Apr
29
In 2008 Gazprom Neft upped its net profit by US GAAP by 12.4% versus 2007 to 4.66 bn USD, sales grew by 52% to 33.08 bn USD, EBITDA – by 27.7% to 7.97 bn USD. We consider the output report to be moderately positive.
In 4Q 2008 Gazprom Neft gained minor operating loss in the amount of 6 mn USD due to worsening of external conjuncture and the negative effect from export duties. Particularly, growth of export duties, MET and transport expenses share in the sales of the company from 39% in 3Q to 53% in 4Q 2008.
Due to output of the new report, correction of macro economic estimates, and due to revision of several fundamental estimates of the company in the target period, we updated the financial model of Gazprom Neft.
According to our current base long-term forecast on raw material prices, we changed the given estimates in the model of Gazprom Neft. As a result the old forecast prices of oil and oil products were reduced by 10.4% and 9.5% respectively.
We have also lowered the target on oil extraction by the company for the coming two years by 7.5%, which was based on the statements by the company’s management. At the same time we kept the extraction volumes growth since 2012 according to the strategy of Gazprom Neft till 2020.
In our model we have also reflected the expectations of the management relating the investment program for 2009, which was estimated in 1.9 bn USD for the adequate development of the company and 645 mn USD – for extensive development. Totally the forecast in the target period provides for 2.4% capital investments reduction. The main volume of investments comes in 2012-2017 in our financial model due to execution of growth strategy.
We detailed the macro economic estimates in our model of the company that affect the discount rate. As a result that leaded to WACC increase for Gazprom Neft.
We did not consider the possible obligated buyback of Gazprom Neft shares from the minority on behalf of Gazprom. We assume such possibility will provide additional support to the shares of the oil company.
The new fair value of Gazprom Neft’s shares totaled 4.84 USD versus the earlier forecasted 6.27 USD (22.8% decrease). But due to the significant growth potential, which forms about 80%, we confirm our recommendation BUY for the shares of the company.
Gazprom Neft: Financial results of 2008 - April 28, 2009 (PDF)