Page 146 - RusRPTJun21

● The company’s oil arm, Gazprom Neft, plans to reach a 45% share of gas in its total hydrocarbon production by 2024-26, which is to improve its carbon footprint.
● Overall, Gazprom Neft’s Scope 1 and 2 emissions were 26mnt of CO2 equivalent in 2020, of which upstream accounted for 19mnt, while overall Scope 2 accounted for 4.4mnt.
● Gazprom’s ADRs accounted for 16.7% in 2020.
● Independent directors made up 27% of the company’s BoD
(three members of 11 in total)
● The company’s number of incidents and accidents, although up
in 2020 (14 cases) compared with 2019 (10), have markedly decreased from the 39 recorded five years ago.
Although we do not think that Gazprom’s (including the Gazprom Neft’s) ESG session is likely to drive any immediate stock reaction, we believe the importance of such events must not be underestimated given the increased demand for quality ESG from financial investors. We therefore welcome the company’s decision to improve its disclosure and transparency.
Otherwise, we reiterate our view that Gazprom is well positioned for the ongoing hydrogen theme expansion. While this is not something that will materialise physically in the short-term, it will still be an important contributor to the company’s fundamentals, we believe. To recap, we examined a theoretical hydrogen case study for Gazprom in our overall ESG-devoted note Point Break, of 6 April. In our view, Gazprom is set to benefit from existing facilitates and infrastructure, as well as its competence and, importantly, its significant resource base.
Gazprom Neft released 1Q21 IFRS on May 18. The results saw a material beat on EBITDA and a modest beat on net income. Our analysis noted the following:
Headline numbers in-line / outperformed: Total 1Q21 revenue was $8.2bn, in-line with BCS estimates and -2% vs Interfax consensus. Headline EBITDA of $2.34bn was +14% vs BCS and +19% vs the Street. Including the contribution from JVs, EBITDA of $2.60bn was -1% vs BCS (no consensus available). Net income came in at $1.13mn, 2% above BCS and Street expectations
Free cash flow was good: FCF was respectable at c$0.57bn – although down 49% q/q, it was up from an average of +$0.3bn/q the previous 6 periods (which included a horrid -$1.1bn in the COVID-affected quarter of 2Q20). Note, positive FCF was accomplished by having relatively modest Operating CF and cutting CapEx
o Operating cash flow fell around 10% from the recent, 6-quarter average of $2.0bn/q to $1.7bn in 1Q21 (likely due to taxation somewhat catching up to rising oil prices)
o Implied CapEx came in at $1.2bn, -29% vs the average of $1.6bn the previous 6 quarters
Leverage improved: Finally, Net debt/EBITDA improved 20% to 1.06x – better than the 1.3x of 4Q20, and still modestly above the c1.0x average of the previous 5 quarters.
Gazprom Neft held its 1Q21 conference call on May 18.
146 RUSSIA Country Report June 2021 www.intellinews.com