Goldman Sachs says Russia’s Lukoil faces risks, less attractive

MOSCOW, Feb 15 (PRIME) -- Goldman Sachs (GS) has excluded shares of Russian oil producer Lukoil from the list of most attractive securities in the CEEMEA region (Central and Eastern Europe, Middle East and Africa), because the company may face difficulties due to higher taxes, the bank said in a research note on Monday.

According to Goldman Sachs, Lukoil has the highest capital expenditures in developing traditional oil fields among all oil companies covered by the investment banking giant; higher taxes may lead to a negative free cash flow, create risks to oil production and limit a rise of company’s dividends.

Lukoil’s shares fell 7% in 2015, while Russian oil companies’ stocks decreased by 6% on average in the period.

Earlier in February Russian Finance Minister Anton Siluanov said that the ministry wants to decrease an oil tax rebate by 50% to U.S. $7.5 per barrel and will consider the issue together with the Energy Ministry in 2016.

Lukoil CEO Vagit Alekperov said that the company’s output may fall 2-3% after taxes have been increased.

Vygon Consulting Chief Economist Sergei Ezhov told PRIME that the tax rise may incur 700 billion rubles of losses to oil companies in 2016 if oil prices are flat and the ruble stands at 77 against the dollar, and the country’s oil production may fall in this case.

Moreover, earlier the government decided to freeze an oil export duty at 42% in 2016 instead of a planned reduction to 36%.

(79.4951 rubles – U.S. $1)

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