Experts associate this achievement with the advanced Vostok Oil project
Rosneft shares renewed their all-time high and reached 586.7 rubles per share. This achievement, set on Thursday at the Moscow Exchange, fully meets the expectations of analysts and market participants. It is associated with Rosneft’s flagship project, Vostok Oil, which the company implements in accordance with the highest environmental standards.
The previous record figure was reached at the end of March – 585.15 rubles per share. Since the beginning of this year, Rosneft’s securities have risen in price by almost 35%, while the blue-chip index has grown by only 13.2%. In May, Raiffeisenbank increased the target value of Rosneft shares by 62% – from 500 to 810 rubles per unit. The target price of depositary receipts (GDR, equal to one share) was increased by 67% – from $ 6.6 to $ 11.
The bank named Vostok Oil, the largest project not only in the domestic but also in the global oil and gas industry, as the key driver of all the latest achievements of Rosneft. It has a number of decisive advantages over its competitors and, accordingly, is particularly attractive for Russian and foreign investors. Its resource base is over 6 billion tons of premium low-sulfur oil, which has a uniquely low sulfur content of 0.01-0.04%.
“For comparison, the resource base of the entire Permian formation, the largest shale region in the United States, is 6.3 billion tonnes,” says Mikhail Delyagin, director of the Institute for Globalization Problems. – Moreover, the density of reserves there is 0.1 million barrels of oil equivalent per km². In the case of Vostok Oil, the figure is 17 million boe. per km² “.
The high quality of raw materials eliminates the need for separate installations at the refinery, which will significantly reduce the volume of greenhouse emissions. A serious logistical advantage of the project is the ability to supply oil from the fields in two directions at once – to the European and Asian markets. Its implementation will ensure the fulfillment of the tasks set by the President of Russia to increase the cargo traffic along the Northern Sea Route to 80 million tons by 2024. Rosneft has already received conclusions from leading international experts confirming the resource base, development technologies and economics of Vostok Oil. At the end of December last year, a large world trader Trafigura acquired a 10% stake in the project. And in early June it became known that a consortium of investors consisting of Vitol and Mercantile & Maritime was claiming a 5% stake.
“Vostok-Oil” – these are Taimyr fields with a direct sales channel along the Northern Sea Route and a colossal resource base, – said the director of the Center for Political Information Alexei Mukhin. – Production within the framework of Vostok Oil is not only drilling rigs and field facilities, it is sea terminals, tank farms, airfields, icebreakers, oil tankers and ice-class gas carriers – a complex high-tech infrastructure. The infrastructure, which is being created from scratch, will provide large orders for the Russian industry. “
Rosneft is our top pick, JPMorgan said in a report. Analysts of the financial holding company associate the company’s long-term development prospects with the Vostok Oil project. “The creation of a new oil and gas province in Taimyr promises to become a flagship project not only for Rosneft, but also for the global oil industry,” they note.
And Goldman Sachs dubbed Vostok Oil “a magnet for investors.” According to the investment bank, its “net present value may reach $ 75 billion.” At the same time, in March, Goldman Sachs raised the target price of Rosneft’s GDRs by 41% to $ 10, not only confirming the “buy” recommendation, but also including the company in the list of the most preferred investment targets in 2021. Goldman Sachs also noted that Rosneft maintains one of the leading positions in the world in terms of the lowest production costs, which ensures the ability to generate high FCF. According to the bank’s analysts, the possibility of further reducing emissions by utilizing associated petroleum gas increases the relative advantage of Rosneft over other oil majors.
Analysts consider the topic of emissions management to be an important driver of Rosneft’s investment attractiveness. In December 2020, Rosneft became the first domestic company to submit a comprehensive carbon management plan until 2035. The list of key target values includes: reducing the intensity of emissions in exploration and production by 30% by 2035, preventing greenhouse gas emissions in the amount of 20 million tons of CO2-equivalent, as well as achieving zero routine gas flaring.
It should also be added that in April Gazprombank raised the target price for Rosneft shares by almost 30% – to $ 10.1 dollars. His analysts have included these securities among the most promising for investments. In turn, the investment company Aton raised the target price of Rosneft shares by 21% – to $ 9.8 per GDR. This is the most impressive indicator among companies in the Russian oil and gas sector. According to Aton experts, Rosneft shares have a growth potential of 39% of their current values.
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