Rosneft Is Said to Focus on Debt in Meeting With Investors

(Bloomberg) -- Rosneft PJSC is trying to persuade investors that it can shrink its record debt burden in an effort to close the valuation gap with some of its rivals.

Russia’s largest crude producer told investors and analysts in London on Wednesday that it plans no big acquisitions this year and will cut capital expenditures, while also boosting cash flows due to stronger oil prices, according to participants in the discussions. The state-controlled company said those factors would result in a reduction in net debt this year, according to the people, who asked not to be named because the event wasn’t public.

Rosneft held the talks just weeks after reporting the highest-ever gross debt and obligations to long-term oil buyers of $93 billion, the result of years of deal-driven expansion in Russia and abroad. Russia’s second biggest oil company Lukoil PJSC, which pumps less than half the oil and gas of its state-run rival, has closed the gap in market value with Rosneft.

The delegation in London was headed by First Vice President Pavel Fedorov, who said by phone that the company is steadily “generating cash flow and working on improving its organic efficiency.” Capital spending this year will decrease to around $14 billion at current exchange rate from some $17 billion last year, according to the company.

Rosneft’s management laid out a similar plan to the company’s board back in December, shifting its focus to organic growth and avoiding big acquisitions. Rosneft Chief Executive Officer Igor Sechin said in January that his company’s “objective” capitalization is about $130 billion compared to $55 billion valuation in Moscow trading on Wednesday.

To contact the reporter on this story: Elena Mazneva in Moscow at emazneva@bloomberg.net.

To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Rakteem Katakey

©2018 Bloomberg L.P.