January 12, 2018 / 1:18 PM / 2 months ago

UPDATE 2-Lukoil calls for exit from output deal if oil holds at $70

(Adds details, quotes, background)

By Olesya Astakhova

MOSCOW, Jan 12 (Reuters) - Russia should start exiting a global deal to cut oil output if crude prices remain at $70 per barrel for more than six months, Lukoil chief executive Vagit Alekperov said on Friday as he unveiled a $2-3 billion share buyback programme.

Russia and Saudi Arabia are leading the wider OPEC and non-OPEC effort to limit production to prop up prices and Brent crude oil futures have risen by more than 50 percent since mid-2017, hitting $70 a barrel this week for the first time since December 2014.

“If the price of $70 remains for more than half a year, we should start exiting smoothly,” Alekperov, who is also a major shareholder in the Russian oil company, told reporters.

Fatih Birol, head of the International Energy Agency, said that while oil prices at $65 to $70 a barrel were good for oil producers now, there was a risk it would encourage more oversupply from U.S. shale drillers.

Alekperov said a price of $60 to $70 a barrel was a comfortable level for Russian oil firms.

“We should not repeat the mistakes of 2000s when the oil price crossed over $100,” he said.


Lukoil also said it would establish a share buyback programme “as an incremental mechanism to distribute capital to shareholders” and planned to cancel around 10 percent out of a total 16 percent of the treasury shares it holds.

“I think these changes will further support the growth of the company’s shareholder value,” Alekperov said.

The board has supported the management initiative to cancel the major part of Lukoil treasury shares and use the remainder in a new long-term incentive programme for key employees.

The company would be cancelling the treasury shares it once planned to use for acquisitions during 2018, while the buy back programme worth $2-3 billion would last for five years, Alekperov told reporters.

The stakes held by both Alekperov and his business partner Leonid Fedun would increase following the changes, with Alekperov’s holdings rising to 30 percent and Fedun’s to just over 10 percent, Alekperov said.

Lukoil shares rose by 5 percent to 3,880 roubles, giving the company a market capitalisation of $55 billion, Thomson Reuters data showed. (Reporting by Olesya Astakhova; Writing by Maria Tsvetkova and Katya Golubkova; Editing by Jack Stubbs/Edmund Blair/Alexander Smith)

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