MOSCOW, may 1. /TASS/. The Board of Directors of Rosneft has approved additional initiatives to the strategy of “Rosneft-2022”, among which the development in 2018-2020 of the program to repurchase shares of the company from open market totaling $2 billion, said in a statement.
The company plans to start share buyback in the second quarter of 2018. “With the aim of increasing profitability for shareholders the company management has proposed to implement a program of share repurchases of $2 billion by 2018-2020 on the open market in addition to the approved dividend policy to pay not less than 50% of net profit according to IFRS. Implementation of the buyback program on the open market will begin in the 2nd quarter of 2018, after obtaining the relevant corporate approvals,” – said in a press release.
Explains that this program will be implemented in the medium term and be funded by free cash flow and selling non-core assets.
Reducing the debt burden
Additional strategic initiatives of the program “Rosneft-2022” include new educational, personnel and social projects, programmes of regional development and the problems of accelerated technological breakthrough for “Rosneft”. To increase the investment attractiveness of the set minimum target level of reduction of the total debt and trade liabilities of the company not less than 500 billion rubles in 2018.
It is planned that this will be achieved through “improving the investment process, accelerating the development of advanced project management methods and optimization of the service supply with a corresponding decrease in the target level of capital investment in 2018 to 800 billion rubles (20% compared to previously approved levels – approx. TASS). “This initiative will be implemented in the framework of previously approved strategy “Rosneft-2022″ with the aim of achieving positive, sustainable impact on the level of cash flow”, – stated in the message.
In addition, the planned reduction in working capital by 200 billion rubles until the end of 2018 due to the implementation of a series of events in the trading business, and optimize the activities of service supply, as well as optimization of the asset portfolio to reduce the proportion of “tail” and non-core assets with the additional net cash flow for shareholders.
The Strategy Of “Rosneft-2022”
The head of “Rosneft” Igor Sechin, commenting on the proposed initiative, said that the successful implementation of the strategy “Rosneft-2022” is a top priority, it aims to gain competitive advantage, which is especially important in the conditions of dynamically changing external environment. “The strategic objectives will determine the evaluation activities of management. The company continues to demonstrate strong financial results, and proposed new initiatives will enable us to increase the efficiency of our core business, using its competitive advantages that will increase profitability for the shareholders. We believe in the fundamental underestimation of the market value of Rosneft in current volatile conditions,” the press service quoted the words of Sechin.
Sechin earlier said that the implementation of the strategy up to 2022 will add 15-20% of the current capitalization of the company.
Earlier it was reported that the Board of Directors of Rosneft approved the strategic development program of the company within the perimeter until 2022, the focus will be on intensification of production, reduced operating costs and rapid growth of digitalization of the business. Rosneft expects a 420 billion rubles of the effect of the implementation of the strategy up to 2022.
A positive signal for the market
Senior analyst of investment company “Aton” Alexander Kornilov believes that the promise of “Rosneft” at a guaranteed reduction of the debt burden and the company’s dividend policy of 50% of IFRS net income is a positive signal for the market. “Shares of “Rosneft”, in fact, sleeping rocket. The company is one of the most efficient in the industry in key areas of the business. But the growth of capitalization for a long time was constrained by the high debt load and uncertainty about the future investment activity of the company, i.e. risk on new purchases and high capex. The promise to significantly reduce debt amid falling capital expenditure and stable dividend for a long time consolidate the shares of “Rosneft” in the status of favourites of the market”, – said Kornilov.
Guarantee a significant reduction in financial liabilities and a decision on buyback will be a real shot of adrenaline for the quotations of “Rosneft”, which have all chances to update historic highs, according to head of analytical Department of “Alpari” Alexander Razuvaev. “Investors have appreciated the company’s decision to increase the dividend on the news about record payment of shares “Rosneft” on the Moscow stock exchange has updated the record since February of 2017, rising to close more than 5% – to 370 rubles per share. In the beginning of the year securities rose in price by more than 25%,” – said Razuvaev.
The Board of Directors of “Rosneft” recommended to shareholders at the annual meeting to approve the dividends payment for the year 2017 in the amount of 6.65 ruble per ordinary share, for a total of 70.5 billion rubles. Thus, taking into account the payment for the first half of 2017, “Rosneft” will direct on dividends of 50% of IFRS net profit (35% for 2016).
The aggregate amount of dividends “Rosneft” for 2017 will be 111,1 billion rubles, which is 75% higher payouts 2016 (63,4 billion roubles), however, interim dividends were not accrued.