OAO Gazprom Neft (GZPFY), the crude- producing arm of Russia’s natural-gas exporter, fell in U.S. trading as an agreement by majority-owned Naftna Industrija Srbije AD (NIIS) to develop a new power plant raised concern capital expenditure will increase.
American depositary receipts of Moscow-based Gazprom Neft dropped 1.6 percent to $26.72 at 2:58 p.m. in New York and were the second-biggest decliners on the Bloomberg Russia-US 14 Index (RUS14BN) of Russian companies listed in the U.S. They earlier fell as much as 3.3 percent, the biggest intraday drop since Nov. 17.
NIS, the dominant oil company in Serbia, signed a cooperation agreement with the government of the northern Vojvodina province and two Hungarian companies to develop a power plant using geothermal energy and to supply local heating plants from geothermal wells, the Belgrade-based company said in a statement on its website.
“Because Gazprom Neft has been generating quite a lot of cash flow, maybe the market is concerned they will start wasting some of that cash flow on capital expenditure that is considered either unnecessary or uncertain,” Julian Rimmer, a trader of Russian shares at CF Global Trading in London, said by phone. “Geothermal power in Serbia, that doesn’t sound like the kind of thing they should be in. There may be question marks from investors, why they’re moving in this direction.”
Gazprom Neft, which had $1.97 billion of free cash flow last year, acquired the rights to 72 of 78 geothermal wells in Vojvodina when it bought a majority stake in NIS from the Serbian government in 2009.
Russia’s markets were closed yesterday and today for a public holiday and local trading will resume on March 11, a Sunday.
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