Surgut has cash of USD 50 billion
The Russian market was strong again in October, and Carnegie Rysslandsfond rose 2.3 percent. The big topic of the month was the surge of Surgutneftegaz common stock, which rose 20 percent during very heavy trading and without any actual news.
There is speculation that Surgutneftegaz, which has more than USD 50 billion in cash, may buy Lukoil or possibly participate in the privatisation of Saudi Aramco. Lukoil has also performed well as it repurchases shares and has adopted a new dividend policy that will pay at least 100 percent of free cash flow as dividends.
Russian oil production in September was 11.2 million barrels per day, which was 0.9 percent lower than in September 2018. This was due to the agreement with OPEC that limits oil production, and Russian oil companies cannot grow under these conditions.
Russia plans to increase coal production by up 20 percent to 480-520 million tonnes by 2024, and then by another 15-26 percent to 550-668 million tonnes by 2035. Russia’s share of the global coal market is expected to rise from 11 percent to 25 percent. One might wonder how these plans align with Russia’s recent ratification of the Paris Agreement.
At a meeting with power company Interao, we took the opportunity as a fund manager to express our strong desire for the company to reduce its exposure to energy from coal and under no circumstances invest in new coal power. Less than 5 percent of its turnover can be attributed to coal-fired power plants, and the overwhelming majority of its power is generated from natural gas. Interao said that it intends to further reduce its coal exposure but currently has no target for zero exposure. We continue to advocate with the company in that direction.
Yandex was extremely volatile this month as the Russian Duma discussed a law to restrict foreign ownership in important Internet companies.