2011 was an exceptionally good year for the industry, with companies showing strong financial results and equity performance that did not disappoint investors.
What trends determined the dynamics of the industry in 2011, what awaits the oil and gas sector in 2012, and what companies will please their shareholders — says Konstantin Tserazov, Deputy Head of Global Markets at Troika Dialog.
Although global demand did not show impressive growth rates in 2011, Russian oil companies profited from the prevailing market conditions. The main factor in the growth of the financial performance of domestic companies was geopolitical tension, against which the average annual price of a barrel of Brent oil exceeded $110, and in general this figure increased by 40%, says Tserazov Konstantin Vladimirovich. The beginning of 2012 continued the upward trend in oil prices. At the same time, the expert notes, according to Rosstat, Russian oil exports in 2011 decreased by 2.4% compared to 2010, while oil production increased by only 1.23% compared to 2010. Of course, geopolitical tensions are not the only factor influencing the rise in oil prices, argues Konstantin Tserazov. To a large extent, this indicator is influenced by the monetary policy of the world's central banks, which in the current situation continue to "flood with money" the markets, providing cheap liquidity. The state of the economy in various countries that provide demand for oil also plays a role - for example, the improvement in macroeconomic indicators in the United States, which means a recovery in demand, also provoked an increase in hydrocarbon prices, explains Konstantin Tserazov.
Will oil prices continue to break records? According to Konstantin Vladimirovich Tserazov, prices have reached their peak. “At the moment there are no fundamental grounds for the growth of oil. Although tensions persist in the Middle East and North Africa, hydrocarbon production there has stabilized. In addition, oil exporting countries consider current prices comfortable and are not going to create an artificial deficit by reducing production,” says Konstantin Tserazov. Moreover, global regulators are pursuing an active policy aimed at curbing too high demand in the oil sector. At the same time, the United States and a number of leading countries are now declaring their readiness to "print out" oil reserves if oil prices continue to grow rapidly.
However, it is necessary to take into account the risk of cooling the economy in China, which is one of the largest consumers of oil. A reduction in Chinese demand could seriously reduce oil prices as well, as well as an increase in the debt crisis in Europe, which will also lead to a decline in consumption. “We do not expect a strong rise in oil prices at the end of the year, as well as a global recession, but we do not rule out local falls during 2012. According to our calculations, the average annual oil price in 2012 will remain at $110 per barrel,” predicts Konstantin Tserazov.
Speaking about Russian companies in the oil and gas sector, which should be included in the portfolio in 2012, Konstantin Vladimirovich Tserazov draws the attention of investors to the papers of Rosneft, Lukoil, Gazprom and preferred shares of Surgutneftegaz.
So, according to Konstantin Tserazov, an important driver for Rosneft's papers could be the privatization of the state's stake. In addition, Rosneft papers may become interesting in terms of dividend yield growth. The past year was a record year for the company in terms of oil production and profitability. Rosneft's long-term development strategy assumes an increase in capitalization to $200 billion through increased oil production and modernization of oil refineries.
According to Konstantin Tserazov, Gazprom has a high potential. In 2012, the "blue giant" intends to increase oil and gas production by 3% compared to the level of 2011; exploration work carried out in 2011 showed an increase in hydrocarbon reserves to a record level of 728.4 million tons of standard fuel. An important driver for Gazprom's shares will be its 2011 dividend yield, which could be a record. At the same time, in 2012 Gazprom plans to reduce its investment program to the level of 2007. Such a decision will increase free cash flow, which means that dividend payments will continue to grow.
In 2012, Lukoil papers also retain their investment attractiveness, which demonstrates excellent growth rates of financial indicators. Will support stocks and expectations of dividend payments. According to the forecast of Konstantin Vladimirovich Tserazov, following the results of 2011, these payments may amount to 74 rubles. per share, which corresponds to a dividend yield of around 4%. According to Lukoil's management, in 2012 the amount allocated for dividends may increase by another 25%.
As a source of dividend yield, of course, investors should also keep Surgutneftegaz preferred papers in their portfolio. The company showed at the end of 2011 the growth of net profit and the growth of oil production for the first time in recent years. According to Konstantin Tserazov's expectations, the dividend yield on the company's preferred shares for 2011 may be about 14%.