Rosneft beats Gazprom as Russia's most valuable company

By bne IntelliNews April 11, 2016

Oil producer Rosneft has for the first time become Russia most valuable company in terms of market capitalisation, narrowly beating natural gas giant Gazpom on both the London and Moscow exchanges, Vedomosti daily reported on April 11.

Capitalisation of Rosneft, which accounts for 40% of Russia's crude oil output, gained $51.5bn on LSE and RUB3.465 trillion on Moscow exchange as of 1p.m. Moscow time versus $50.8bn and RUB3.447 trillion for Gazprom.

Earlier in March, Bloomberg reported that Rosneft's capitalisation can exceed that of gas major Gazprom in 2016.

Rosneft quickly caught up with Gazprom, and as of March 28, the companies' value on the Micex Moscow exchange reached RUB3.4 trillion and RUB3.2 trillion, respectively, making them and Sberbank the three most valuable Russian companies.

Capitalisation of Russia's largest crude producer grew 1.4-fold since January on positive company news despite the slump in world oil prices. In March, the stock price of Rosneft reached an all-time-high on the Moscow Exchange, when the company said it will boost investment by 30%, despite oil prices dropping by more than this in 2015.

Later that month Rosneft posted IFRS results above expectations, showing strong earnings and cash flow for the fourth quarter of 2015, as compared with both domestic and international hydrocarbon peers.

Industry experts surveyed by Vedomosti also attribute the rise of Rosneft's shares to speculative interest on background plans to privatise a stake in the company, and to the recent recovery of oil prices.

Gazprom was established in 1989 by reorganising the assets of the Soviet Ministry of Gas Industry into a corporation, and has since been Russia's largest gas producer and exports monopolist.

Rosneft, established in 1993, was one of many players in the oil market until its controversial indirect acquisition in 2004 of auctioned assets of former oligarch Mikhail Khodorkovsky's bankrupt oil major Yukos.

The consolidation of Rosneft into Russia's largest oil producer continued under the management of Igor Sechin, a close ally of President Vladimir Putin. In 2012, Rosneft its acquisition of the country's second-largest oil producer TNK-BP.

On March 22, Vedomosti and RBC reported that Rosneft last year asked President Vladimir Putin to override gas exports monopoly of Gazprom and allow it to export gas to Europe.

Russia's second-largest natural gas producer Novatek, which already won an exemption from  Gazprom's monopoly on liquefied natural gas (LNG) exports, has reportedly also been pushing to be allowed to perform indirect pipeline gas exports to Europe.

The influential head of Rosneft and close Putin ally Igor Sechin reportedly requested that gas exports limitations are lifted on the company, which has an agreement with its largest non-state shareholder British Petroleum to supply 7bcm of gas.

Gazprom CEO Alexei Miller, another long-term member of Putin's team, reportedly slammed the proposals by both Novatek and Rosneft in a letter to the president.

  2014 2015E 2016E 2017E
Financials, $ mln      
Revenues 145,887 83,665 53,357 70,691
EBITDA 28,699 17,305 13,147 17,912
EBITDA margin 20% 21% 25% 25%
Net income 9,238 8,299 8,619 6,688 3,291 6,265
EPS (adj), $ 0.87 0.63 0.31 0.59
Div/share, $ 0.13 0.12 0.08 0.15
Valuation, Gearing and Yield        
EV/EBITDA 3.5 6.2 8.2 5.8
P/E 4.3 6.9 14 7.4
P/CF 0.9 3.9 4.3 3.3
Net debt/EBITDA 2.1 3.5 4.7 3.2
Dividend yield 3.50% 2.70% 1.80% 3.40%
Revenues 0% -43% -36% 32%
EBITDA -3% -40% -24% 36%
EPS (adj) -28% -28% -51% 90%
Sector Valuation      
EV/EBITDA 2.3 3.4 5.6 4.8
P/E 4 5.2 11.2 8.6
P/CF 1.6 2.9 4.5 4.2
Sector Growth      
Revenues -7% -35% -42% 25%
EBITDA -17% -29% -40% 20%
EPS -28% -28% -56%  
Main Shareholders      
Russian government (Rosneftegaz) 69.50%      
BP 19.80%      
Strategic investors (Petronas, CNPC) 2.00%      
Other (free float) 8.70%      

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