Bloomberg News

Surgut Earns 4% on $30 Billion Cash Pile, East Capital Says

April 19, 2012

OAO Surgutneftegas, Russia’s fourth-largest oil producer, “reassured” investors that it has $30 billion of cash, which is deposited in domestic banks, and plans to pay preferred dividends, a fund manager said.

“They told me that the cash pile is earning at least 4 percent in Russia’s top 10 banks, and not to worry, no exposure to PIGS bonds,” Aivaras Abromavicius, who helps run East Capital Asset Management’s $1.5 billion Russian fund, said today, citing a December visit to the Surgut-based company. PIGS refers to Portugal, Italy, Greece and Spain.

Surgutneftegas’s market value is $35 billion, held back in part by opaque reporting -- it doesn’t disclose the amount of cash it holds or the identity of its major shareholders. That may change as early as next year as Russia pushes companies to report to international financial reporting standards.

Surgutneftegas rose as much as 4.1 percent and traded up 3.2 percent at 28.94 rubles at 4:53 p.m. on the Micex Index in Moscow.

The introduction of international financial reporting standards will lead to a re-rating of the stock, Abromavicius said. The fund holds $200 million in Surgut shares, he said. East Capital manages a total 4.1 billion euros ($5.4 billion), according to its website.

Alexey Artemnenko, a spokesman at the Surgut, Siberia-based oil producer, declined to comment on the cash pile.

Surgut’s senior management has issued assurances internally that the oil producer will pay out dividends on preferred shares, which mid-level managers hold, Jacob Grapengiesser, a portfolio manager at East Capital, said at the same event. The preferred shares climbed 2.1 percent at 19.431 rubles.

To contact the reporters on this story: Jason Corcoran in Moscow at jcorcoran13@bloomberg.net; Stephen Bierman in Moscow at sbierman1@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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