Page 18 - FSUOGM Week 50 2020

FSUOGM NEWS IN BRIEF FSUOGM

RUSSIA Bazhenov formation, Interfax reported "enthusiastically confirmed" a Buy call
citing the company's technology subsidiary on Gazprom. The analysts noted that
Russia's "dividend play" director Kirill Strizhnev. Gazprom's exports are recovering faster
than expected after a tough year, with
As reported by bne IntelliNews,
Transneft confirms 50% Bazhenov Shale in the West Siberian Basin European exports seen returning to normal
by 2023.
is a massive formation of 75bn barrels of
payout “technically recoverable” shale oil. the recent increase in spot gas prices in
"Gazprom’s stock price is yet to reflect
Reportedly, the tested approach of
Russian state pipeline operator Transneft using 2,000 meter-long wells with up to Europe (TTF - Title Transfer Facility -
confirmed its 50% minimum dividend 30 fracturing stages proved to be efficient, touched $209/1,000 cubic meters, adding
payout policy at a conference call following with unit development costs (UDC) were over 18% in the last week)," VTB Capital
the release of 3Q20 IFRS results, BCS Global reduced from R30,000 per tonne in 2016 analysts wrote, noting that the entire gas
Markets wrote on December 8, seeing the to RUB13,000 this year with certain wells futures curve has also moved up.
news as slightly positive. achieving the target UDC of RUB8,000 per A $195/kcm spot gas price in 2021
As reported by bne IntelliNews, most tonne. implies RUB13 dividend per share (DPS), or
recent reports have shown that Transneft will Gazprom Neft also boosted the share of a "quite healthy" 6.5% dividend yield (DY)
avoid the biggest risk to its financials, namely locally-sourced equipment increased from to be paid in 2022, VTBC estimates.
the reduction of its oil transportation tariffs. 20% to 95%. The company set the capex Gazprom is considerably leveraged to
The company also positively surprised with budget for hard-to-recover technologies export prices, given the majority of the
2019 dividends and was seen by the analysts (Bazhenov, Domanic) at RUB9.6bn in 2020 company’s opex is quasi-fixed, the new
as turning into a strong dividend investment and RUB7.9bn in 2021. spot gas prices in Europe (which serve a
play. The company plans to drill 7-8 wells benchmark for some 2/3 of Gazprom’s gas
Transneft may reconsider the 50% from one pad to make final technology tests contracts in the region) is a direct addition
payout policy when the Finance Ministry to ensure that broader drilling of the pad to the company’s Ebitda and earnings,
(MinFin) submits a document with guidance can begin in 2023. VTBC analysts note.
(May 2021) and, in theory, it could shift to "The update shows really good progress "Lower oil and gas prices (compared with
dividend payouts based on free cash flow on the hard-to-recover West Siberian that suggested by the futures curves) as well
(FCF), like Lukoil private oil major does. shale oil resources from one of the sector as potential sanctions of Gazprom (or its
However, BCS GM analysts think this is technology leaders," Sberbank CIB key projects), which would be negative for
unlikely to be approved by the ministry. commented on December 15. sentiment towards the company, are the key
"Transneft's current dividend policy Making the development of the risks to our investment case for the stock,"
envisages a base-case payout of 25% if net Bazhenov profitable by reducing the UDP the analysts warn.
debt/EBITDA is below 1.5 and FCF/net debt to RUB8,500 per tonne by 2025 would add
is above 0.33. However, for the last three about 0.5-3.8mn tonnes of annual crude oil
years the government has asked the company output (up to 5% of the company's output),
to pay out no less than 50% of adjusted based on the management guidance, CENTRAL ASIA & SOUTH
net income," Sberbank CIB reminded on Sberbank CIB analysts stress.
December 8. The analysts at Sberbank CIB believe that CAUCASUS
"Recently, the government approved an latest updates, put Gazprom Neft well on
extension until 2030 of its tariff policy for track to reach its targets. Kazakhstan completes
crude oil pipelines, removing uncertainty BCS Global Markets on December 15
around the issue – a move we consider also commented that the news are positive first stage of gas pipes
transformational for the investment case of for Gazprom's Neft own shale ambitions,
Transneft's preferred shares," Sberbank CIB while affirming a Buy call on Gazprom's installation project in Nur-
analysts note. Neft shares.
Sberbank CIB expects the company's FCF Sultan
yield to almost triple in 2020-2025 to above
30%, which would suggest substantial scope Kazakhstan has completed the first stage of a
for dividends to improve. Assuming a 50% EASTERN EUROPE project to lay new gas pipes throughout the
payout of adjusted net income, the analysts Kazakh capital Nur-Sultan, according to a
forecast the dividend yield to improve from Gas price recovery cements report by Trend news agency, citing Nur-
6% next year to 15% in 2025. . Sultan’s Akim (Governor) Altay Kulginov. The
Buy calls at Russia's second and third stages of the project are to be
completed by 2023.
Gazprom Neft moves Gazprom pipes installed to support private sector
The first stage saw 300 kilometres of gas
forward with Bazhenov VTB Capital on December 15 upgraded entities, according to Kulginov.
the recommendation on shares of Russian
“More than 1,000 kilometers of the gas
extraction natural gas giant Gazprom from Hold to pipeline have been delivered. Now the
local Akimat is laying internal gas mains,”
Buy, with a 12-month target price of $3.5,
Gazprom Neft, the oil arm of Russian due to recovery of gas prices. Kulginov said at a briefing at the Central
natural gas major Gazprom, is moving As reported by bne IntelliNews, Communications Service.
forward on the shale oil extraction in the in December BCS Global Markets “Up till now, pipes from the central

P18 www. NEWSBASE .com Week 50 16•December•2020