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. Last Updated: 07/27/2016

LUKoil Shareholders See Profit

Russia's largest oil company LUKoil announced a jump in profits this year, as well as much-awaited share prices for affiliate companies and dividends at its annual shareholders' meeting Wednesday.


LUKoil vice president Leonid Fedun told reporters during the meeting that LUKoil expects a net profit this year of 3.5 trillion rubles ($700 million), up from 2.4 trillion rubles in 1995.


James Fenkner, director of research at CentreInvest Securities, said the projection was "not bad" but about what investors had expected.


"It's neither a buy or a sell signal. Everyone expected earnings to slow down this year" after a 71 percent jump in dollar terms from 1994 to 1995, he said.


LUKoil announced last month pre-tax profits of 3.43 trillion rubles.


Investors, who had been training a keen eye on the ratios for swapping LUKoil stock for shares in some of its daughter companies, were likely satisfied with the results, analysts said.


Several hundred shareholders approved share price ratios for Permneft, Nizhnevolzhskneft, Kaliningradmorneft, Astrakhaneft and Astrakhanefteprodukt. Most investors were watching Permneft, an oil extraction company, analysts said. It was priced at one Permneft share to five LUKoil shares.


"Basically, Permneft is the only issue that mattered," said Fenkner. "It was by percentage of par value the largest company which LUKoil was trying to consolidate, and also the most liquid on the secondary market."


The ratio was likely the result of a compromise between LUKoil and Permneft, which previously announced a ratio of one share to six, seven or eight LUKoil shares, analysts said.


But the decision is good news for shareholders in Permneft.


"The big thing [at the meeting] was the Permneft share swap," said Stuart Amor, a vice president at CS First Boston who follows the Russian oil industry. "Investors were surprised. If you own Permneft you were very happy."


Permneft closed in over-the-counter trading Wednesday at $28.50, up from $23.90, according to the Skate agency, while LUKoil was at $8, down from $8.30.


The decision on the conversion ratio means that a holder of 100 shares of Permneft can now make the swap, receive 500 shares of LUKoil and sell the whole package for $4,000 instead of $2,850.The five companies -- all extraction companies save Astrakhanefteprodukt, which does marketing -- were folded into LUKoil Holding last September.


The share swap ratio for Nizhnevolzhskneft was five shares to seven of LUKoil; Astrakhaneft was one to one; Kaliningradmorneft was three to one; and Astrakhanefteprodukt was 10 to one.


Shareholders also voted to approve a 500-ruble dividend for each preferred share and a 200-ruble dividend for each common share, effectively unchanged from last year, analysts said.


At the shareholders' meeting, voters passed all 10 items on the agenda, including approving a new company charter -- which all joint-stock companies must do by law before July 1 -- and electing a new board of directors.


All but two of the 11 current board members were re-elected, with one of the new members being Sergei Lobazov, president of the investment company NIKoil, which runs LUKoil's share registry.


President and CEO Vagit Alekperov also retained his post.


The shareholders' meeting was tightly run, but some small shareholders, during question periods, got a little off track. One man took the microphone twice to argue that LUKoil should stop spending so much money on projects with foreign partners, while another wondered what to do with his 1993 voucher certificate which entitles him to a small stake in LUKoil Fund.


The board -- politely at first, then tersely -- answered that LUKoil's investment strategy is foreign-driven, and that at the LUKoil Fund's Moscow headquarters they would be happy to explain how to cash the voucher.


?Chernogorneft, the main oil producer in the Sidanko group, will invest its 42 billion rubles in 1995 profits in future development, according to a statement Wednesday.


Shareholders also elected a nine-member board and approved a new company charter at the June 1 annual meeting in Nizhnevartovsk, said the statement from Salomon Brothers, which is seeking to place Chernogorneft's shares abroad.


The profits figures were according to Russian accounting standards, with a Western audit expected to be completed shortly. No comparative profits figures were given.