Jan. 23 (Bloomberg) -- Smaller Russian oil companies such as OAO Gazprom Neft and TNK-BP Holding are better buys than their bigger competitors as they provide higher dividends and have better production prospects, according to Troika Dialog.
Russia’s oldest investment bank sees “much more value in smaller oil names, such as Gazprom Neft, TNK-BP Holding and Bashneft, which are our top picks in the sector over the blue chips due to their superior longer term production growth, better free cash flow generation and higher dividends,” Troika analysts including Oleg Maximov and Alex Fak wrote in a report e-mailed today.
Troika is “cautious” on stock of OAO Gazprom, Gazprom’s Neft’s parent and the world’s largest natural gas producer, on concern gas demand in Russia is lagging behind the pace of economic growth.
Gazprom Neft forecasts oil and natural-gas output will climb to a record this year as the St. Petersburg-based company seeks to almost double volumes by the end of 2020. Production will rise to 59.6 million metric tons of oil equivalent in 2012, or 1.19 million barrels a day, Gazprom Neft said Dec. 29.
The company plans to increase annual oil and gas output to 100 million tons in the next nine years as it expands in Iraq, Venezuela and Africa, and develops its Siberian fields.
Gazprom Neft’s Moscow-traded shares slipped 0.4 percent to 150.05 rubles, or the equivalent of $4.86. Its American depositary receipts have yet to trade today as of 12:24 p.m. in New York, after jumping 5.8 percent to $24.44 last week. One ADR equals two ordinary shares. The U.S.-traded stock yields 3.27 percent, compared with Gazprom’s 2.2 percent, data compiled by Bloomberg show.
TNK-BP, the Russian oil venture owned by BP Plc and a group of billionaires, was little changed at 86.74 rubles on Moscow’s Micex index, while OAO Bashneft, the Russian oil producer controlled by billionaire Vladimir Yevtushenkov’s AFK Sistema, gained 0.6 percent to 1,494 rubles, its eighth straight trading day of gains. TNK yields 8.4 percent, data compiled by Bloomberg show.
Gazprom plans to raise output at least 2.5 percent this year after less than 0.5 percent growth last year, Nail Gafarov, deputy head of the production department, said in December. The energy producer may double its dividend payout for 2011 to a record, according to a Dec. 20 statement.
The Moscow-based company’s American depositary receipts rose 1.4 percent to $11.87 in New York today.
--Editors: Emma O’Brien, Brendan Walsh
To contact the editor responsible for this story: Emma O’Brien at Eobrien6@bloomberg.net