Gazprom: The Saudi Arabia of Natural Gas

Stock price of buy-recommended Gazprom (OGZPY.PK) has regained upward momentum toward estimated net present value [NPV] of $62 a share as the company gets past the warm winter of early 2007. First quarter 2007 results reported Oct. 8 portrayed a modest gain in revenue as price increases offset lower weather-related volume.

Gazprom sold clean fuel for an average price of $2.66 an mcf, equivalent to crude oil at $16 a barrel on a heating equivalent basis, a price first reached by oil thirty years ago. Gazprom has winter time capacity to sell about 72 billion cubic feet daily, equivalent to 12 million barrels daily (mmbd), or more than Saudi Arabia’s oil producing capacity around 10 mmbd.

We think that buying Gazprom stock today is like buying Saudi Arabia in the 1970s. Of course, Saudi Arabia stock does not trade, but Gazprom stock does. We hedge the political risk by keeping the weighting of Gazprom stock to about 9% unlevered in the illustrative McDep Energy Portfolio.

Originally published on Oct. 8, 2007.

Comments

[kurt walter]

Bought this one a few years ago at split adjusted $4.00 per share. Monster winner. Not selling. It is practically a monopoly.