Novatek Pushes Gazprom's Leadership
Novatek: New market leader
This year saw a new frontrunner emerge in Russia’s gas sector. Novatek, an independent producer and the government’s new favorite, has beaten state-controlled giant Gazprom to tax privileges.
Gazprom, with its market cap down about 60% from its pre-crisis level, is selling its core assets and downgrading production and export estimates.
Novatek seems to have revived after influential oil trader Gennady Timchenko bought into its share capital. Timchenko acquired his stake in October 2008, when Novatek was valued at $11 billion; now its value has shot up to $36 billion. Since last spring, the company bought four major oil assets for $1.9bln excluding the new units’ debt, and boosted its reserves nearly 150%.
Last summer, Novatek signed an agreement with Gazprom on future independent export of its liquefied gas from Yamal. Later this year, Novatek was granted significant tax privileges, something Gazprom had been asking for but never managed to obtain. As a result, Novatek’s market cap peaked at $29 billion in late October.
Gazprom’s results are far less impressive this year. With market capitalization of $151 billion, down 58.3% from its pre-crisis level, it was forced to sell some of its oil and gas assets. Novatek bought a 25.5% stake in SeverEnergia from Gazprom and 51% of Sibneftegaz from Gazprombank. Gazprom halved its stake in Novatek by selling 9.4% to Gazprombank in December.
Gazprom failed to negotiate tax privileges and lost its Mineral Tax battle with the Finance Ministry: in 2011, the tax will surge 61%, the first rise in five years. One of the major shareholders, German E.ON, divested Gazprom stake this year.
What’s worse, the Russian natural gas monopoly now has to admit that U.S. shale gas is not a myth, and show more consideration toward its European customers, because its European exports will not regain their pre-crisis level in 2010 or 2011, said Denis Borisov, a Bank of Moscow analyst.
Germany’s E.ON, WIEH and Wingas, France’s GdF and Italy’s Eni negotiated adjustments to its long-term contracts, which may inflict losses on the supplier.
Gazprom is valued far below Novatek or Western majors by EV/EBITDA and P/E multiples, Borisov said. Some analysts predict modest growth in 2011, while others believe Gazprom is in for yet another difficult year. As for Novatek, most analysts agree that it still has enough growth potential.
Gazprom could be more efficient than all Western majors and have greater market value, a company source said. However, this will only happen if the gas transport system is operated and financed by a separate entity, and if the gas giant is no longer forced to “voluntarily” sponsor social programs, and Olympic and APEC projects.
Gazprom CEO Alexei Miller remains optimistic. He believes that Gazprom’s value is growing steadily and expects its market cap to exceed its pre-crisis level and reach a “fair” value. “My recommendation is to buy,” he said without elaborating.
Source: RIA Novosti (via Vedomosti)