Offering unlevered appreciation potential of 34% to estimated net present value [NPV] of $121 a share, buy-recommended Lukoil Oil Company (LUKOY.PK) combines rich resources with effective management amid the improving economic environment of Russia.
Third quarter 2007 results, reported December 12, exceeded our expectations with the help of record downstream unlevered cash flow (Ebitda). The disclosures prompt us to raise our projections of Ebitda for the next twelve months which could lead to a future increase in NPV.
The growing home market for oil products in Russia offers profits to Lukoil that are not available in the export market because of Russia’s high export tax. We carry a double weighting of Lukoil stock in the illustrative McDep Energy Portfolio.
Originally published on December 14, 2007.