MOSCOW (Reuters) - Russia’s largest oil producer Rosneft (ROSN.MM) has proposed a $2 billion share buyback to improve returns, alongside plans to cut total debt and trading liabilities by a minimum of 500 billion roubles ($7.9 billion) this year.
Rosneft said in a statement on Tuesday that it would reduce debt partly by selling non-core assets, adding that the proposed share buyback programme would be carried out between 2018 and 2020 through open market repurchases.
“The Company continues to demonstrate robust financial results and proposed new initiatives will enable us to improve the focus on the business using core strengths that will result in the enhancement of shareholder returns,” Rosneft Chief Executive Officer Igor Sechin said.
The proposals are part of the “Rosneft-2022” strategy and are focused on increasing profitability and returns on its existing assets, the oil company, in which BP has a 19.75 percent stake, said.
Rosneft has been expanding aggressively, investing billions of dollars in foreign assets and last month Moscow-based brokerage Aton described it as the “most leveraged oil company in Russia”. Rosneft’s most recently published estimate for its net debt was 2.216 trillion roubles, excluding prepayments of foreign firms, as of the end of June last year.
“We are strong believers in the fundamental value of Rosneft that is not fully appreciated by today’s volatile equity markets,” Sechin, a close ally of Russian President Vladimir Putin, added.
Rosneft also said that enhancing its investment governance, project management practices and improving procurement would mean a 20 percent decrease in its capital expenditures guidance for 2018 to 800 billion roubles. This would help it achieve a sustained cash flow impact within “Rosneft-2022”.
The company also said it would achieve an improvement in its working capital position of 200 billion roubles by the end of 2018 through “a number of initiatives in the trading business and the procurement function”.
It said it would carry out a review of its asset portfolio, focused on decreasing the share of “tail and non-core assets” and disposing of these should provide incremental net cash flow to shareholders, Rosneft said.
Rosneft has filed legal challenges in European courts against EU sanctions imposed in 2014 and 2015 over Moscow’s role in the Ukraine crisis.
(This story has been refiled to add dropped letter in word “Aton” in paragraph five.)
Reporting by Olesya Astakhova; Writing by Gabrielle Tétrault-Farber and Alexander Smith; Editing by Adrian Croft/David Evans