Based on Q4 Gas Valuations Gazprom Anticipates Significant Boost of Annual Revenue and Net Profit

Unlike in the U.S. where Henry Hub Spot gas is trading around $3.85 per MMBtu, gas prices in Europe at one point jumped over $ 2300 per 1,000 cubic meters or $80.66 per MMBtu. According to the ICE London data, that happened on Tuesday, December 21. January futures contract on the TTF hub in the Netherlands peaked by 24% higher.

At the same time, prices for January futures on the TTF index rose to $ 2,120, or 23.5% higher than on December 20 ($1,716.7). Earlier on Tuesday, Russia’s Gazprom (GAZP.ME, OGZPY) keeps reducing the physical gas flow through the Yamal-Europe pipeline to Germany due to weak demand from end-use European customers (the higher the prices the weaker the demand) and, as a result, suspension by Gazprom of booking pumping capacities. Later that day, updated Gascade data showed the start of reverse gas supplies via Yamal-Europe from Germany to Poland. Gas prices are rising amid low levels of inventories.

On December 20, it was reported that Gazprom had booked only 21.6% of transit capacity through the Yamal-Europe pipeline via Poland for January.

According to the preliminary estimates, by the end of 2021, Gazprom's net profit will reach a record exceeding 2 trillion rubles (approximately $27.15 billion). Revenue, in its turn, will exceed the record of 2018, 8.2 trillion rubles. The net profit for the first nine months of 2021 has already amounted to 1,550 billion rubles, which exceeded the results of any previous calendar year. Also, EBITDA for Gazprom will reach a historic record of 3.5 trillion rubles.

And the expected dividend will exceed 1 trillion rubles, which will represent the maximum value for the entire Russian stock market. Q4 is expected to make the largest contribution to the final size of the dividend base. Hence, taking into account the current situation in the oil and gas markets, the total dividend for the year will exceed 45 rubles per share.

The company's upbeat results owed much to the market recovery after the pandemic and the all-time record gas prices in Europe. Taking into account the above considerations, Gazprom’s forward P/E will drop from the current 4.2 to slightly over 2, which will be a one-off cheap valuation. Gazprom shares are capable to double from their current Rub 342 level by the end of winter in Europe.