OREANDA-NEWS. June 01, 2010. According to Deputy Finance Minister Shatalov, all 22 Eastern Siberian fields subject to the export duty breaks (including Vankor, Verkhechonsk, and Talakan) will start paying reduced export duties from July 2010. The reduced scale will be based on the threshold price of USD50 (as opposed to USD25 for regular export duties). In addition, according to Shatalov, the Vankor field developed by Rosneft will start paying regular export duties from 2011, reported the press-centre of OTKRITIE Financial Corporation.

View: Should the government approve export duty modifications in line with Shatalov’s remarks, the impact on our Rosneft forecasts would be negative, since current assumtions have the Vankor field returning to normal export duties from the beginning of 2012. Our 2010 EBITDA and net income forecasts would be trimmed by 2% and 3%, respectively. Our 2011 EBITDA and net income forecasts would decrease by 18% and 22%, respectively, while our post-2011 forecasts would be essentially unchanged. The resulting downside risk to our DCF-based valuation of Rosneft appears to be minor (to the tune of 3%), which is mainly attributable to the discounted changes to our 2011 forecasts. 

Rating: Given the limited impact on Rosneft’s valuation, we believe a potential decision on export duties would be positive to the extent that it would remove uncertainties related to future tax payments. While the potential decision represents some downside risk to our 2010-2011 forecasts, we maintain our positive view on the stock and our BUY rating.