Rosneft’s Return to Profit Improves Prospects for 2020 Dividends

(Bloomberg) -- Russian oil giant Rosneft PJSC returned to profit in the fourth quarter of 2020, signaling that dividends for the year can be paid.

The company reported a net income of 324 billion rubles ($4.36 billion) in the three months through December, above analyst estimates. The Vostok Oil deals and some non-cash items allowed the return to profit, Rosneft said in a statement on Friday.

Rosneft’s bottom line was positive for the second half of the year and the whole of 2020, indicating that the producer can pay out final dividends for the year after scrapping interim payouts. Rosneft started paying dividends based on its half-year results in 2017.

“Despite all the difficulties of 2020, the company has achieved a net income, which will be the basis for the distribution of dividends in accordance with the dividend policy,” Chief Executive Officer Igor Sechin said in the statement.

Big Oil has mostly reported disappointing fourth-quarter earnings, signaling the industry’s recovery from the pandemic will be long. While most international producers, such as Royal Dutch Shell Plc or Exxon Mobil Corp., remain committed to making or even raising dividend payouts, investors question just how soon the sector will be able to improve its cash flow.

Russian oil companies have been under even more pressure due to output constraints as part of the country’s commitment to the OPEC+ deal. Rosneft, which accounts for about 40% of the nation’s output, bears the most of the burden.

Analysts were divided on the outlook for Rosneft’s dividends ahead of the report, with estimates ranging from no annual payouts at all to “moderate” final dividend.

Rosneft shares erased some of morning losses and traded down 0.3% at 499.45 rubles as of 2:01 p.m. in Moscow.

©2021 Bloomberg L.P.