Russian Energy Stocks Sink as Tax Threat Seen Depleting Profits

  • Rosneft, Gazprom targeted in new levies through 2020
  • State giants could lose as much 10% of cash flows: Sberbank

Russian stocks fell for a second day after the government renewed calls to boost taxes on energy companies to narrow its budget shortfall.

Oil and gas were among the biggest losers in Russian stocks, sliding 1.1 percent as a group versus a 0.6 percent drop for the Micex benchmark. The ruble strengthened 0.4 percent to 64.88 per dollar by 12:10 p.m. in Moscow.

Faced with the biggest deficit in six years and depleted sovereign funds, Russia may seek 320 billion rubles ($4.9 billion) from new taxes on the industry next year and additional levies through 2020. The burden could leave energy companies whose profits have shown resilience to plummeting crude prices “much more exposed," according to Sberbank CIB.

"Extractions are rather heavy and will affect both the cash flows and dividend payments,” said Vladimir Vedeneev, chief investment officer at Raiffeisen Asset Management in Moscow.

Gazprom PJSC, Surgutneftegas PJSC, Rosneft PJSC and Tatneft PJSC would be hardest-hit by new taxes, losing as much as 10 percent of operating cash flows, Sberbank CIB analysts led by Alex Fak said in an e-mailed note.

Shares in Russia’s biggest oil company Rosneft slumped 1.5 percent to 345.1 rubles. Gazprom fell 1.3 percent to 135.20 rubles per share, its third day of declines.