Analysts are the most optimistic on OAO Lukoil (LUKOY) stock since November, predicting a 29 percent rally in the next 12 months, as the Russian oil producer says it will use last year’s record profit to boost output.
Lukoil climbed for a fourth day in Moscow and New York, with the company’s American depositary receipts posting the second-biggest advance on the Bloomberg Russia-US Equity Index (RUS14BN) of the most-traded Russian stocks in the U.S. yesterday. The measure fell 0.4 percent to 101.49 yesterday, while RTS stock index futures rose 0.2 percent to 153,320 in U.S. hours.
Russia’s second-largest oil producer will invest more than $16 billion this year to lift output by 18 percent by the end of 2015, Chief Executive Officer Vagit Alekperov said yesterday, after Lukoil reported record 2012 net income of $11 billion. The Moscow shares, which jumped 0.9 percent yesterday to 2,010.20 rubles, or $65.47, will rise to 2,585.04 rubles in the next year, according to the average of 21 analyst price targets compiled by Bloomberg. Fifteen rate the stock buy.
“I like Lukoil more now than I did before,” Andrey Polischuk, an analyst at ZAO Raiffeisenbank in Moscow who rates the shares hold, said by phone yesterday.“They are able to increase production this year and further increase revenue.”
ADRs of Lukoil rose 1.4 percent to $66 in New York yesterday, the steepest jump since Feb. 13. They traded at a 0.9 percent premium to the company’s shares on Moscow’s benchmark Micex Index, the most since Nov. 16. Lukoil climbed 8.9 percent in Moscow over the past year and trades at 4.44 times estimated earnings, the second-lowest valuation among 15 global oil producers tracked by Bloomberg after Moscow-based TNK-BP Holding (TNBP) at 4.3 times.
Lukoil is counting on deposits in Siberia, the Caspian Sea, Iraq and Uzbekistan to drive output growth after recording its first production increase since 2009 in September, according to preliminary Energy Ministry data released Oct. 2.
While oil output fell 1.3 percent last year, natural gas production grew 10 percent, the company said yesterday. Crude production will be little changed this year at about 1.83 million barrels a day, Vice President Azat Shamsuarov said in London yesterday, before climbing to 2.05 million barrels a day next year and 2.15 million barrels in 2015.
The Market Vectors Russia ETF (RSX), the largest dedicated Russian exchange-traded fund, fell 0.1 percent to $29.05 yesterday. The RTS Volatility Index, which measures expected swings in the stock futures, retreated 3.2 percent to 19.67.
Lukoil will consider boosting dividend payout ratios from next year when investment demands ease, CEO Alekperov said. The Moscow-based company will distribute 23 percent of net income in 2012 and is looking to boost shareholder payments to 30 percent of profit in the medium term, he said.
“Dividends are higher than what we expected,” Alexei Kokin, an analyst at UralSib Financial Corp. who rates the stock buy, said by phone yesterday from Moscow. “It would be good if they increase dividends faster.”
OAO Gazprom Neft, the oil unit of Russia’s natural gas export monopoly, led gains on the Bloomberg-Russia gauge yesterday, rising 1.9 percent to $23.12 and boosting its premium to the Moscow shares by 1.9 percent, the biggest gap since Sept. 13. The shares climbed 0.5 percent to 139.49 rubles, or $4.54 yesterday. One ADR equals five ordinary shares.
Crude for April settlement increased 1.3 percent to $91.56 per barrel on the New York Mercantile Exchange yesterday as first-time jobless claims unexpectedly fell in U.S. last week.
Brent crude for April settlement on the ICE Futures Europe exchange settled advanced 9 cents to $111.15 a barrel. Urals crude slid less than 0.1 percent to $107.90.
Russia’s ruble strengthened less than 0.1 percent to 30.6975 per dollar. The currency lost 0.3 percent to 34.9770 against the dollar-euro basket used by Russia’s central bank to manage swings that erode exporter competitiveness. Ruble’s futures showed the currency weakening less than 0.1 percent against the dollar at 30.732 in U.S. hours.
United Co. Rusal, the world’s largest aluminum producer, lost 1.2 percent to HK$4.18 in Hong Kong trading as of 9:55 a.m. local time. The MSCI Asia Pacific Index gained 0.5 percent.
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