Page 139 - RusRPTSept21

The previous guidance, issued in February, was at above USD 200/kcm (see our Morning Comment of 10 February). This upward revision was expected, given the dynamics of oil and gas prices YTD. However, the recent macro and futures curve could imply a still higher realised price: it might be close to USD 330/kcm for 2021, under a spot price assumption of some USD 388/kcm, we calculate. If that is the case, it could translate into a 17.8% FY21 dividend yield for Gazprom.
We think that the company’s revision of its price forecast might be followed by an upward revision in the capex guidance, especially considering the need to replace a de-ethanisation unit at the Urengoi condensate treating facility. To recap, the company normally revises its capex in September.
Launching Nord Stream-2 this year would be ahead of the mid-2022 timeline that we expect. As a reminder, we think the key upside from the NS2 pipeline lies in its lower transportation cost compared with legacy pipelines (we estimate the effect in 2023 at c.4% of EBITDA, or USD 1bn/a). And this year, NS2 might help to rearrange gas flows from the Yamal-Europe pipeline from the Nadym-Pur-Taz region, by increasing production in Yamal.
The reserves in Gazprom’s four largest underground gas storages (UGS) in the EU now average only 18.25% of the maximum possible level, or approximately 1.1 bcm (out of 6bcm). This is the lowest level in history. The current average level of reserves for all storage facilities in the EU, according to AG SI+, is 61.5%. On 16 August, according to Kommersant, Gazprom said that it had prioritised pumping gas to domestic storages. After the accident at the Urengoi Condensate Treatment Plant, Gazprom started to withdraw gas from underground storages to deliver it to European consumers. Nevertheless, in our Gazprom – Urengoi accident, of 10 August, we mentioned that our proprietary layer-by-layer gas industry model suggested that Gazprom would gradually be able to replace the gas initially planned for production from condensate-rich horizons with dry gas. We also calculated the negative effect on the company’s EBITDA at 1.9% and 1.6% in 2021F and 2022F, respectively. In addition, we think that building a new deethanisation unit might require up to $1bn in capex and one year to launch. All else being equal, this leads to 10% lower 2021-22F FCF. For now, we think that the development is neutral for the stock.
Construction of Russia’s first ever bunkering vessel – for natural gas
139 RUSSIA Country Report September 2021 www.intellinews.com