Gazprom Says Production is Set to Decline; Street Sees 6% Downside

Gazprom PJSC Sponsored ADR CEO Alexey Miller announced important business updates at the conference call on Dec. 24, including its production estimates, expected domestic supplies, and export details.

Miller disclosed an expected production of 452 billion cubic meters of gas due to the “challenging” year-end 2020, implying a 10% year-on-year decline versus 500 billion cubic meters of gas in 2019 end.

Gazprom PJSC Sponsored ADR’s (OGZPY) production capacities exceeded the annual production volumes by almost 100 billion cubic meters of gas.

Expectations for domestic supplies from Gazprom’s gas transmission system stood at 223 billion cubic meters of gas.

The company also projects 2020 exports will land at 179 billion cubic meters of gas, implying a 105 billion cubic meter decline compared to actual exports of 198.8 billion cubic meters of gas in 2019. The gas exports to Europe stood at a record high of 17.4 billion cubic meters in October.

China emerged as another important market by exceeding the contractual amount of Gazprom by 25% on one particular day in 2020.

The company will invest RUB 526.1 billion in gas supply programs, linear gas pipelines, and natural gas over the next five years.

J.P. Morgan analyst Alex Comer upgraded the rating to Buy from Hold with a $6.50 price target on Dec. 23. The price target implies an upside potential of 18%.

The medium-term gas dynamics outweighed longer-term concerns, noted Comer. (See OGZPY stock analysis on TipRanks)

From the rest of the Street, the stock scores a cautiously optimistic analyst consensus of a Moderate Buy based on 3 Buys and 2 Holds. The average analyst price target of $5.16 implies a downside potential of 6.4% to current levels. The share price of the energy corporation has already lost 33% year-to-date.

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