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Gazprom Neft Hit Hard From OPEC Production Cut

Gazprom

Gazprom Neft’s total oil production for 2017 will be lower than it was in 2016, according to an announcement by CEO Alexander Dyukov on Thursday.

A new Reuters report also says Dyukov maintains that Gazprom’s production strategy has supported the international agreement to lower oil output and rebalance global markets on the supply side.

In concert with the Organization of Petroleum Exporting Countries, Russia agreed to lower production by 300,000 barrels per day last November. OPEC itself was on the hook to bring down bloc-wide output by 1.2 million bpd. Though the cartel’s compliance topped 100 percent during the early months of the agreement’s implementation, Nigeria and Libya have ramped up production since then. The latest figures show OPEC compliance leaning towards 80 percent.

Originally, OPEC members Nigeria and Libya had been granted exceptions to the deal due to months and years of domestic strife, respectively. Both nations have experienced a dramatic resurgence in their oil sectors since January, however. The change of outlook in Nigeria led Abuja to declare that it would stagnate output once it hit 1.8 million bpd.

Earlier this year, reports surfaced that Gazprom Neft plans to borrow some $2 billion next year as it expects international oil markets to stabilize. The recovery, paired with quantitative easing sanctioned by the Russian government, will allow the state giant to refinance existing debt even as it faces the brunt of sanctions from the United States and the European Union. The measures, enacted as a political response to the Kremlin’s annexation of Crimea, prevent the company from accessing international lenders.

CFO Alexey Yankevich also told Bloomberg in August that Gazprom Neft plans to hike its dividend to $0.25 (15 rubles) per share in 2019, from about US$0.18 (10.68 rubles) for 2017, thanks to an upbeat production growth forecast and higher refining margins after a refinery upgrade. 

By Zainab Calcuttawala for Oilprice.com

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