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Lukoil to save money on ConocoPhillips
By not buying back all of its shares from the U.S. company
Lukoil has not yet passed a final decision on the buyback of its shares from the American company ConocoPhillips. The Russian oil giant has no intentions of exercising the option for the purchase of 11.61 percent of its shares from its U.S. partner, Vice President Leonid Fedun told journalists on Tuesday. According to him, it is simply not feasible for the company to purchase its shares at an increased price, especially since Lukoil would need these funds to participate in a tender for the development of the Trebs and Titov strategic oilfields. Fedun indicated, however, that some of the offered shares would nevertheless be purchased. Notably, the option for Lukoil’s share buyback has some restrictions: if the company is unable to purchase all of its shares, ConocoPhillips undertakes not to sell 5 percent or more of Lukoil’s shares to a single investor, and the upper limit for the sale of Lukoil’s shares is set at 0.59 percent of the total amount per month. Currently, Lukoil is burdened with the matter of using the 7.6 percent of its shares that the company already bought back from ConocoPhillips. According to Fedun, Lukoil is considering several different options for using these securities. “A small part may be used to pay bonuses to employees, and a portion may be applied towards major purchases, though that is unlikely. So far, we see these shares as our financial reserve. We may also consider the shares’ gradual redemption,” the company’s vice president explained. He went on to add that the Russian legislation did not specify a procedure for the gradual redemption of the treasury stock, and the company was holding consultations on the matter with regulators. Meanwhile, as IFC Metropol analyst Alexei Kokin sees it, buying back the remainder of its shares from ConocoPhillips is not a priority for Lukoil at the moment. He noted that it would be unprofitable for the company to buy back shares at $56 each when their market price stood at only $53. “In this case, we can say that Lukoil is saving money by not exercising the option,” the expert stated. Analytical department of RIA RosBusinessConsulting
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