Gazprom: Rich in Resources, Weak in Capital

Buy-recommended Gazprom (OGZPY.PK)’s stock has lost upward momentum in 2007, as it trades below its 200-day average, signaling the need for investor patience in realizing long-term appreciation.

At the same time, the underlying commodities natural gas and oil are also out of favor, a condition we believe is temporary. Because Gazprom is rich in resources that are not getting world price currently, Russian companies don’t need higher global commodity price for profits to grow.

Gazprom does need billions of dollars of capital to develop new supplies of clean fuel. In the context of enlightened self interest, we expect Russia’s leaders to create a positive environment for Gazprom stock that engenders confidence by investors, lenders and customers to provide the most economical source of capital.

Results for the third quarter of 2006, reported according to international financial standards on February 13, confirm that average gas price has risen to $2.83, but is still far from the benchmark for futures at $6.58 a million btu. Estimated net present value at $56 a share amounts to a modest multiple of current cash flow from low natural gas price.

Originally published on February 13, 2006

Comments

[dcappe10:]

I would not recommend Gazprom to any new investor in the Russian Oil sector. There are other stocks that have better outlooks for the future than Gazprom. I found an article that details the rising stocks, not the falling.

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2007 Jun 27 12:50 PM