The best result on the Russian stock market last week was shown by LUKOIL shares, which skyrocketed by 22.77%. A number of events coincided that improved the attitude of investors towards these securities, but most importantly, their hope for high dividends strengthened

Action of the Week: Dividends are expected from LUKOIL

Many Russian stocks were up last week, but mostly they were up 1-5%. Still, the Moscow Exchange Index added 9.54%. The result was provided by a narrow circle of heavyweights who showed double-digit or close to that profitability. This group included the shares of Gazprom, NOVATEK, Sberbank and Norilsk Nickel, but LUKOIL was the undisputed leader. Compared to the close of the previous Friday, its shares by the evening of April 29 rose by 22.77%.

It was a worthy end to a month that, for the most part, was a rather gloomy one for the oil company's stock. On April 1, a new round of their decline started, as a result of which on the afternoon of Friday the 22nd, they lost 37%.

The news background was appropriate: the refusal of Canada and the United States from Russian energy carriers, continuous, although by no means always serious, talk about the embargo of European countries threatening domestic oil. There were also rumors about a possible expropriation of refineries owned by Russian companies in the West. On April 13, Great Britain included the permanent head of LUKOIL, Vagit Alekperov, on the sanctions list, and on the 21st, he announced his decision to leave the board of directors and resign.

Vagit Alekperov was not a controlling shareholder. As of March 31, he owned 3.12% of the shares, and in relation to another 5.43% of the shares he had a “beneficiary economic interest” (beneficiary) through trusts, funds and other instruments. But there were fears that this situation could affect the business of the oil company, both in the market and among the top manager himself. This is how he later explained his decision.

But with the announcement on April 22 of the appointment of Vadim Vorobyov as interim head of the corporation (it is planned to appoint him as president of LUKOIL), the perception of the shares of the oil giant by investors began to change. After all, if we ignore the gloomy external background, then the economic situation of the company at the moment is by no means not bad.

The volume of hydrocarbon production in 2021 amounted to 2.16 million barrels of oil equivalent (of which oil accounted for 1.6 million bpd), which is comparable to the production of countries such as Norway, Mexico, Kazakhstan or Nigeria. Oil prices are still very high.

For 2021, according to BCS Express, the estimated dividends on LUKOIL shares amounted to about 870 rubles, of which 340 rubles were already paid in December. This, analysts believe, means that in 2022, total payments could exceed 1,000 rubles per share. At April 22 prices, this corresponded to a dividend yield of over 27%. Even based on quotes for the close on April 29, we get quite a solid 21.3%.

And this was followed by a whole series of positive and confidence-building events for investors. Brent oil, which fell below $100 per barrel on April 25, returned above this figure on the same day and grew most of the week. It reached $10 on Friday but closed the day lower at $106.08.

On April 26, LUKOIL exercised its right to waive the moratorium on bankruptcy introduced by the government for the period from April 1 to October 1. This removed a number of restrictions from the company, but the main thing for investors was that the moratorium did not allow the payment of dividends.

On April 27, LUKOIL paid $34.2 million on bonds maturing in April 2023. This also made an impression, because earlier some Russian companies, for example, Severstal, EuroChem Finance and Russian Railways, were unable to fulfill their debt obligations due to the blocking of foreign exchange payments by Western intermediaries.

Finally, on Friday, the company released its RAS financials for the first quarter of 2022. LUKOIL's net profit soared 10.4 times in annual terms, amounting to 133.38 billion rubles. Its revenue grew by 2.2 times (up to 723.2 billion rubles), and gross profit – by 3.5 times (up to 191.247 billion rubles). It is not surprising that according to the results of this day, LUKOIL shares became the leader in the Moscow Exchange Index, soaring by 7.27%.