12:57 26.11.2015

Ukrnafta head proposes revising company’s dividend policy

3 min read
Ukrnafta head proposes revising company’s dividend policy

Head of public joint-stock company Ukrnafta Mark Rollins has said that the dividend policy of the company should be revised and the practice of paying dividends from all its profit should be stopped.

Rollins told reporters that allocating all of the company’s profit to pay dividends to the company's shareholders deprives the company of the chance to invest in its development.

He said that it is currently optimal to pay no more than 30% of net profit to shareholders. The dividend policy should depend on cash receipts.

"I've proposed that Ukrnafta's dividend policy depends on cash receipts. First we should look what earnings are planned, and what investment is to be made. If the price of oil will be, for example, $200 per barrel, I would not oppose the increasing the figure, but if the earnings are small, there is no sense in paying large dividends and leave the company without investment," he said.

Rollins also said that the tax burden on the company should be reduced, in particular, royalties for fossil fuel should be cut. Otherwise, the company would make losses due to restricted investment.

He said that with the current prices of oil, royalty rates and the current dividend policy, even taking into account sales of gas at market prices, will cause Ukrnafta to suffer a loss in 2017.

He said that funds should be investment in new equipment, special permits to produce fossil fuel should be extended, and new permits should be issued to stop the pace of falling gas and oil production.

Rollins also said he proposed that the amicable agreement between Naftogaz Ukrainy holding and the minority shareholders in Ukrnafta on gas produced by the company that was sold, but not paid for by the holding, should be signed.

The schedule foresees payments being made over seven years. In turn, this would allow Ukrnafta to only to close its liabilities on tax debts and dividends, but also invest in the development of the company.

He said that according to the assessment, the holding's debt to the company for natural gas of around 11 billion cubic meters exceeds UAH 50 billion.

"The third party assessed the debt for us, and it was confirmed by one of the firms of the Big Four [of audit companies]… The assessment gave over UAH 50 billion, including gas that was taken from Ukrnafta under joint production agreements," he said.

Rollins said that as for the sum of the debt could be discussed, adding that the main issue is that the sides start negotiations on the issue.

"I think that the signing of the amicable agreement is in the interest of all sides," he said.

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