Stock Analysis & Valuation PJSC Gazprom (OGZD.L)

• Previous Close: £0.58
• Sector Valuation Confidence Level: Low

Valuation method	Value, £	Upside, %
Artificial intelligence (AI)	n/a	-100
Intrinsic value (DCF)	0.74	27
Graham-Dodd Method	4.60	691
Graham Formula	4.50	674

Strategic Investment Analysis

Company Overview

Public Joint Stock Company Gazprom (OGZD.L) is a global energy giant headquartered in Russia, primarily engaged in the exploration, production, transportation, and sale of natural gas. As one of the world's largest natural gas producers, Gazprom plays a pivotal role in supplying energy to Europe and other regions, with extensive pipeline infrastructure and significant reserves. The company operates across the entire gas value chain, from upstream extraction to downstream distribution, making it a key player in the global energy market. Despite geopolitical challenges, Gazprom remains a critical supplier, leveraging its vast resource base and strategic infrastructure. The company's financial performance is closely tied to global gas prices and geopolitical dynamics, which influence its revenue and profitability. Gazprom's operations are vital to both the Russian economy and international energy security, positioning it as a significant entity in the hydrocarbon sector.

Investment Summary

Gazprom presents a high-risk, high-reward investment proposition due to its dominant position in the global natural gas market and its extensive infrastructure. However, the company faces substantial geopolitical risks, particularly amid ongoing tensions between Russia and Western nations, which have led to sanctions and disrupted revenue streams. The FY 2023 financials show a net loss of RUB -652 billion, driven by reduced European demand and pricing pressures. Despite strong operating cash flow (RUB 2.3 trillion), high capital expenditures (RUB -2.7 trillion) and significant debt (RUB 6.97 trillion) weigh on financial flexibility. Investors must weigh Gazprom's long-term resource advantages against near-term political and economic uncertainties. The lack of dividends in 2023 further diminishes near-term appeal, making this stock suitable only for risk-tolerant investors.

Competitive Analysis

Gazprom's competitive advantage lies in its unparalleled natural gas reserves, extensive pipeline network, and dominant market position in Europe and Asia. The company controls a significant portion of global gas supply, giving it pricing power and strategic leverage. However, geopolitical tensions have eroded its European market share, forcing diversification toward Asian markets, particularly China. Gazprom's vertically integrated model ensures cost efficiencies, but reliance on pipeline exports (vs. LNG) limits flexibility compared to global peers. The company's financial health is strained by high debt and sanctions-related constraints, reducing its ability to invest in LNG and renewable energy transitions. Competitively, Gazprom lags behind Western majors in technological innovation and sustainability initiatives, which may hinder long-term positioning in a decarbonizing world. Its competitive edge remains tied to political alliances and traditional gas demand, making it vulnerable to energy transition shifts.

Major Competitors

• Equinor ASA (EQNR.OL): Equinor is a leader in offshore energy and LNG, with a strong focus on sustainability and renewable investments. Unlike Gazprom, Equinor benefits from political stability and access to Western markets. Its diversified energy portfolio (including wind and hydrogen) provides resilience against gas market volatility. However, it lacks Gazprom's vast pipeline infrastructure and low-cost reserves.
• Shell plc (SHEL.L): Shell is a global integrated energy major with a robust LNG and downstream business. It outperforms Gazprom in technological innovation and renewable energy investments. Shell's financial flexibility and diversified revenue streams reduce reliance on any single market. However, it does not have Gazprom's scale in pipeline gas or state-backed pricing power.
• TotalEnergies SE (TOTF.PA): TotalEnergies has aggressively pivoted toward renewables while maintaining a strong LNG portfolio. Its strategic investments in electricity and decarbonization give it an edge over Gazprom in the energy transition. However, TotalEnergies lacks Gazprom's dominance in pipeline-supplied gas and faces similar geopolitical risks in some operating regions.
• Exxon Mobil Corporation (XOM): ExxonMobil is a leader in LNG and upstream technology, with a strong balance sheet and global reach. It benefits from political stability but cannot match Gazprom's low-cost reserves in Russia. Exxon's slower renewable energy transition contrasts with Gazprom's focus on traditional gas, though it faces fewer geopolitical headwinds.
• BP plc (BP.L): BP has committed heavily to renewables, reducing its reliance on hydrocarbons. While it lacks Gazprom's pipeline dominance, BP's diversified energy mix and strong brand provide stability. Its financial discipline contrasts with Gazprom's debt-heavy structure, but it cannot leverage state-backed pricing advantages.