LUKOY - Lukoil

[fareastwarriors]

Total Agrees to Lukoil Shale Deal, Brushing Off Russia Sanctions

 

 

http://www.bloomberg.com/news/2014-05-23/total-agrees-to-lukoil-shale-deal-brushing-off-russia-sanctions.html

[fareastwarriors]

Lukoil CEO Alekperov Plans Dividend Buying Spree to Boost Stake

 

 

http://www.bloomberg.com/news/2014-05-23/lukoil-ceo-alekperov-plans-dividend-buying-spree-to-boost-stake.html

 

Alekperov, the company’s largest shareholder with more than 22 percent, said in an interview in St. Petersburg that he’ll spend the entire dividend on Lukoil shares. His 2013 payout may amount to about $600 million, which would translate into a stake of about 1.2 percent at current prices, according to Ildar Davletshin, an analyst at Renaissance Capital Ltd.

 

Lukoil managers led by Alekperov and Vice President Leonid Fedun have pledged to keep adding to holdings they bought last year. Alekperov acquired more than $681 million of shares in 2013 and at least $77 million this year, according to Bloomberg calculations from Lukoil filings.

[fareastwarriors]

Billionaire Lukoil CEO’s Stock-Buying Plan Adds to Rally

 

http://www.bloomberg.com/news/2014-05-28/billionaire-lukoil-ceo-s-stock-buying-plan-adds-to-rally.html#disqus_thread

 

interesting post in the comment section:

 

John Garrett •10 hours ago

There is no more transparent, better governed or managed operation than LUKoil.

 

Vagit Alekperov's leadership and behavior is the epitome of best corporate governance practices. This has been intentionally accomplished by numerous secondments between LUKoil managers and the various Western companies (Arco, BP and COP) who have, at one time or another been substantial LUKoil shareholders.

 

LUKoil's dividend has grown at a 10-year compound average annual growth rate of roughly 15%

[yadayada]

thanks for posting.

Renaissance estimates earnings before interest, tax, depreciation and amortization from the company’s new projects, including the Caspian offshore and Uzbek gas operations, will reach about $10 billion, while annual capital expenses will decline by $5 billion by 2017.

especially the capex thing sounds good. That will probably be a catalyst.

[Andy Dufresne]

Q1 results out:

 

http://www.lukoil.com/press.asp?div_id=1&id=4017&year=2014

 

http://www.lukoil.com/new/finreports/2014

 

My quick take - revenues continue to rise yet EBIT and NI fall by 1/3, EBITDA by 1/6 ... FCF of 179 million ... the company points to currency translation loses & loss on the sale to Sinopec yet its QoQ COGS increased by a greater absolute amount than the increase in sales and opex was also lower due to lower transportation expenses resulting from the weaker ruble ... all of this while prices realized on O&G were lower by 4-5% so, overall not a pretty picture and I am left wondering how long we will have to wait to see the capex reduction and the operational leverage to boost FCF to reasonable levels .... then again, I am a complete novice in O&G so please - critique away!

[phil_Buffett]

http://www.bloomberg.com/news/2014-05-29/lukoil-quarterly-net-falls-33-on-write-offs-missing-estimates.html

[yadayada]

so this is only because they had rubbles on the balance sheet (which depreciated) and because they probably overinvested a bit. But that seems to be a problem almost every large oil company has.

 

even with those earnings it is still cheap if capex comes down sometime soon and this will turn into a cash cow.

[plato1976]

why should we expect the capex to come down?

 

so this is only because they had rubbles on the balance sheet (which depreciated) and because they probably overinvested a bit. But that seems to be a problem almost every large oil company has.

 

even with those earnings it is still cheap if capex comes down sometime soon and this will turn into a cash cow.

[yadayada]

why should we expect the capex to come down?

 

so this is only because they had rubbles on the balance sheet (which depreciated) and because they probably overinvested a bit. But that seems to be a problem almost every large oil company has.

 

even with those earnings it is still cheap if capex comes down sometime soon and this will turn into a cash cow.

It was in the article, and my guess is that the CEO also knows this (and maybe it is somewhere in a LUKOIL news message or in their AR?). WHy would CEO load up thi smuch if the quality  of their earnings is really crappy going forward?

[plato1976]

In general Big oil 's earning quality is quite poor

Their earning looks ok but then their FCF is only 60% of ER or even lower due to sustained higher CAPEX

It just validates the theory that it's more and more exp to find new oil

 

maybe Lukoil is different but...

 

why should we expect the capex to come down?

 

so this is only because they had rubbles on the balance sheet (which depreciated) and because they probably overinvested a bit. But that seems to be a problem almost every large oil company has.

 

even with those earnings it is still cheap if capex comes down sometime soon and this will turn into a cash cow.

It was in the article, and my guess is that the CEO also knows this (and maybe it is somewhere in a LUKOIL news message or in their AR?). WHy would CEO load up thi smuch if the quality  of their earnings is really crappy going forward?

[fareastwarriors]

Lukoil to Build $30 Billion Cash Pot After Debt Freeze

 

http://www.bloomberg.com/news/2014-06-26/lukoil-to-build-30-billion-cash-pot-after-debt-freeze.html

[NomadicRiley]

Just got notice of an information letter from Lukoil about dividend withholding tax rates.

 

https://materials.proxyvote.com/Approved/677862/20140512/SHLTR_213676.PDF

 

Does anyone know how this impacts individual investors who own shares in the name of their retail broker?

 

 

[JBird]

Just got notice of an information letter from Lukoil about dividend withholding tax rates.

 

https://materials.proxyvote.com/Approved/677862/20140512/SHLTR_213676.PDF

 

Does anyone know how this impacts individual investors who own shares in the name of their retail broker?

 

First, ask your broker whether or not they've decided to disclose the information. If they do not disclose, you're going to pay a 30% rate. If they do disclose, your rate stays at 15%.

 

Charles Schwab has decided not to disclose. They've done this because if they choose to disclose, Russia is legally entitled to an audit of the information. Charles Schwab does not want Russia auditing their client information. Sadly my tax rate just doubled.

[TwoCitiesCapital]

Just got notice of an information letter from Lukoil about dividend withholding tax rates.

 

https://materials.proxyvote.com/Approved/677862/20140512/SHLTR_213676.PDF

 

Does anyone know how this impacts individual investors who own shares in the name of their retail broker?

 

First, ask your broker whether or not they've decided to disclose the information. If they do not disclose, you're going to pay a 30% rate. If they do disclose, your rate stays at 15%.

 

Charles Schwab has decided not to disclose. They've done this because if they choose to disclose, Russia is legally entitled to an audit of the information. Charles Schwab does not want Russia auditing their client information. Sadly my tax rate just doubled.

 

Scottrade claims not to provide this either, but the representative keeps referencing tax reclaiming and that I should speak with a tax advisor to reclaim taxes for foreign taxes paid even though it's in an IRA....so I'm pretty sure they just don't know what they're talking about and that "No disclosure" is the easiest answer for them.

 

I've been thinking about switching to IB for a few weeks now that it is an approved broker at my co. Anyone hold these there and know if they do the disclosure?

[fareastwarriors]

who's adding here?

[phil_Buffett]

who's adding here?

 

i  :)

[Laxputs]

Seems they spend huge amount of cap ex in the last 9 years or so. But so far net income barely grew? It dropped in 2013. Net income went from 6.4 bn$ to 7 billion$ basicly in 9 years.

 

like 78 billion went into capex vs like 31bn$ of depreciation over that period. So what will happen in the future? Will they become a cash cow at some point? And is the drop in net income due to corruption? Since depreciation and capex should like almost level out in the long run (otherwhise this doesnt look that cheap) they should have to generate like 47 bn$ of FCF more then net income so far to make up for last 9 years?

 

Isnt there risk that by the time they should become a cash cow, their oil wells start to dry up. And so this will keep repeating. If you discount that, this thing is trading more at like 7-8x earnings. And there are less risky oil company's you can have for that multiple. Seems like their huge investments didn't really yield that much results.

 

I thought this was interesting, nice research. Did you disprove this or finding anything of interest in this regard?

[Laxputs]

Any speculations on how sanctions may affect Lukoil? It seems like sanctions are just targeting access to international debt markets which doesn't seem like an issue for Lukoil. This article from today mentions Exxon and BP in Russia:

 

http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/big-oil-under-pressure-as-western-sanctions-on-russia-weigh/article19881350/

 

 

It's interesting that some ETF co's are considering dropping Russian equities from their global indexes. Would add to the buying opportunity if that were to take place.

[Laxputs]

Is this reasonable:

 

An investment with Lukoil could be thought of as such:

 

Get a 20-25% normalized earnings yield with a company that is paying a growing 5% dividend and buying back stock. It's trading at 50% of BV. The average multiple of Exxon, Chevron, Total, Conoco Phillips, BP, Petrobas is 1.6 BV.  Suppose in 10 years times it trades for 1.25 BV, a 30% discount to comps. And suppose there is a 7% risk of appropriation or total loss scenario over 10 years (made up number and I'd have to believe likelihood of that scenario is a lot less). Is the return equivalent to:

 

22.5%/year compounded at N years + (probability X *150% multiple re-rating from initial purchase multiple of 50% BV) - (5%*initial investment)

 

 

[Mephistopheles]

When does this company pay dividends? It's a bit confusing on the website. The last payment was in July, but that seems to have been the only one for 2014, whereas there were two in 2013.

 

http://www.lukoil.com/static_6_5id_243_.html

 

Also, is it too late for me to get a 15% tax rate if I buy after the deadline for disclosure?

 

The Intermediaries will need to generate the above disclosure information based on the available

documents (including tax residency certificates) and provide it to the Depositary Bank between July 16

to July 18, 2014.

 

https://materials.proxyvote.com/Approved/677862/20140512/SHLTR_213676.PDF

[leftcoast]

Damodaran's valuation of Lukoil: Go where it is darkest: When company, country, currency and commodity risk collide!

http://aswathdamodaran.blogspot.com/2014/11/go-where-it-is-darkest-when-company.html

 

Even if I assume that oil prices drop by another 20% and that the standoff over Ukraine will not end soon (translating into higher equity risk premiums), the value per share that I get is $50.56, higher than the stock price of $45.30. At $45.30 a share on November 18, 2014, I am again either missing something profound or the stock is massively under priced.

...

With Lukoil, there is the Putin wild card, where the troubles in Ukraine expand into Poland, Hungary and the rest of the old Soviet empire. That, combined with a collapse in oil prices, would make me regret my investment, but I plan to buy Lukoil to my portfolio, and live with the discomfort of having no power to exert change. After all, at the right price, you can live with a lot of discomfort!

 

If you are tempted to complain about how much uncontrollable risk you face investing in Vale and Lukoil, keep in mind two facts. The first is that they are bargains precisely because of the uncertainty, as global investors flee from he companies, abandoning good sense along the way. The second is that it could be worse, since you could be holding Petrobras (instead of Vale) and Rosneft (instead of Lukoil) where the concerns are multiplied.

 

[no_free_lunch]

Thanks leftcoast.  It's a good article.  Very well written.  I am still not 100% sold on LUKOY but I have to admit it's very cheap.

 

I looked at Lukoil's operating cash flow and it is insane.  It was $19B in 2012 versus a current $40B market cap.  Cash & ShortTerm Investments are about equal to all of the short & long debt.  If they halted capex they could buy 95% of the company in 2 years.  At that point the remaining shareholders would have a 20x.  Of course revenue would plunge without the capex, it's dependent on the price of oil, there are country risks, etc.  but still!  It is very risky but it definitely has multi-bagger potential.

[ccplz]

Anyone looking at Lukoil now?

[Jurgis]

Personally, I take a political stance on Russian companies and I won't buy any single one of them if my investment has a chance to support Putin's regime. My country has suffered Russian occupation in the past and there's a high likelihood of another one coming.

 

From investment point of view, the likelihood that Putin will nationalize or otherwise usurp foreign investor holdings is more than 30% IMHO.

[mttddd]

Ya the russian political situation is not one i want to mess with. Also with all the other oil companies hurting I think there is other value out there to be had in the sector with less risk.