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.
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
Stock market players have high praise for the Company’s strong profit margins and stable financial results.
We have already noted the stability of the operating margin of Gazprom Neft while maintaining quarterly EBITDA at a level of
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
Sanctions have caused moderate damage, but the investment history of Gazprom Neft remains attractive
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.
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.
“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”.
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.
Gazprom Neft management has earned an excellent reputation by developing a very ambitious strategy for the Company’s development back in
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|
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.