Surgutneftegaz cash horde closes in on market cap

By bne IntelliNews March 30, 2012

Graham Stack in Kyiv -

The cash horde of secretive management-controlled oil major Surgutneftegaz now totals $25.5bn, according to the company's 2011 RAS results published March 29. The sum is a global record for the sector, but investors remain unconvinced that minorities will ever get a sniff.

The figure in the 2011 accounts represents a serious hike on the $19.9bn in cash the company held at the end 2010. According to Vedomosti, $25.5bn is the highest ever cash holding by an oil & gas company in the world, but although Surgut has always horded liquidity, it does little for its share price.

The company's market capitalization of around $34bn on the London Stock Exchange is not that far above the value of its cash horde. However, the company has never disclosed where it keeps its cash, and what interest it earns. Surgut's relations with the Kremlin and other power brokers in Russia have also come under question in the past.

Despite a promise from CEO Vladimir Bogdanov recently that Surgut is ready to join the push for the Russian oil sector to boost investment, the company's spending plans for 2012 are minimal and could be financed entirely out of profits even after payment of dividends, the newspaper reports.

"We maintain our view that the market is not taking into account almost $30bn of cash on the balance sheet of Surgutneftegas, with the company currently trading at 1x EV/EBITDA," write analysts at Renaissance Capital. "The implied EV of the company - the fourth-largest crude producer in Russia - is just $10bn, while cash accounts for 77% of its market cap. We think investors remain sceptical due to a lack of confidence in RAS accounts and/or concerns that the alleged cash position will never be distributed among minority shareholders."

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