Surgutneftegas Rallies as Profit Tripled, Dividend Looms

OAO Surgutneftegas rose to a four-month high in New York on speculation the Russian oil producer will increase its dividend after 2014 profit surged as the ruble’s plunge increased the value of its foreign-currency cash hoard.

The American depositary receipts rallied 3.4 percent to $7.40 in New York on Monday. The Bloomberg Russia-US Equity Index advanced 2.5 percent to 58.42. United Co. Rusal dropped 1.6 percent to HK$4.86 at 10:35 a.m. in Hong Kong.

Surgut ended a two-day decline after it said 2014 profit to Russian accounting standards, the measure used to calculate the dividend, tripled to 892 billion rubles ($15.5 billion). The surge in earnings came as the company revalued its cash pile, which is denominated mostly in dollars, amid a 46 percent drop in the ruble. Surgut had at least 1.8 trillion rubles in cash last year, according to its filing.

“The company benefited a great deal from the ruble devaluation,” Alexei Kokin, an analyst at UralSib Financial Corp., said by phone. “Its 2014 dividend is going to be extraordinarily high.”

Analysts surveyed by Bloomberg project a 2014 dividend of 8 rubles per preferred share, more than triple the payout for the prior year. Kokin said he raised his estimate to 8.2 rubles from 7.8 rubles after Monday’s earnings report. The ADRs are each equivalent to 10 Moscow-traded shares.

The ruble tumbled last year as Brent crude, the oil grade traders use to price Russia’s main export blend, sank 48 percent. On a scale of 1 to 5, with five representing a buy, the company’s London-traded shares have a consensus analyst rating of 2.54, compared with 3.73 a year ago, according to data compiled by Bloomberg.

Ruble Rebound

The ruble has gained 5.4 percent this year, rebounding as Brent recovered from a six-year low in January. Alexander Kornilov, an analyst at Alfa Bank, said there’s “no reason to expect such an extraordinarily high dividend” from Surgut for 2015. “The stock, which is seen as a safe haven against the ruble devaluation, is fairly priced at its current levels,” he said.

Twelve of 20 analysts rate Surgut’s preferred stock hold, while seven recommend buying and one says sell. Total buy ratings have slid to the lowest level in a year from a record-high 16 in November, data compiled by Bloomberg show.

“Surgut is still the best dividend play in Russia,” UralSib’s Kokin said. “The preferred stock looks attractive for the near future, at least until the dividend cut-off date in July.”

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