OAO Gazprom (OGZPY:US) is valued at less than $100 billion for the first time since 2009 as concern Vladimir Putin’s natural gas producer is being mismanaged fuels a rout in its shares.
American depositary receipts (OGZPY:US) of Gazprom sank 2.9 percent to $8.25 in New York yesterday, pushing the market value of Russia’s gas export monopoly to $97.7 billion, the lowest level since July 2009. Shares in Moscow traded at a four-year low. Russia’s Micex Index (INDEXCF) dropped 0.1 percent to 1,428.52 by 3:28 p.m. in the capital today.
State-run Gazprom has wiped out about a third of its market value over the past year as rising expenditure, declining profit and the prospect of lower-than-forecast dividends deter investors. Gazprom trades at 2.9 times estimated earnings, the second-cheapest stock on Russia’s 50-member Micex gauge and about one-fifth of Ecopetrol SA (ECOPETL), the Colombian oil company whose daily production is 13 times less than Gazprom’s, data compiled by Bloomberg show.
“Gazprom’s dividends disappointed -- that was just the latest blow to investors -- and there are risks their contracts will be revised and prices lowered spurring further declines in net profit,” Alexei Kokin, a senior oil and gas analyst at UralSib Financial Corp. who has rated Gazprom’s Moscow shares hold since September, said by phone from Moscow yesterday. “There is hope that the company’s management will be replaced, this is the only thing that would be able to turn the stock around.”
Putin, currently in his second stint as president after four years in between as prime minister, urged Gazprom at its 20th anniversary gala Feb. 21 to improve its performance and increase corporate governance. The company -- run by Chief Executive Officer Alexey Miller -- is thwarting efforts to boost state oversight of its capital spending, Deputy Economy Minister Sergei Belyakov said last month in an interview.
The financial turmoil in Cyprus has made markets uneasy, Gazprom spokesman Sergei Kupriyanov said by phone today. There hasn’t been any corporate news in the past week that would be responsible for the share decline, he said.
Gazprom’s market capitalization in New York has dropped from as high as $369 billion in May 2008. Ecopetrol, which is also government-controlled and is based in Bogota, is valued at $112.8 billion, data compiled by Bloomberg show.
The Moscow-based company produced an estimated 487 billion cubic meters of natural gas in 2012, according to an investor presentation on its website dated February. Coupled with production at crude unit OAO Gazprom Neft, Gazprom’s output was about 9.59 million barrels of oil equivalent a day last year, compared with daily oil production of 754,000 barrels for Ecopetrol, data compiled by Bloomberg show.
Shares of Gazprom fell 1.5 percent yesterday on Russia’s benchmark Micex gauge to 130.89 rubles, or $4.18, the lowest level since March 31, 2009. They were little changed at 130.90 rubles today. ADRs (EC:US) of Ecopetrol climbed 0.4 percent to $54.70 in New York.
“Corporate governance is clearly the core reason” for Gazprom’s underperformance, Lev Snykov, a partner at Greenwich Capital in Moscow, which holds Russian stocks including Gazprom, said by e-mail April 1. “Gazprom clearly deserves to be among the most expensive stocks in the world due to its asset base, but so far it is among the least appreciated names in the energy space.”
Net income for Gazprom, which supplies about 25 percent of Europe’s gas, dropped 37 percent to 556 billion rubles ($17.8 billion) last year, according to a March 27 report prepared to local accounting standards. That translates into a dividend of 5.9 rubles a share given the company’s policy of returning 25 percent of profit to shareholders. Gazprom estimated a dividend of between 7 and 8 rubles in February.
Ecopetrol plans to spend 80 percent of its 2012 net income on dividends, according to a Feb. 25 statement. Gazprom is now the world’s 11th-largest oil and gas company by market capitalization, while Ecopetrol is No. 8. Exxon Mobil Corp. is the world’s most valuable oil and gas producer at $405.2 billion, data compiled by Bloomberg show.
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