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Eastern Europe
March 30, 2018 www.intellinews.com I Page 19
circa $130bn of operating cash flow at $50 per barrel oil price (vs our current forecast of $126bn at $55 and spend an aggregate $80bn in capex (vs our forecast of $86bn), resulting in aggregate FCF of $50bn, 25% above our estimate with additional upside potential from Lukoil using more conserv- ative oil price assumptions," RenCap estimated.
Lukoil's presentation "left a very good impression" and "delivered what equity investors like to hear," said Aton Equity that also maintained Buy rating on the company at a target price of $78 per GDR.
Aton also welcomed the conservative $50 per barrel oil price assumption, that should help smoothen the high oil price volatility and will help the company to sustain sufficient FCF to provide a constantly rising dividend.
"Lukoil has no plans for any large-scale investments into downstream, emphasising instead maintenance capex in refining as well as cost optimisation and further distribution
channel reinforcement," Aton wrote, stressing that the company prioritises high-margin upstream output.
"The newly presented strategy 2027 effectively classifies Lukoil as a conservative and stable company with a highly predictable business that is secure in bad times thanks to a low debt burden, and very limited exposure to risky and capex-intensive projects," the analysts noted.
For Aton, the company said essentially everything that investors like to hear from Russian oil majors, namely: "1) No obsession with volumes growth at any price and timeframe; 2). Focus on margins; 3). Conservative and selective capex policy; 4). Lowered exposure to downstream capex in Russia; 5). Increasing and de-facto guaranteed dividends with upside via buybacks; 6). Best practice corporate governance and management interest strongly aligned with minority shareholders."