“LUKOIL says goodbye to the American past, promising shareholders a bright future. Generalization

The Board of Directors of the company at a routine meeting, was suddenly taken two important decisions

Photo: inter/TASS, Alexander Tarasenkov

– The Board of Directors of “LUKOIL” on Friday alone, it would seem, report-annual meeting, suddenly took two important for shareholders decisions. The company will repay the main part quasicanonical package, which it “inherited” from the already half-forgotten U.S. shareholder and will hold a buyback.

The shares of “LUKOIL” based on the news, added to the increased turnover of 6%.

Restless action

Treasury stake in the largest private oil company in Russia traces its genealogy from the package state. In 2004, the American ConocoPhilips bought at a privatization auction all remained at the time the state-owned stake of “LUKOIL” in the amount of 7.6% of capital for $2 billion, the Sides announced a strategic Alliance, a new partner has promised to bring its stake to 20%, which he did by the end of 2006. But in 2010, Conoco started the divorce process, and by 2011 got rid of shares in a Russian company and sold them partly to “LUKOIL”, part of the market.

“LUKOIL” has carried out the repurchase of own shares from Conoco, not directly, but in the controlled structure. So, 7,6% of shares LUKOIL bought Conoco at LUKOIL Finance Limited. Later LUKOIL translate this package to the balance of LUKOIL Investments Cyprus.

In 2012, LUKOIL announced that LUKOIL Investments Cyprus in the period up to September 2015 can be purchased from the market shares of NK up to $2.5 billion At the moment “LUKOIL” quasicanonical about 141 million shares (approximately 16.6% of the capital).

LUKOIL has considered two options for disposal of “naznachenie” – SPO in Hong Kong and repayment.

“Hong Kong is our goal. But at the same time, we do not exclude the possibility of repayment of any part of the shares, as soon as there are economic conditions and will take into account all legal aspects,” – said in the fall of 2014 Vice-President “LUKOIL” Leonid Fedun. In 2016, the idea of placing shares in the Asia Pacific region has already seriously been considered due to the weak oil market, to repay Treasury shares lacked “legal basis”, lamented Fedun.

“The idea is constantly in the air to offset part of the Treasury package. Unfortunately, CB does not have a clear structure, recommendations, how to implement it, how to carry out accounting policies. Legal the untested nature of this issue complicates our approaches to understanding,” he said.

New entry

The Board of Directors of “LUKOIL” on 12 January approved the repayment of part of Treasury stock and buyback mechanism. “Long-term strategic development program approved by the Board of Directors in December of last year, primarily aimed at improving the efficiency and financial growth. It also includes a number of important changes that we plan to implement in 2018”, – are reported words of the President of the company Vagit Alekperov.

“In particular, in the framework of the strategy review, the Board of Directors supported the initiatives of the management for repayment of the main part of the Treasury shares held on the balance sheet of the group, and use the remaining shares in a new long-term incentive programme for key employees of the company, as well as to create an additional mechanism for the distribution of funds to shareholders in the form of buyback of shares. I believe that these changes will further enhance the shareholder value of the company,” he explained.

The company will repay 100 million shares (almost 12% of the capital), the rest will be sent to incentive program management.

Have Alekperov still more

LUKOIL plans to buyback $2-3 billion over five years, said Alekperov.

According to Alekperov, its stake in LUKOIL after the redemption of Treasury shares will amount to about 30%, Leonid Fedun – up to 10%. “My package, unfortunately, will not exceed 30%, Leonid Arnoldovich – 10%+”, – he said. “A package change just like everyone else – 10%,” added Alekperov.

The head of the company told “Interfax” that he did not buy the shares of the company for several months before the announcement of the buyback program.

He added that “LUKOIL” plans to pay “treasuries” until the end of 2018.

Low start

LUKOIL to start on Friday announced the redemption of its own shares at any time, additional enterprise solutions for this, said to “Interfax” the first Vice-President NK Alexander Matytsyn.

On the question of whether implementation of the program to begin in the near future, he answered: “Until the money budgeted”.

Answering the question about the fate of the redeemed shares, A. Matytsin said, “Then we will be able to send them to maturity. Nobody knows: we do not even bought, but the goal is to keep them no”. He stressed that the goal of motivational programs for management, these shares will not be used.

Matytsyn noted that the stock under the buyback will be purchased on the market.

Unlike the start of the buyback program, for amortization of Treasury stock will require the convening of an extraordinary shareholders meeting of “LUKOIL”, said Matytsin.

The influx

Index provider MSCI may increase the weight of LUKOIL in the MSCI Russia index by 0.9 percentage points to 14.8% as a result of redemption of Treasury shares, estimated by the analysts of “VTB Capital”.

As a result, the inflow of funds into equity from the passive investors will be $120 million.

As stated in the review “VTB the Capital” repayment “LUKOIL” the main part of the Treasury stake of 100 million shares will increase the company’s free float to 56% from 49% and an increase of the ratio FIF (foreign inclusion factor, in relation to the Russian companies, the estimated free float) for its shares from 0.50 to 0.60.

At the same time, as noted in the materials of the investment if a significant portion of the buyback will be implemented to maturity quasicanonical stock, it may reduce the growth weight of “LUKOIL” in the index.

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