Rosneft, Russia's biggest oil producer, plans to undertake a number of initiatives in order to boost its appeal to investors and reduce its debt, including a $2bn share buyback program running from the second quarter of 2018 to 2020.
The proposals are part of the “Rosneft-2022” strategy and are focused on increasing profitability and returns on its existing assets, the state-run Moscow-based producer, which pumps more than 40 percent of Russia’s crude said. The buyback programme will be financed “through organic free cash flow generation and sales of non-core assets,” according to a statement Tuesday.
"Successful implementation of “Rosneft-2022” is our top priority. It will help to further boost our competitive advantage in the volatile external environment. Specific targets are now part of the management performance assessment" Rosneft Chief Executive Officer Igor Sechin said.
The Company continues to demonstrate robust financial results and proposed new initiatives will enable us to improve the focus on the business using core strengths that will result in the enhancement of shareholder returns. We are strong believers in the fundamental value of Rosneft that is not fully appreciated by today’s volatile equity markets” he added.
Rosneft spent about $100 billion over the past years expanding aggressively, investing in foreign assets and transforming itself into the world’s largest publicly traded oil company. As a result of that expansion, the state-controlled oil major ended 2017 with a record $93 billion in loans and obligations to long-term oil buyers.
Other investment makeover goals set by Rosneft include a minimum debt reduction target of RUB500bn ($8.4bn) by end-2018.
This decrease would be achieved with the help of: Enhancement of the investment governance, project management practices and improvements in the procurement function with corresponding decrease in the capital expenditures guidance for 2018 at the level of 800 billion rubles (20% decline compared to the earlier guidance)
Improvement in the working capital position of the Company by the end of 2018 in the amount of 200 billion rubles, which would be achieved with a number of initiatives in the trading business and the procurement function.
Strategic review of the asset portfolio focused on decreasing the share of tail and non-core assets, the disposal of which should provide incremental net cash flow to the shareholders.
“This move puts Rosneft’s strategy into an almost perfect alignment with minority shareholders,” Ildar Davletshin, an energy analyst at Wood & Co. Financial Services AS in London told Bloomberg. “It should boost both the equity value and the share price.”
The world’s largest listed oil producer by both output and reserves has a market capitalisation of $64.4bn as of May 1.