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  • bardinja bardinja Feb 23, 2001 10:17 AM Flag

    Comprehensive report on Russian oil cos

    Many thanks to kathi17 on the Yahoo clubs russian adrs board (messages 8512 and 8513) for this informative report:

    "About this oil and gas report:
    It is probably the most comprehensive report I have ever seen on the Russian oil and gas industry. It
    is very long and informative. I would recommend downloading it so you can keep it for a reference.
    It contains charts of everything from ownership of companies, to maps of oilfields, to maps of
    pipelines and much much more. "

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    • I was pleasantly surprised to read in the report ( that Tatneft is rated the same as Lukoil on corporate governance risk (fair to vulnerable) and degree of transparency (moderate).

      Tatneft was rated one grade lower (poor) than Lukoil (adequate) on degree of accountability.

      Both companies were rated highly in investor relations.

      The real shocker was that Tatneft is rated very high, two grades higher in fact, than Lukoil on financial discipline. Tatneft receives a rating of good whereas Lukoil receives a rating of susceptible.

      So overall, Tatneft looks very good in comparison with Lukoil.

      Yet, Tatneft is currently trading at a PE of 1.6 or so whereas Lukoil is at 2-4 if my memory is correct.

    • Thanks Bardinja, it was really good to see such an informative report which is available to everyone, not just their clients!

    • Here is the introductory paragraph from the report:

      "This report is intended to provide an introductory overview of the Russian oil and gas sector, in
      particular,and the structure of Russia�s capital markets in general.
      Its aim is to provide a summary of the most important companies operating in the sector in Russia
      and to explain the main factors which will drive industry investment,both internal and external,
      and profitability.
      Specifically,the issue of corporate governance is addressed on a company specific basis,as well
      as how the perception of this being a higher risk n Russia than elsewhere affects investment flows
      and valuations.For an industry which is used to investing in often hostile and unstable parts of
      the world,uncertainty over ownership rights and legal enforcement have acted as major obstacles
      to attracting foreign investment into Russia.
      Adjusted for emerging market standards,the value of quoted equities in Russia is estimated to be
      currently $52 bln less than �fair value� and the clearly dentifiable reason for this s investor concern
      over current corporate governance issues.The bulk of this $52 bln is accounted for by just four
      companies,ncluding Gazprom and LUKoil.
      The oil and gas sector has,in recent years,been the scene of most of the major battles over
      shareholder rights,such as BP�s dispute over SIDANCO and the restructuring of YUKOS.The
      resolution of the current issues concerning LUKoil�s unwillingness to release audited US GAAP
      financials and,particularly,the restructuring of Gazprom and the disclosure of its relationship
      with Itera,will not only drive the valuation of these stocks but also of investor attitudes towards
      the whole market.
      Investors have shown that,despite cheap valuations and obvious potential,even $1 invested in
      an environment which cannot guarantee protection on at least that $1 of value,is a risk which is
      And it is clear that Russia needs both capital investment and technology upgrades in its oil and
      gas industry.In the closing days of the Soviet empire,Russia was producing over 12 mbpd of oil.
      By the time of the 1998 financial crisis,this had collapsed to just a trickle over 6 mbpd.Russia�s
      plans to develop a broadly based economy over the next ten years are very dependent on the
      liquidity provided by oil and gas exports.This explains the push to raise production and exports
      and try to revive the PSA program.
      Russian enterprises are continuing to spend on production and export capacity,but to make a
      real difference,foreign participation will have to increase.This is the challenge facing the
      government and the industry right now."

      "This report is issued in conjunction with CERAWeek 2001,in Houston,Texas."

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