OAO Lukoil, Russia’s second-biggest oil producer, is poised for its first monthly gain since October as investors anticipate an increase in earnings and dividend payments while its top executives purchase shares.
Lukoil, which reports earnings today, gained 0.8 percent yesterday in Moscow, extending its monthly advance to 3.5 percent. The company’s shares trading in New York rose 0.5 percent yesterday while the Bloomberg index of the most-traded Russian stocks in the U.S. slipped to a one-week low.
While analysts estimate Lukoil’s net income dropped 19 percent in the first quarter to $2.1 billion, the company is forecasting a 15 percent increase in dividend payments this year. Vagit Alekperov, the company’s billionaire chief executive officer, also said May 23 that he’d use his 2013 dividend payout of about $600 million to buy Lukoil shares.
“Lukoil remains our top pick in the sector,” Ildar Davletshin, an oil and gas analyst at Renaissance Capital who has a buy rating on the stock, wrote in a note yesterday. “We continue to favor it over state-owned Rosneft and Gazprom. We are much more confident than the market in new projects that the company is pursuing and the value they could create in the future.”
Renaissance estimates earnings before interest, tax, depreciation and amortization from the company’s new projects, including the Caspian offshore and Uzbek gas operations, will reach about $10 billion, while annual capital expenses will decline by $5 billion by 2017.
The shares have an average 12-month return potential of 34 percent, according to analysts surveyed by Bloomberg, compared with a 19 percent mean projection for OAO Rosneft, the nation’s largest oil producer.
Of 17 analysts covering Lukoil, 14 recommend that investors buy the shares, while three have hold ratings.
Alekperov, the company’s largest shareholder with more than 22 percent, said in an interview in St. Petersburg last week that he’ll spend his entire dividend on Lukoil shares. His 2013 payout may amount to about $600 million.
“Alekperov’s point is that Lukoil is the highest yielding investment,” said Timur Salikhov, an oil and gas analyst at BCS Financial Group. “Hence, better to spend all the money on buying shares than pursuing other projects.”
Lukoil managers led by Alekperov and vice president Leonid Fedun have pledged to keep adding to holdings they bought last year. Alekperov acquired more than $681 million of shares in 2013 and at least $77 million this year, according to Bloomberg calculations from Lukoil filings.
The Bloomberg Russia-US gauge fell 0.2 percent to 87.85, the lowest since May 20, trimming a monthly advance of 9.6 percent. Futures on Russia’s RTS Index gained 0.8 percent to 128,310 in U.S. hours.
The Market Vectors Russia ETF, the biggest U.S. exchange- traded fund that holds Russian shares, climbed 0.6 percent to $25.34. The RTS Volatility Index, which measures expected swings in futures, slipped 1.6 percent to 26.52.
Moscow-based United Co. Rusal, the world’s biggest aluminum producer, added 0.3 percent to HK$3.30 at 10:38 a.m. in Hong Kong trading.
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