Russia’s Secretive Richest Firm Up 30% on Hope It Won’t Hold Money Forever

(Bloomberg) -- Shares in Russia’s most secretive major company have soared by almost one-third this week, sending the market into a frenzy for a plausible explanation for the gains.

Some analysts are speculating that Surgutneftegas PJSC, Russia’s fourth-largest oil producer, will finally put to work some of the mountain of money that it’s been hoarding, perhaps by buying a stake in its larger rival, Lukoil PJSC. The $51.6 billion cash pile at the end of the June, which was bigger than South Africa’s foreign currency reserves, has been growing for most of the three-decade reign of General Director Vladimir Bogdanov.

“I’ve heard two versions about what is driving Surgutneftegas,” BCS analyst Sergey Suverov said. “First, it could be a merger with Lukoil or, second, a change in the dividend policy that will devote part of the cash pile to boosting dividends.”

The company’s ordinary shares climbed 7.7% to 46.92 rubles at 3:40 p.m. in Moscow, bringing the gain this week to 30%. The stock enjoyed a similar surge in early September, which also went unexplained.

A spokesman for Surgutneftegas said the company doesn’t comment on speculation. A spokeswoman for Lukoil denied a deal was in the works.

While Surgutneftegas is publicly traded, the identity of who really controls the company is subject to much speculation. Its Byzantine shareholding structure is such that more than 75% of the company at the end of 2016 was controlled by about two dozen firms with interlocking ownership that are all registered in the Siberian city of Surgut, where the firm’s main oil assets are located. None of them have more than 5%, meaning the company doesn’t need to disclose their names.

Despite the strong returns this year, some asset managers are content remaining on the sidelines.

“Surgutneftegas is a very difficult one for us to invest in I would say, because some people would wonder whether it’s an operating company,” James Donald of Lazard Asset Management said by phone. “Surgutneftegas is this company with a huge amount of cash controlled by one individual, who doesn’t really like to see investors.”

--With assistance from Dina Khrennikova and Áine Quinn.

To contact the reporters on this story: Jake Rudnitsky in Moscow at jrudnitsky@bloomberg.net;Irina Reznik in Moscow at ireznik@bloomberg.net

To contact the editors responsible for this story: Torrey Clark at tclark8@bloomberg.net, Phil Serafino, Tom Lavell

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