Rosneft Vows to Crack Down on Debt
State-controlled oil and gas giant Rosneft said May 1 its board had added to its 2022 Strategy, after “taking into account the message” of Russian President Vladimir Putin to the country’s parliament.
Its new strategy initiatives include a target to reduce Rosneft debt by a minimum of rubles 500bn ($8bn) during 2018.
Rosneft said this would be helped by three measures: a target cut in capital expenditure during 2018 of rubles 800bn ($12.75bn), representing a 20% reduction in capex compared to earlier guidance; efficiencies of rubles 200bn in 2018 from trading and procurement savings; and a “strategic review of the asset portfolio” aimed at reducing Rosneft’s share of non-core assets.
Rosneft also undertook to hold a $2bn share buyback during 2018-2020, starting this quarter.
Investors in Russian stocks are more nervous, after sanctions imposed a month ago by the US Treasury Dept that included Gazprom CEO Alexei Miller and scores of Russian oligarchs, but not Gazprom itself. Exxon acknowledged in early March that it had abandoned some activities planned jointly with Russian state Rosneft, after the US blacklisted the latter's CEO Igor Sechin, but remains a Sakhalin-1 partner.
Rosneft did not disclose its net debt at end-2017 when it published annual results in mid-March, vowing then only to "reduce short-term debt." It has a reputation for spending, last year paying Eni $1.125bn for a 30% interest in Egypt's giant offshore Zohr gasfield and committing to invest more than $2bn in Zohr over the next four years; yet it did not exercise an option to buy a further 5% equity in Zohr.
The May Day Rosneft move to shore up its finances may in particular be aimed at reassuring BP, which owns 19.75% of Rosneft, after BP CEO Bob Dudley in an unguarded moment last week indicated some unease at the UK company’s exposure to Russia; the two companies are meant to be working on a strategy to promote Rosneft gas sales into Europe.
Rosneft CEO Igor Sechin said: "Successful implementation of 'Rosneft-2022' is our top priority; it will help to further boost our competitive advantage in the volatile external environment.”