Gazprom Reemerges as Natural Gas Giant

Buy-recommended Gazprom (OGZPY.PK) offers unlevered appreciation potential of 200% to a McDep Ratio of 1.0 where stock price would equal Net Present Value (NPV) of $64 a share. Released today, results according to international accounting for the quarter ended March 31, 2009 exceeded our estimate from four months ago for unlevered cash flow (Ebitda) and natural gas price while volumes were less. Though it is unreported history, the second quarter was likely the low point in Ebitda mainly because of the timing of European natural gas contract price.

As relayed on today’s conference call, European volumes in the third quarter are back to the year ago level and price is expected to return to the year ago level in the fourth quarter. Beyond recovery in the higher-priced European market, the continuing growth potential lies in bringing the Russian market to comparable profitability with Europe. Though NPV looks high relative to stock price it appears readily justified by unlevered present value multiple (PV/Ebitda) compared to high reserve to production ratio (Adjusted R/P).

Subject to the normal risks in global enterprises, we are betting that the promise of a higher stock price for its largest company and all the benefits it would bring for the country of Russia is a powerful motivation that will ultimately benefit investors as well.

Originally published on August 26, 2009.

Comments

[Ferdinand E...:]

Gazprom reemerges as natural gas giant. When was it anything else?

Sep 21 10:47 AM

[OiledGaz:]

Most of articles promoting Russian energy giants are paid for by those giant companies. Almost all analysts are paid for positive comments on Russia and its energy companies.
The truth is probably opposite to what they are propagating about Russia or its companies.

Sep 21 12:14 PM

[sako shooter:]

Horizonal drilling and gas plays in western and central europe are going to dramaticlly reduce Gazprom's market share in western europe. Would you invest in shares of the US mafia? That is what you are doing when you buy into Gazprom.

Sep 22 04:57 AM

[kstock:]

Natural Gas is picking up heavily in the United States, where CNG bus fleet sales are being spurred increasingly by government subsidies. To read up on this trend, and for an in-depth look on the technology and its future here and abroad, there is a good headline available at Yahoo Finance:
finance.yahoo.com/news...

Sep 22 10:22 AM