Opportunities for Investors

Prospects for growth in value

According to leading analysts from major investment companies, Gazprom Neft is one of the best companies in terms of its current position and potential for development within the Russian oil and gas industry compared with its competitors.

LLC URALSIB CAPITAL

Gazprom Neft remains our favorite in the oil and gas sector. Tax cuts for East Siberian projects make it more likely that its ambitious plans for geological exploration and production in 2014–2020 will turn into a reality. Gazprom Neft is currently trading at a discount versus the majority of comparable domestic companies despite its excellent growth prospects and the anticipated high dividend yield in 2013–2015. Getting the Prirazlomnoye and Dolginskoye fields from Gazprom, extending benefits on export duties for new fields in the Yamalo-Nenets Autonomous District and lowering the mineral extraction tax rate for oil in tight formations should become a catalyst for growth in share quotes in the long term.

November 2014

Stock market players have high praise for the Company’s strong profit margins and stable financial results.

OJSC SBERBANK

We have already noted the stability of the operating margin of Gazprom Neft while maintaining quarterly EBITDA at a level of 2.0-2.3 bn USD for almost four years now. We believe that this trend will also continue until the end of 2015 after which production from new fields will begin contributing and facilitating growth in profit.

September 2014

The market believes the Company’s investment history remains appealing despite the low liquidity of its shares and complicated geopolitical situation in 2014. The foundation for the Company’s future growth includes the new production projects Yamal, Messoyakha, Novy Port and Prirazlomnoye, which are capable of ensuring growth in production until 2025. In addition, the experience gained from stabilising production at mature fields and developing complex technologies for the development of fields lowers dependence on Western contractors and essential technological solutions. Along with a high level of operating efficiency, the favourable location and modernisation of oil refineries, strong market positions and high sales growth rates in the premium market segments are all factors that provide significant competitive advantages for the Company by creating considerable potential for growth in its value in the long term

OJSC GAZPROMBANK

Sanctions have caused moderate damage, but the investment history of Gazprom Neft remains attractive

November 2014

Gazprom Neft is trading at a significant discount versus its peers from developed and emerging markets and also versus Russian VIOC for such indicators as price/earnings ratio (P/E) and the enterprise value versus EBITDA ratio (EV/EBITDA). Almost all market players also acknowledge the Company’s leading positions in terms of dividend yield.

OJSC GAZPROMBANK

Gazprom Neft is trading at a level of 3.3 for 2015 P/E and at a level of 2.3 for EV/EBITDA with discounts of 23% and 1% versus Russian VIOC; it’s 60% and 46% versus peers from emerging markets and 69% and 44% for peers from developed markets. The dividend policy, which involves payment of 25% of IFRS net profit, provided the second highest yield in 2014 on common shares in the Russian oil and gas sector at 6.4%.
Gazprom Neft is one of the main beneficiaries of tax benefits in terms of dividend yield.

November 2014
LLC IC VELES CAPITAL

“In 2014, we expect growth in dividends, which suggests a dividend yield versus current quotes around the level of 7.1% and makes Gazprom Neft the second most attractive stock in the sector (after the preferred shares of Surgutneftegas) in terms of dividend yield”.

May 2014

Investors and investment analysts offer a positive assessment of the Company’s history since it joined the Gazprom Group in 2006 until today

The stock market also has high praise for the Company’s strong management.

OJSC GAZPROMBANK

Gazprom Neft management has earned an excellent reputation by developing a very ambitious strategy for the Company’s development back in 2006–2007. At the same time, the Company’s leadership has demonstrated the ability to achieve the goals it sets by fundamentally transforming the Company over the period from 2007 to 2014 via the effective development of existing assets, an effective mergers and acquisitions policy as well as establishing joint ventures with such key oil and gas sector players as OJSC Rosneft and OJSC NOVATEK.

November 2014

Analysts and investors believe that the incentives introduced by the government on the mineral extraction tax and export duties to stimulate growth in production at new fields will have a positive effect on the economic indicators of the Company’s projects and accelerate their return on investment.

According to several leading analysts, the Company is significantly undervalued by the market in 2014 compared with its competitors. Gazprom Neft shares are undervalued by more than 40% (as of 31 December 2014). This is largely due to the restricted liquidity of the Company’s shares. The potential for growth in hydrocarbon production, a high proportion of refining, expanded sales in premium segments and the active development of new production projects, along with a high level of operating efficiency, are all factors that provide significant competitive advantages for the Company by creating considerable potential for growth in its value in the long term.

Recommendations of analysts for Gazprom Neft shares
Analysts Date Recommendation Tgt Px, RUR
Ak Bars Bank 11.08.2014 Buy 184.0
Alfa Bank 03.10.2014 Buy 190.4
JP Morgan 23.01.2015 Sell 175.0
Raiffeisenbank 27.01.2015 Buy 182.0
Investcafe 19.02.2015 Buy 232.0
BrokerCreditService 26.02.2015 Buy 256.5
BofAML 02.03.2015 Buy 175.0
Gazprombank 03.03.2015 Buy 201.2
Sberbank 03.03.2015 Buy 311.1
UBS 03.03.2015 Buy 187.1
UFS 03.03.2015 Hold 180.0
Deutsche Bank 04.03.2015 Buy 205.0
Goldman Sachs 04.03.2015 Hold 189.6
Citi 06.03.2015 Buy 201.8

Dividend yield

Calculated on the basis of dividends declared in the corresponding year in RUB versus the value of one share in RUB on the Moscow Exchange as of 1 January.Dividend yield%

Assessment of investment appeal

Ratio of the Company’s market capitalisation versus annual earnings (P/E)
Ratio of Company’s value versus earnings before taxes (EV/EBITDA)

A high level of information transparency

In 2014, Gazprom Neft shareholders and investors were able to get a close look at oil production processes at the Novoportovskoye field on the Yamal Peninsula and oil refining at the Moscow Oil Refinery.

In 2014, the Company was presented with several awards for its interaction with investors:

  • The Gazprom Neft IR website received the Silver Award in the Stevie Awards international rating of corporate relations in the category of Best Investor Relations Site;
  • The Company’s corporate Annual Report received six awards at prestigious national and international competitions of annual reports.