A head of Russneft: “The company is not at risk of bankruptcy”

The oil industry in Russia might not have existed.  This statement was made by the President of Russneft Company Evgeny Tolochek, who drew attention to the state of affairs in the industry, caused by the pandemic and the global crisis on the hydrocarbon market in the spring of 2020.  At the same time, he hastened to assure the public that Russneft had no reasons to be concerned about bankruptcy.

The reason for the tension around the oil company, which is a part of the Safmar Holding, was a delay in credit payments to VTB, which Russnedt defaulted on this spring.  If this happened in the American market, as many analysts believe, it would be possible to talk about the further bankruptcy of the company.

It is quite logical that the Fitch international agency considered it right to downgrade the brand's rating to the state preceding the default.

However, the company survived thanks to financial support from the state, despite a serious decline in revenue (up to 75%).

When it comes to the oil company's debt, the creditor bank (VTB) transferred it ($ 1.2 billion) to the Qatari bank CQUR Bank LLC, as it is one of the company’s shareholders (VTB's share is about 19%), in March 2020. To remedy the situation, Russneft, according to its top manager, had to cut costs and moderate its appetite for the amount of dividends, which were planned to be increased to $ 100 million.

Now, apparently, the shareholders will receive only $ 60 million for 2019. This and other issues will be solved at the shareholders’ meeting, which is scheduled for September 24. 

The reason for the crisis, associated with payments on the loan, according to the head of Russneft, was the procedure for calculating taxes.

The oil price fell from $ 64 to $ 15 per barrel, while the taxes were charged based on the previous quotations.  As a result, the company had to cut the volume of investments, reducing them by 35%.  Along with the reduction in operating costs, Russneft managed to achieve savings of 12.5 billion rubles.  However, this would not have been enough for salvation if the authorities had not included the organization in the list of strategic enterprises.