OAO Bashneft, the oil producer controlled by Russian billionaire Vladimir Evtushenkov, is preparing to raise at least $1 billion in a share sale in London or Moscow later this year.
While no decision has been taken on whether or where the sale will go ahead, the company will be ready should market conditions allow, Chief Executive Officer Alexander Korsik said in an interview yesterday. The sale, designed to increase the stock’s liquidity, may comprise shares held by Evtushenkov’s Sistema group or new shares, he said.
The choice between London or Moscow will be guided by financial considerations and not politics, Korsik said. The Russian government is encouraging businesses to raise money in home markets after President Vladimir Putin’s decision to annex Crimea prompted the imposition of U.S. and European Union sanctions on some Russian businesses and individuals.
“London is a major option,” Korsik said. “Investors are meeting us. No final decisions have been taken.”
The Moscow-based company will continue with a dividend policy of paying 100 percent of free cash flow to investors, Korsik said. The policy is prudent as long as the ratio of debt to earnings remains below two, he said.
The company is working with one international bank and two Russian banks on planning the fundraising, Korsik said, declining to name them.
Bashneft, whose main fields are in the Bashkortostan region in Russia’s southern Ural mountains, has expanded production through the acquisition of Siberian explorer Burneftegaz LLC earlier this year for $1 billion.
Production is estimated to rise more than 10 percent this year to 17.7 million metric tons (about 350,000 barrels a day), Korsik said. Output from the Burneftegaz fields is forecast to rise to 40,000 barrels daily by 2020 from 12,000 now, helping to offset declines at existing fields, he said.
Bashneft estimates its capital expenditures at $8 billion in the next five years, Sberbank CIB analysts in Moscow said today in an e-mailed note after meeting the company in London yesterday. More than $5 billion may be spent in upstream, the Moscow-based VTB Capital said in an e-mailed note after the meeting.
Bashneft common shares increased 3.6 percent to at 2,393.2 rubles in Moscow today. Preferred shares gained 0.2 percent.