Lukoil Shares Plunge Amid US Sanctions and Asset Sale Failures

Shares of one of Russia’s largest oil companies – Lukoil – have been rapidly falling for the fourth week in a row on the Moscow Exchange amid U.S. sanctions and a thwarted attempt to sell the company’s foreign assets.

According to Western media, the market is reacting to the restrictions and difficulties in selling the company’s overseas assets.

Current trading dynamics and market capitalization

During Wednesday trading, Lukoil shares fell to about 4,900 rubles per share – the lowest level in more than two and a half years. Over the day, the price declined by 4.6%; since the start of the week, by 7.4%; and since October 23, when the sanctions were imposed, by 18.6%.

As a result, the company’s market capitalization decreased by 777 billion rubles, which is about 9.6 billion dollars.

Investor sentiment and expert opinions

“Lukoil” led the decline on the exchange: investors fear that due to sanctions the company will not be able to meaningfully dispose of foreign assets without substantial losses, says leading Freedom Finance analyst Natalia Milchakova.

The company, operating in 11 countries worldwide – from Western Europe to Latin America – has been nearly paralyzed in external markets. The attempt to sell assets to Swiss Gunvor was blocked by the U.S. Treasury. Lukoil is now preparing for the possibility that all foreign assets valued at 14 billion euros could be lost, a source familiar with the situation said. Russian sources also report that Rosneft could fully absorb Lukoil.

Outlook and impact on finances

According to a source close to analytics, losing foreign assets would deprive the company of about a third of its revenue. Last year Lukoil reported a record 8.4 trillion rubles in revenue, of which more than 1 trillion was paid to shareholders.

The U.S. Treasury’s license to complete the deal with Lukoil expires on November 21. By that date, the company is expected to divest its foreign assets. However, full realization of assets within such a timeframe seems unrealistic: Kasatkin Consulting managing partner Dmytro Kasatkin notes that the typical term for such assets is 6–12 months.

Additional consequences of the sanctions

As previously reported, after the U.S. sanctions were imposed, Lukoil lost the ability to manage its assets abroad: in Iraq the company cannot receive money or oil for the West Qurna-2 field, in Finland the Teboil network of fueling stations has been left without fuel supplies, and the trading unit Litasco – its Swiss partner – cannot charter tankers or process payments.

The United Kingdom has also imposed sanctions on Lukoil.