Gazprombank experts presented a report on the Russian oil and gas sector (available to Izvestia). Analysts of the financial institution name Rosneft and Gazprom as favorites in the market.
According to a banking survey for the oil and gas sector, a new project in the north of the Krasnoyarsk Territory, Vostok Oil, allows Rosneft to count on an increase in cash flows and a doubling of capitalization. Analysts raised the target price for Rosneft securities in 2021 by 18% to $ 7.8 per GDR and confirmed their recommendation at the level of “buy”.
From the current levels, the growth potential of quotations of securities of “Rosneft” is about 26%. “We are assigning a rating to the company’s securities“ outperforming the market, ”says Gazprombank experts in their report. Rosneft shares together with Gazprom shares (the target price was raised from $ 7.2 to $ 7.3 per GDR) are named the favorites of the sector with significant upside potential due to the expected recovery in hydrocarbon prices. Rosneft, in particular, benefits from the development of the Vostok Oil cluster and other projects in the region. As a result, Rosneft may receive an additional 6-7% in EBITDA for 2021.
Rosneft is focusing on the creation of a new oil production cluster in the north of the Krasnoyarsk Territory – the Vostok Oil project, within the framework of which it is planned to export more than 100 million tons of oil per year along the Northern Sea Route in the 2030s.
According to Gazprombank experts, the implementation of this project will improve Rosneft’s production profile, profitability and ESG metrics and lead to a fundamental revaluation of the company’s shares.
The report, citing media reports, also indicated that Trafigura recently acquired a 10% stake in the project with its own funds and a syndicated loan. Thanks to this, Vostok Oil can be valued at $ 86 billion (100% of the share capital). This means that Rosneft’s market capitalization could more than double its current level.