Provisions Shrink Petrom Dividends For 2008

Petrom, the largest company listed on the Bucharest Stock Exchange, yesterday announced that their dividends for 2008 could be significantly smaller than a year before as a result of provisions for the last quarter of 2008. Specifically, the provisions refer to failed exploration activities in Russia, which led to a decrease of the accounting value of Petrom investments in that country.

Petrom will make additional provisions as a result of the reorganization process and of the ongoing litigations with current or former employees. "The positive part of the news is that Petrom announced they would disburse dividends," said Marcel Murgoci, Trading Manager of the brokerage firm Estinvest. "A significant decrease in the dividends, as announced, would not be so serious if correlated with the Petrom quotation on the Stock Exchange," he added. According to Murgoci, even a 50% year-on-year decrease in the dividends disbursed by Petrom would still mean a good return on investment. "Last year, Petrom paid 0.0191 RON/share, which was their highest ever. If the dividends for 2008 were cut by half, the company would still be attractive for investors. Evidence of that comes from the fact that the market did not have a negative reaction today (i.e. yesterday), when the news was announced," Murgoci added.

Adrian Duna, an analyst with KD Capital Management, pointed out that current estimates indicate that Petrom achieved better results in 2008 than in 2007. "We will see how significant the dividend cut will be, considering that the dividends for 2007, when the results were weaker, the company offered 0.0191 RON/share," said Duna. Petrom has a market value of 9.34 billion RON at an average price of 0.1650 RON/share dated yesterday.