Gazprom Neft to Borrow $2 Billion Next Year in Bet on Rates

Updated on
  • Steadier oil market seen leading to Russian interest-rate cuts
  • Company not looking at Asian debt markets, CFO Yankevich says

Gazprom Neft PJSC, the oil arm of Russia’s natural-gas exporter, plans to borrow the equivalent of $2 billion next year on the expectation crude markets will stabilize and the country’s central bank will continue to lower rates.

Gazprom Neft will be an “active player” in the domestic debt market and use the proceeds mainly for refinancing, Chief Financial Officer Alexey Yankevich said in an interview via video link from St. Petersburg. The company, which is barred by sanctions from major international borrowing, is considering bonds with a maturity of five to seven years and bank loans.

The Bank of Russia paused monetary easing in July after three straight interest-rate cuts this year, as tensions with the U.S. grew. Policy makers said they may return to easing in the second half if inflation continues to slow. Gazprom Neft believes the Russian market is unlikely to worsen and may improve, according to Yankevich.

“Stabilization in the domestic debt market is even clearer than in the oil market,” he said. “If the oil market stabilizes, which is what we believe, it will enable the central bank to pursue its policy of reducing interest rates.”

Gazprom Neft sold 15 billion rubles ($250 million) of seven-year bonds with a coupon of 8.25 percent this month, after selling a similar amount in April. Before the end of 2017, it plans to borrow a further $300 million to $400 million, according to Yankevich. Borrowing over the year will come close to $1 billion as outlined in the business plan, he said.

Gazprom Neft isn’t looking to raise money in Asia, where rates are "noticeably higher" for the company than in the domestic market, Yankevich said. “But from the point of view of diversification it is important, we keep a hand on the pulse.”

— With assistance by Elena Mazneva

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