Lukoil Sinks on Concern Spending to Cut Payout

Lukoil Sinks on Concern Spending to Cut Payout
Gasoline storage tanks are seen at the Lukoil-Nizhegorodnefteorgsintez petroleum refinery, operated by OAO Lukoil, in Nizhny Novgorod, Russia. Photographer: Andrey Rudakov/Bloomberg

OAO Lukoil retreated from a 16-month high in New York on concern new investments outside Russia will limit increases in dividend payments from the nation’s second-biggest crude producer.

American depositary receipts of Lukoil fell 2.2 percent to $64.37 in New York yesterday, driving the first slump in eight days for the Bloomberg Russia-US Equity Index of the most-traded Russian stocks in the U.S. Futures expiring Dec. 17 on Moscow’s RTS Index lost 0.3 percent to 149,270 as oil dropped on concern over the U.S. budget. Polyus Gold International Ltd., Russia’s largest miner of the metal, slid the most in a month.

Lukoil, which trails state-backed oil producer OAO Rosneft on market value, is considering buying Exxon Mobil Corp.’s 60 percent stake in the West Qurna-1 project in Iraq, First Vice President Ravil Maganov said last week, according to the RIA Novosti newswire. The company is also planning new wells in Africa, Andrei Kuzyaev, head of its overseas unit, said Dec. 5. Dividends will be boosted by at least 15 percent a year, Deputy Vice President Andrei Gaidamaka said Nov. 27.

“There is big deal of doubt over how much Lukoil will pay in dividends after increasing spending,” Elena Savchik, an analyst at Moscow-based Aton Capital LLC, who has a sell rating on the stock, said by phone from Helsinki yesterday. “I’m particularly concerned about their excessive spending on expansion outside of Russia.”

Interim Dividend

ADRs of Moscow-based Lukoil slipped the most since Nov. 7 in New York yesterday, to trade at a 0.9 percent discount to the company’s shares listed on Russia’s Micex Index. The Moscow-listed stock fell 1 percent to 1,995.50 rubles.

The producer’s board recommended an interim dividend of 40 rubles per share on Nov. 7 and said shareholders will vote on the payment Dec. 18. Lukoil will pay a dividend of 42 rubles in May, according to analysts’ estimates collected by Bloomberg, after paying out 75 rubles in May of this year.

Lukoil will make a decision on possible participation in the West Qurna-1 field by the end of the year, Chairman Vagit Alekperov said Nov. 28. The company already holds 75 percent of the separate phase 2 project at the field. Lukoil plans to spend $600 million on west African exploration next year, compared with an earlier plan of $300 million, Kuzyaev said on Dec. 5. The company failed to find commercial reserves after drilling several wells off Ghana and the Ivory Coast.

The Bloomberg Russia-US gauge declined 0.6 percent to 97.07 in New York yesterday. The Market Vectors Russia ETF, the largest dedicated Russian exchange-traded fund, fell 0.9 percent to $29.09, retreating for the first time in 12 days. The RTS Volatility Index, which measures expected swings in the stock futures, rose 4.3 percent to 23.61 points.

‘Environment of Uncertainty’

“Russia is an oil and commodity driven market,” Matt Krueger, a portfolio analyst at Global Finance Private Capital in Sarasota, Florida, who helps manage $500 million in emerging-market assets, said by phone yesterday. “We are in a global environment of uncertainty over U.S. budget talks and the European debt crisis.”

Crude for January delivery retreated 1 percent to $85.89 a barrel on the New York Mercantile Exchange yesterday. Prices are down 13 percent this year. Brent for January settlement on the London-based ICE Futures Europe exchange dropped 1.5 percent to $107.91 a barrel. Urals crude, Russia’s chief export oil blend, declined 0.9 percent to $106.24.

Ruble futures showed the currency weakening 0.2 percent to 30.752 per dollar yesterday.

London-based Polyus Gold lost 2.1 percent to $3.28 in New York, the biggest daily drop since Nov. 14. In London, the shares slipped 1.1 percent to 208.75 pence, or $3.36. Gold prices sank 0.9 percent yesterday.

RusHydro, MTS

Yandex NV, owner of Russia’s most-used search engine, rose 2.8 percent to $21.95 in New York, the biggest gainer on the Russia-US measure in trading 36 percent above the daily average over the past three months. The Moscow-based company is among Credit Suisse Group AG’s top stock choices for 2013, the bank said in an e-mailed report yesterday.

OAO RusHydro retreated 1.7 percent to $2.36 in New York, after the stock declined 0.8 percent to 75.22 kopecks, or 2.44 U.S. cents, in Moscow. Russia’s biggest renewable energy producer will start issuing an additional 110 billion shares at 1 ruble each on Dec. 19 and expects to complete the offering within 30 days, Moscow-based RusHydro said in a regulatory filing yesterday.

OAO Mobile TeleSystems, the nation’s chief mobile operator, advanced 1.2 percent to $18.44 in U.S. trading, closing at the highest level since Sept. 17. The company’s Moscow-listed stock added 0.3 percent to 239.47 rubles.

The company known as MTS “has the strongest business profile,” among its competitors, Moody’s Investors Service wrote in a report issued yesterday. The ratings company “expects MTS to retain its lead in terms of subscribers and revenues for now,” it said.

United Co. Rusal, the world’s largest aluminum producer, sank 0.4 percent to HK$4.79 in Hong Kong trading as of 11:40 a.m. local time. The MSCI Asia Pacific Index gained less than 0.1 percent today.