ROSNEFT IS ENOUGH FOR $27 BLN
The head of OAO Rosneft said maintaining dividends is a "sacred obligation" for Russia's largest oil company as sanctions limit its financial flexibility.
"We have enough liquidity to service current credit lines," Rosneft Chief Executive Officer Igor Sechin said in an interview while visiting a drilling rig in the Arctic Ocean. "We continuing to work and generate cash every day."
Rosneft, the world's largest publicly traded oil producer by volume, faces 1.07 trillion rubles ($27 billion) in loans requiring repayment this year and next. Sanctions imposed to punish Russia for its actions in Ukraine prevent Rosneft from borrowing in U.S. or European capital markets for periods of longer than 90 days.
Rosneft's profit this year will probably exceed $13 billion providing the company has sufficient funds to service debts, Sechin said. Nonetheless, financial restrictions may mean some projects get delayed.
"The financial condition that the company is in and the financial resources that we have allows the company to work in any condition," Sechin said. "Some projects we probably will move to the side and start to realize them a little bit later."
Rosneft, based in Moscow, had sought as much as $42 billion in loans from the Russian government, two people familiar with the matter said in August. Sechin wouldn't say what size funding Rosneft sought, and clarified that it would be loans, not equity.
The company's petition to the government to make cash available during sanctions applies only to future projects such as the proposed Far East Petrochemical plant and East Siberia, he said.
"The support will be determined by the resources of the budget and plans of the governments," Sechin said. "If it comes about, that means we will continue developing all our projects."
The company has built about $18 billion in cash through the first six months of the year to service payments, Sechin said. Rosneft does not list that cash, gained as advance payments for crude delivered to China and traders, as debt.
The company didn't draw down any Chinese cash in the second quarter even as it made an agreement for as much as $70 billion in advance payments for oil deliveries.
"Work with our Chinese partners is proceeding according to plan," Sechin said. "All our mutual responsibilities are on schedule."
Rosneft response to sanctions on technology exports will be to produce more relevant equipment and know-how locally, Sechin said. Rosneft has sought to increase the role of domestic suppliers and contractors to lower costs, Sechin said.
"So in some sense you could say that sanctions have helped us with a number of decisions that will cut costs," Sechin said.
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