Gazprom Neft to Boost Dividends as Output Growth Beats Peers

(Bloomberg) -- Gazprom Neft PJSC, the oil unit of Russia’s biggest natural-gas exporter, is set to boost dividends over the next few years. The question is by how much?

The payout may rise to 15 rubles (25 cents) a share in 2019 from about 10.68 rubles this year as upgraded refineries yield more valuable products and output growth outstrips other top Russian producers, Chief Financial Officer Alexey Yankevich said. Capacity exists to push payouts above the company’s policy of 25 percent of profit, he said Wednesday in an interview via video link from Gazprom Neft’s headquarters in St. Petersburg.

“An increase is likely, the question is, at what rate it will happen?” Yankevich said. “This decision depends on shareholders.”

Russian oil producers have increased returns to investors even as the collapse in crude prices has reduced profits. Rosneft PJSC, the biggest producer, will next month consider the Kremlin’s order that state-led companies pay out half of net income. Lukoil PJSC, which already provides a better yield to shareholders, this year proposed increasing dividends by at least the rate of inflation.

First-half net income rose 23 percent to 111 billion rubles from a year earlier, Gazprom Neft said in an emailed statement on Thursday. Oil and gas production climbed 5.3 percent to 44 million metric tons in the period, while sales increased almost 23 percent to 944 billion rubles.

Dividend Outlook

Gazprom Neft, about 96 percent-owned by Gazprom PJSC, is shielded from government rules on state property agency holdings because it’s a subsidiary. Even so, the oil producer insists it won’t fall behind rivals.

“We believe that the amount of dividends per share should grow, and will grow,” Yankevich said.

Gazprom Neft will await more stability in oil prices before considering a return to paying interim dividends, a practice it discontinued last year, according to the CFO. The finance boss sees oil prices remaining at around $50 a barrel at least through next year, with an exchange rate of about 60 rubles to the dollar.

The company is likely to finance its investment program for 2018 at about this year’s level of 360 billion rubles, though the board hasn’t set concrete plans yet, he said.

--With assistance from Dina Khrennikova

To contact the reporters on this story: Stephen Bierman in Moscow at sbierman1@bloomberg.net, Elena Mazneva in Moscow at emazneva@bloomberg.net.

To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Dylan Griffiths, Amanda Jordan