Gazprom (OGZPY, quote) apparently is not happy with the sanctions applied to Russia from Crimea and clearly doesn’t like the prospect of the European Union looking elsewhere for their gas, when and if they can.

Image courtesy Gazprom

View from the rigging of Gazprom's Sahkalin-2 oil well in the Okhotsk Sea

The announcement today that the company would stop formal and typical investor relations with those in the U.S. and Europe is actually pretty comical. It should probably be met with a "#Who cares!", as I tweeted out earlier today.

Gazprom has destroyed more capital than any company in the world in the last six years if you look at combined stolen or wasted CAPEX, and market cap.  Investors ultimately only care about lost market cap as it effectively imputes how efficient or not a company is with their CAPEX.

Gazprom was a $420m market ca in May of 2008.  The company is now a $92m market cap.  Gazprom once expected to be the first trillion dollar company in the world, and planned to zoom past Exxon in terms of global importance and value. 

Seriously, you have to laugh at the statement today.  If you are a long term investor in Gazprom over the last 5 years you have to cry.

Gazprom had a reasonable bounce into 2011 along with emerging market stocks although never kept pace with other commodity or resource linked companies in terms where it moved relative to pre-crisis levels at the peak of emerging markets in March of 2011. 

Even before Crimea was a thought in Vlad Putin's Soviet chess game, Gazprom had traded back to October 2008 lows Gazprom(June/July 2013) on pure corporate incompetence. 

Investors had long gone tired of a company with shrinking production, one selling off choice upstream assets for a song to domestic players in Russia, one averaging $40Bn in CAPEX over the last 5 years, and one who was seeing choice contracts in EU renegotiated at much lower levels.

Recently, after a 24% move by Gazprom since the March 14th low, investors should look at the $8.25 level as at least a place to take profits, and possibly be an outright seller of Gazprom.

The catalysts for the company remain a dividend payout ratio that may see major boost from new regulations proposed.

Gazprom already offers a healthy 4.6% div yield.  A gas deal with china is picking up steam and will be announced finally in my view after 10 years of head fakes and false announcements. I’m not sure the deal will be anywhere near as dramatic as people have hope for and China does not need to pay top dollar on a long term commitment.

What you should know about Gazprom is the valuation is comically cheap.  The stock trades at a 0.31 P/B level and a 2.58X P/E all on current year basis.  The numbers get slightly cheaper on estimated '14 FY.  It’s very difficult to short a stock this cheap for fear of a small re-rating.  Gazprom may, however offer a tactical trade into May when historically Russia has traded as hard ( to the downside) as any market in the world when we have broader global equity risk aversion. 

The stock has bounced as short covering in Russia (RSX, quote) means that Russian conduits like Gazprom were a primary short vehicle when investors wanted to push macro Russia shorts as Ukraine/Crimea escalated. 

 

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