Optimization of assets: Lukoil's management approved the sale of the oil trader Litasco

Vagit Alekperov argues that the decision to sell Litasco is not connected with anti-Russian sanctions and the company considers the optimization of all foreign assets.
Origin source
The Lukoil management approved the sale of Litasco, the oil trading division of the company. The transaction will be considered in late November - early December, the president of Lukoil Vagit Alekperov told journalists. "As for Litasco, the board in principle gave the go-ahead for preparing the material, instructed the company's responsible employees to submit proposals on the feasibility of selling Litasco. We hope that by the end of November - beginning of December such documents will be submitted to the board, and the board will make a final decision, "Alekperov said (quoted by TASS).

According to him, the decision to sell is not connected with anti-Russian sanctions and the company considers all its foreign assets in order to optimize, the head of Lukoil stressed. Litasco, he said, is a non-core asset. Sources Reuters reported in late August that one of the reasons for the sale of a trader may be sanctions. In addition, the sale will help attract a significant portion of working capital from trading activities to Russian exploration and production projects and oil production in Russia. It was also reported that after the sale, the company could equal the world leaders - "gradually Litasco will become an independent trading house, such as Vitol or Trafigura".

What is changing the "window into the world"

The sale of Litasco ("windows to the world" for Lukoil, as stated on the site of the oil trader) may be the first step towards the sale of all foreign assets of the company. The released funds of Lukoil are likely to focus on the development of oil fields in Siberia. "Lukoil" is on the US sanctions list since 2014, but it is not forbidden to sell assets. Oil trading, when a standard cargo costs more than $ 50 million, is a capital-intensive business that requires trading houses to have tens of billions of dollars of credit lines available to dozens of global banks.

According to Alexander Kornilov, an analyst with the oil and gas sector of Aton, Litasco's business has grown significantly and it has become too onerous to have an oil trading division with similar volumes of operations inside Lukoil. "It's about getting rid of a non-core asset," Kornilov said. Kornilov believes that the proceeds from the sale of Litasco can be used to increase dividends, as well as the launch of new projects in Iraq, Mexico and Iran. Raiffeisenbank analyst Andrei Polishchuk also believes that, in general, Lukoil's international projects have not been very successful, and their marginality is incomparable with Russia's. And the company's plans in the first place - a return to Russian assets.

According to Polishchuk, Litasco can cost about $ 3 billion. But Lukoil can also ask for compensation for its investments in the company. "That is, Lukoil will be interested in more than $ 3 billion," the analyst said. In his opinion, Alekperov's company will receive the money received in the first place in domestic projects, including in the Barents Sea, and in the long term - in the Arctic. Also, we can talk about investing in projects in Uzbekistan.

Buyer of Russian oil

Litasco is a unique phenomenon for the Russian oil business. It seems that this is the only oil trader of Russian origin, which not only sells foreign oil and oil products, but also does it in volumes comparable to the supplies of related companies. Litasco ranks first in the ranking of the largest buyers of Russian oil under the Forbes version. For the second consecutive year, Lukoil has maintained this status: in 2017, the volume of purchases amounted to 32.9 million tonnes, a year earlier - 35.8 million tonnes. In 2004, 28% of Litasco's trade fell on third parties, in 2008 - 40%, and two years later already 52%. In 2015, this ratio was 51 to 49 in favor of Lukoil.

At the turn of the 1990-2000s, all world oil giants created separate trading divisions, and Lukoil was no exception. In 2002, it decided to consolidate export deliveries to the Swiss subsidiary Litasco. To do this, the management of Lukoil chose the Swiss Lukoil-Geneva, another 2000 renamed Litasco (Lukoil International Trading and Supply Company). The choice of headquarters in Geneva was explained by the loyal tax laws of Switzerland.

Creation of own trading division was not cheap pleasure, Forbes was told earlier by one of sources close to "Lukoil": investments in capital Litasco and guarantees to banks were about $ 7-10 billion. At creation Litasco the task was set that the factor ROI (the ratio of profit to investments) reached 15%, but this did not happen immediately. The volume of Lukoil exports increased gradually: In 2005, the trader sold 87% of Lukoil's exported oil, in 2011 - remained the same level. Now Litasco takes over all the deliveries of Lukoil outside of Russia.