Rosneft ups dividend with an eye on Exxon

ST PETERSBURG, Russia Wed Jun 20, 2012 1:29pm EDT

Flag with the logo of Rosneft, Russia's largest oil company, flutters over the Novokuibyshevsk refinery near the city of Samara, October 28, 2010. REUTERS/Nikolay Korchekov

Flag with the logo of Rosneft, Russia's largest oil company, flutters over the Novokuibyshevsk refinery near the city of Samara, October 28, 2010.

Credit: Reuters/Nikolay Korchekov

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ST PETERSBURG, Russia (Reuters) - Russian Rosneft's politically powerful chief executive said the state oil company would double its dividend payout for last year, saying he wanted shareholder returns to be competitive with U.S. majors.

Igor Sechin, who assumed the CEO's chair after serving as deputy prime minister and oil "tsar" during Putin's premiership, said the company would pay a total of 7.53 roubles per share on last year, doubling the planned payout.

With ExxonMobil (XOM.N) CEO Rex Tillerson present at a Rosneft (ROSN.MM) strategy presentation in a Russian refinery town last week, Putin had asked Sechin if it was possible to raise the payout on last year to 25 percent of net profit from the planned 11.5 percent payout.

That makes for a dividend yield of about 4 percent at current share prices. Rosneft, the holder of the world's largest liquid hydrocarbon reserves, also recently completed a $2 billion share buyback.

ExxonMobil Corp, the world's largest publicly traded oil company, raised its quarterly dividend by 21 percent, bowing to sustained pressure from investors and Wall Street analysts.

Exxon's annual dividend yield is now 2.6 percent, while Chevron's (CVX.N) 11 percent increase brought its quarterly payout to 90 cents per share, for an annual yield of 3.5 percent based on its closing share price of $103.85.

Rosneft was a second tier Russian producer just over a decade ago but gained bulk with the acquisition of major production assets from bankrupted oil company YUKOS.

Putin and Sechin would like to see it join the ranks of global majors, and openly compare the company with Exxon, which tops the league of publicly traded producers.

Sechin was speaking at Rosneft's annual meeting in St Petersburg, where executives from the U.S. major, which concluded a landmark exploration deal to drill in Russia's Bazhenov shale and Arctic offshore zones, were guests of honor, together with executives from Eni (ENI.MI) and Statoil (STL.OL), who followed suit with similar deals.

Pointing to ExxonMobil Development President Neil Duffin, sitting in the front row, he singled out ExxonMobil for its model of shareholder return.

"They return up to 40 percent. We are only at four," Sechin said. "But we are working on it."

Sechin was a Cold-War era military translator who began a career as a civil servant in the St Petersburg city government with Putin in the 1990s.

He visited the United States for the first time in April to present the ExxonMobil deal and visited its facilities in Texas, including a platform in the Gulf of Mexico.

"We have yet to build all of this," he said, referring to the vast production and infrastructure needs of the offshore zones to be explored with ExxonMobil, Eni and Statoil.

He also said Rosneft needed to boost efficiency to maximize shareholder returns while maintaining heavy capital spending, in particular on a stepped-up refinery modernization programme needed to meet tighter emissions standards and rising demand for high grade fuels in Russia.

Rosneft also increased its investment programme to 600 billion roubles ($18.50 billion). It had earlier planned 500 billion roubles, the company's top financial official said.

"We will spend almost 600 billion roubles on investment programme this year," Dmitry Avdeev, recently appointed to the finance post from his previous job as co-head of investment banking, told the AGM.

He added later that figure included acquisitions, rejecting suggestions that Rosneft had ramped up capex.

Sechin said Russia was looking at various options to expand Rosneft's presence on the stock market, including a move onto the U.S. stock market.

"We are studying a possibility and viability of entering the American (stock) market," Sechin told a shareholder who asked him about company's plans to increase its exposure to foreign stock markets. (Additional reporting by Denis Pinchuk and Olesya Astakhova, editing by William Hardy)

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