As previously announced, Rosneft-2022 key strategic focus is to increase profitability and returns on the existing assets. Portfolio is comprised of highly effective organic investments with primary objectives of “on time – on budget” delivery, synergy application, new technologies replication facilitation leading to overall step changes in efficiency.
Additional strategic initiatives include employee development programs, educational and social projects, regional development programs and goals for accelerated technological advancement of Rosneft.
The Board of Directors supported enhancing shareholder returns and improving the equity story of the Company. Among the initiatives presented the management of Rosneft proposed to establish the minimum target of RUB 500 billion for the year of 2018 for the decrease of the total debt and trading liabilities of the Company. This decrease would be achieved with the help of:
- Enhancement of the investment governance, project management practices and improvements in the procurement function with corresponding decrease in the capital expenditures guidance for 2018 at the level of 800 billion rubles (20% decline compared to the earlier guidance); this initiative would be undertaken with the purpose of achieving a sustained cash flow impact within the framework of Rosneft-2022 strategy.
- Improvement in the working capital position of the Company by the end of 2018 in the amount of 200 billion rubles, which would be achieved with a number of initiatives in the trading business and the procurement function.
- Strategic review of the asset portfolio focused on decreasing the share of tail and non-core assets, the disposal of which should provide incremental net cash flow to the shareholders.
Additionally with the objective of enhancing shareholder returns, the management of Rosneft proposed that the Company undertakes a USD 2.0 billion share buy-back program in the course of 2018-2020 through open market repurchases in addition to the approved dividend policy of a 50% payout of the basis of IFRS net profit. The medium-term buy-back would be financed through the organic free cash flow generation and divestments of non-core assets. The execution of the share buyback program would start in Q2 2018 subject to the receipt of customary corporate approvals.
Commenting on additional initiatives to the “Rosneft-2022” Strategy, Rosneft Chief Executive Officer Igor Sechin noted: "Successful implementation of “Rosneft-2022” is our top priority. It will help to further boost our competitive advantage in the volatile external environment. Specific targets are now part of the management performance assessment. The Company continues to demonstrate robust financial results and proposed new initiatives will enable us to improve the focus on the business using core strengths that will result in the enhancement of shareholder returns. We are strong believers in the fundamental value of Rosneft that is not fully appreciated by today’s volatile equity markets”.