OAO Gazprom, the world’s biggest natural-gas producer, may maintain its dividend ratio at last year’s level as fallout from Russia’s annexation of the Crimean region overshadows record 2013 exports to Europe, according to two people with knowledge of the plan.
The government, Gazprom’s controlling shareholder, will probably approve dividends at 25 percent of last year’s domestic-standard profit, said the people, who asked not to be identified because a final decision isn’t expected before May. Gazprom has been fighting a dividend increase as Russia presses companies to distribute profit based on international reporting principles, according to one of the people.
Gazprom declined 1.1 percent today, erasing gains of as much as 2.3 percent earlier in Moscow.
Russia is determining payouts from state companies while facing the weakest economic outlook since its 2009 recession and rising investor flight as the U.S. and European Union threaten to ratchet up sanctions over Crimea. President Vladimir Putin joined the former Ukrainian region to Russia last week amid the worst standoff with the West since the Cold War.
Gazprom, which relies on Ukraine’s pipeline to ship about half its export volumes to Europe, is likely to become a prominent investor in the Black Sea peninsula. Crimea should boost gas production by 50 percent to 100 percent, Russian Prime Minister Dmitry Medvedev said today in Moscow, according to the government website. “Gazprom is taking the initiative in this regard,” he said.
With billions of dollars of spending for the Sochi Winter Olympics and new gas transit routes to Europe bypassing Ukraine, the company has said it doesn’t have sufficient funds to distribute more cash. At the same time, the state has frozen Gazprom’s domestic prices and increased taxes, and Ukraine’s debt for gas supplies has grown to about $1.8 billion.
At a meeting with investors in London earlier this month, Gazprom executives confirmed a forecast for dividends at 6 to 8 rubles a share.
Gazprom may pay dividends in the lower end of the range, one of the people said. While there’s no final profit estimate, the company isn’t interested in issuing record dividends for now given the crisis with Ukraine, the person said.
The gas producer’s press office declined to comment.
Profit for the first nine months calculated under Russian standards declined 9 percent to 467 billion rubles ($13 billion). Income under international standards increased 4 percent to 859 billion rubles. Russia’s biggest company by market capitalization hasn’t disclosed its income for last year.
Gazprom, which has paid out about 25 percent of Russian-standard profit since 2011, has sought to delay an increase in its dividend ratio or a move toward basing payouts on profit to international financial-reporting standards, which has been 1.5 to 2 times higher than the local standard in the last three years.
While Gazprom’s Russian-standard profit is difficult to predict, it may have reached about 700 billion rubles last year, Alexei Kokin, an oil and gas analyst at UralSib Financial Corp. in Moscow, said by phone. That would translate into a payout of about 7 rubles a share, compared with 5.99 rubles a year earlier, based on the domestic standard, Kokin said. The figure matches Bloomberg’s estimate of 7 rubles, while it’s lower than the 7.56 ruble mean of 17 surveyed analysts.
Gazprom’s mean estimated dividend will yield 6.1 percent at today’s share price, above the 4.4 percent average of a group of producers that includes 15 of its peers, according to data compiled by Bloomberg.
Gazprom’s investment and dividend plans may suffer because of Ukraine’s failure to pay for natural-gas supplies, the Russian export monopoly said March 13. Gazprom may use the gas debt as a reason to lower its divdends, Kokin said at the time.
“Even with Ukraine’s risks, Gazprom has a strong cash flow after record natural-gas exports to Europe last year,” Maxim Moshkov, an energy analyst at UBS in Moscow, said by phone. “Investors would appreciate if Gazprom pays 8 rubles or more, taking into account the weakening Russian currency.”