Stock Analysis & Valuation PJSC Rosneft Oil Company (ROSN.L)

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• Sector Valuation Confidence Level: Low

Valuation method	Value, £	Upside, %
Artificial intelligence (AI)	n/a	n/a
Intrinsic value (DCF)		n/a
Graham-Dodd Method	6.20	727
Graham Formula	65.90	8687

Strategic Investment Analysis

Company Overview

Public Joint Stock Company Rosneft Oil Company (ROSN.L) is one of Russia's largest integrated oil and gas companies, engaged in exploration, production, refining, and distribution of hydrocarbons. Headquartered in Moscow, Rosneft operates across key Russian oil-producing regions, including Western and Eastern Siberia, Timan-Pechora, and the Russian Far East. The company's business spans upstream (exploration and production) and downstream (refining and petrochemicals) segments, with a vast network of filling stations and a strong export presence. Rosneft also produces a wide range of petroleum products, including motor oils, aviation fuels, and petrochemical derivatives. As a state-controlled entity under Rosneftegaz, it plays a strategic role in Russia's energy sector, benefiting from domestic resource dominance but facing geopolitical risks due to international sanctions. The company's vertically integrated model ensures stability across oil price cycles, though its reliance on Russian policy and global energy markets remains a key factor for investors.

Investment Summary

Rosneft presents a high-risk, high-reward investment case due to its dominant position in Russia's oil sector and exposure to volatile energy markets. The company benefits from vast reserves, low production costs, and state backing, but faces significant geopolitical risks, including sanctions and regulatory uncertainties. In 2021, Rosneft reported strong revenue ($817.1B USD) and net income ($88.3B USD), supported by elevated oil prices. However, its high debt load ($448B USD) and dependence on Russian policy decisions add risk. Dividend yields (2.65 USD/share) may appeal to income-focused investors, but long-term viability hinges on global energy demand and Russia's geopolitical standing. Investors must weigh Rosneft's resource strength against sanctions-related liquidity and operational constraints.

Competitive Analysis

Rosneft holds a dominant position in Russia's oil sector, leveraging state support and extensive reserves to maintain low-cost production. Its integrated model provides stability, with refining and distribution complementing upstream operations. However, the company faces stiff competition from global oil majors and regional peers. Unlike Western firms, Rosneft has limited diversification into renewables, leaving it more exposed to hydrocarbon demand cycles. Its competitive edge lies in access to vast Siberian reserves and preferential treatment in domestic projects, but sanctions restrict technology partnerships and financing options. Compared to private Russian rivals like Lukoil, Rosneft benefits from closer government ties but suffers from inefficiencies typical of state-controlled enterprises. Internationally, it lacks the operational flexibility of BP or Shell due to geopolitical constraints. Rosneft's refining capabilities are robust but lag behind global leaders in complexity and efficiency. The company's long-term competitiveness depends on maintaining low production costs while navigating sanctions and evolving energy policies.

Major Competitors

• PJSC Lukoil (LKOH.ME): Lukoil is Russia's largest privately-held oil company, with strong international downstream operations. Unlike Rosneft, Lukoil has more flexibility in partnerships but lacks state backing. It excels in refining efficiency and European market presence but faces similar sanction risks. Lukoil's reserves are smaller than Rosneft's, though its management is considered more agile.
• PJSC Gazprom (GAZP.ME): Gazprom dominates Russia's gas sector but competes with Rosneft in LNG and petrochemicals. Its vast pipeline infrastructure and European gas contracts provide stability, but over-reliance on gas exposes it to energy transition risks. Gazprom has stronger government ties than Rosneft but faces similar geopolitical headwinds.
• PJSC Tatneft (TATN.ME): Tatneft specializes in heavy oil production and tires, a niche compared to Rosneft's broad operations. It has lower debt and better profitability metrics but lacks scale and diversification. Tatneft's technological expertise in difficult reserves is a strength, though it cannot match Rosneft's resource base.
• BP plc (BP.L): BP is a global energy major transitioning toward renewables, unlike Rosneft's oil focus. BP's diversified portfolio and advanced technology give it resilience, but its production costs are higher. BP exited its Rosneft stake due to sanctions, highlighting the geopolitical divide between Western firms and Russian players.
• Shell plc (SHEL.L): Shell's global LNG leadership and downstream strength contrast with Rosneft's Russia-centric model. Shell has aggressively moved into low-carbon energy, while Rosneft remains hydrocarbon-heavy. Shell's financial flexibility and brand are superior, but Rosneft benefits from lower-cost reserves and less shareholder pressure on emissions.