| 2008-09-30 |
Published: The Kommersant ú Newspaper |
SERGEI VOROBIEV, Deputy Chairman of ITERA Management Board, told "Ú" how the world financial crisis influenced the real sector of the economy, particularly the oil and gas business.
— Did the world financial crisis correct your company’s plans?
— Yet, late last year, when we were doing financial planning for 2008-2010, we expected very tough conditions at the borrowing markets in 2008 and the first half of 2009. When placing the second bonded loan of Rub. 5 billion in November of 2007, we felt the market had considerably shrunk and that we were looking into a difficult period to come. However, the depth and abruptness of the financial market fall in Russia were considerably larger than we expected. I thought we would reach the peak point much later that is to say in October or November. This is the time when Russian companies normally massively borrow from the world markets and when they have to settle or refinance their previous borrowings at the same time.
Our plan was to concentrate on the core assets and get involved only in the projects that were going to produce results in the very near future so that we could understand exactly how we were to sell gas, what risks we had and what conditions for a long-term stable work we needed. Since late 2007, we worked out a very clear principle: we stopped financing non-core businesses with the gas money. We also stopped buying from associate markets.
We understood the crisis in the US and Europe would affect Russia some way. A political situation acted as an economic fall catalyst, too. I am not sure if we are to rejoice or feel sorry for the experience we received, but never before had we experienced a crisis of such a scale and depth. The crisis of this magnitude is not to be seen by every other generation of people. Its depth should be measured not by weeks, but by months or probably by years.
— How do you assess the impact of the crisis on the real sector of economy, on operation of oil and gas companies?
— I would like to highlight two aspects. The crisis itself is a bad thing in any case, because there is less money around and money becomes more expensive. This is why companies have to reconsider their development programs to reduce their dependence on borrowed financial assets. At the same time, crisis makes banks reconsider their approach to risks and select borrowers more cautiously. From this viewpoint, the real sector is going to suffer the least and probably benefit in certain cases. We continue contacting some Western banks. They are interested to finance our projects because they do not involve real estate which growth prospects are not clear, but assets with stable money flows. Such clients are guarantee for the banks that payments would be effected not at the expense of the increased facility value, but thanks to sales of the product which is always in demand. An overproduction crisis is impossible in this case, because natural gas will be needed in future as well. I think that the oil and gas sector will be less vulnerable to financial markets’ volatility.
— Would the lending rate growth continue?
— Rates may continue growing for one or two months more. Then they will stabilize for a half a year and become moving back to the previous level. Everything will depend on the implementation of Henry Polson’s Plan in the US and on other state regulative measures.
— How would you comment on the forecasts regarding the crisis in the real sector in spring of 2009 because of a sharp drop in a free market price of oil from $140 to $90 per barrel?
— I believe that the oil market was much overheated in the last half-year; forward contracts were being bought aggressively. It was clear that the growth of oil prices was caused not by real demand, but rather by financial investments and gambling on the stock exchange. Now, an abrupt correction of oil price has taken place and the long-term perspective forecast is going to be a more reserved one.
Super profit received in the first half of this year by the Russian state and petroleum companies thanks to oil price bulge would allow oilmen feel comfortable even in case the oil price is as low as $70-80. They would also be able to keep their companies within the forecast development limits, because the general price level for 2008 would remain high enough. At the same time, many companies borrowed money on security of their own shares. Now they would have to pay the so-called margin call or increase the collateral. They have to be ready to do it. In case stable revenue is there, all this can be regulated.
— What is your forecast regarding the situation development?
— I think, the emotional wave should ebb, although we shall still see the crisis of smaller banks with insignificant client base in the course of one and half or two months. It is possible that some of them would have problems, bankruptcy included. Everything will depend on how much the state is prepared to regulate and control the financial market stabilization process.
— Would oil and gas companies need to correct the investment programs for 2009?
— I am convinced this crisis is to last not one month, but one and a half or two years. This is why it would be necessary to deal with reduced expenses and to control the investment programs in 2009 and the first half of 2010. The less we depend on external financing, the more stable positions of companies would be.
— How much justified is the repurchase by companies of their own shares, the way Novatek or LUKoil shareholders do?
— This is a very good solution in case a company has free money. No matter how funny it may sound, the purchase of the own shares may be a more safe use of cash assets than investing in financial instruments or placement of the remainder cash on accounts of large international banking institutions.
— When would companies, for example ITERA, go back to IPO ideas?
— This question should be addressed to shareholders. My personal feeling is it is necessary to make the placement when the market would at least reach the spring level. This is not going to happen in the next few months. My forecast is that this process is going to be shifted until at least late 2009.
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