprom is antici- pated to pay 40% and 50% of net profit for 2020
and 2021, making 8% and 12% dividend yields respectively.
Rosneft is expected to deliver 9% divi- dend yield, and together with the share buyout pledged by the company, return for sharehold- ers could reach 12% in 2020, Goldman Sachs believes. Most recently the company delivered on its 2019 dividend guidance.
The bank downgraded Lukoil to Neutral and Gazprom Neft to Sell. Gazprom Neft is predicted to have a dividend yield of 7% in 2020 and 9% in 2021, but could be forced to finance the payout through higher debt. Lukoil, which pays all of its free cash flow in dividends, is forecast to deliver 6% dividend yield in 2020 by Goldman Sachs.
On May 7 BCS Global Markets added Lukoil to its Dividend Basket, assuming 9.3% dividend yield, and noting that the company continues to operate with positive FCF even in current mar- ket conditions. Attractive multiples indicate lim- ited downside in the name, BCS GM believes.
“However, the larger part of Lukoil’s yield for the next twelve months is provided by the remaining dividends from 2H19 earnings (DPS of RUB350/sh)” and BCS GM expects the divi- dend yield to decline to circa 4% after the ex-div- idend date in early July.
“In the meantime, we believe the name is a relatively safe bet as a top dividend stock,” BCS GM concludes. ™
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w w w . N E W S B A S E . c o m Week 19 13•May•2020