Interaction with investors and shareholders

Update of minority shareholder information in register

Gazprom Neft conducted an analysis of the shareholder register and compiled a list of minority shareholders with outdated information in the register. The shareholders were mailed information about the need to update their data in the register, and a message about the need to update the information was also posted on the corporate websites of the Company and the registrar DRAGA JSC. Expenses on updating the shareholder data in the register were paid by the Company.

Goals of update
  • To reduce corporate procedure expenses for dividend payments and the mailing of materials for General Meetings of Shareholders
  • To reduce the risk of tax penalties
  • To minimise financial and reputational risks due to possible fraud by third parties against shareholders with outdated information in the register and the issuer being involved as a defendant (co-defendant)
  • To improve the quality of corporate governance. Compliance with the standards of the Code of Corporate Governance (CCG) ensures the Company has a high assessment of corporate governance
  • To ensure the maximum exercising of rights by minority shareholders. The Company will be able to promptly inform minority shareholders about opportunities to exercise their rights and also reduce expenses on corporate actions

Interaction with investors

The Company regularly holds conference calls for investors involving Company executives. In addition, Gazprom Neft each quarter publishes an Analysis of the Management of the Company’s Financial Condition and Performance Results – an appendix to the Gazprom Neft Group’s IFRS financial statement.

The Databook and Datafeed statistical reference guides are also published for a detailed analysis of the Company’s operations.

In order to provide the most complete level of awareness, Gazprom Neft regularly holds meetings with investors and shareholders and takes part in all major conferences of investment and brokerage organisations.

The Company holds the annual ‘Investor’s Day’ event each year involving senior Gazprom Neft executives at which analysts and investors from investment companies can get first-hand answers to all of their questions.

Gazprom Neft regularly shows off its own production assets to investors and analysts by organising onsite meetings at production and extraction sites.

Development of the Shareholder User Account e-service

The Company and its registrar DRAGA JSC introduced the Shareholder User Account web service during the reporting year. The service is free to shareholders and makes it possible to promptly obtain information about their account, number of securities, accrued and paid dividends and the reasons for their return as well as the most recent information about Gazprom Neft events, corporate actions and measures along with detailed instructions on the deadlines and procedures for their implementation.

The Company plans to improve and expand the functionality of the service by developing the following key areas of the Shareholder User Account:

  • Interactive modules and an e-meeting, which will include:
    • e-voting
    • registration for the meeting of shareholders
  • Corporate actions (CA), which will include:
    • information about the right to participate in CA
    • the filing (withdrawal) of applications (requests)
    • information about the exercising of rights
  • Register transactions, which will include:
    • the submission of instructions to amend shareholder information
    • the submission of documents to perform transactions
    • the receipt of e-documents
  • Additional capabilities of the Shareholder User Account, which will include:
    • the ability to pay for registrar services with a bank card
    • the submission of requests to obtain information from the register
    • monitoring of e-documents

Recognition of Gazprom Neft reports and website in 2016

The Company’s corporate reporting and corporate website regularly receive high praise from expert commissions and juries at Russian and foreign contests.

Competitions and awards

  • Moscow Exchange and Securities Market Journal annual report contest

    Short list of nominations

    ‘Best Annual Report’
  • IR Society Best Practice Awards1(UK)

    Short list of nominations

    ‘Best Annual Report’ ‘Best Interactive Annual Report’

    Winner in the nomination

    ‘Best Use of Digital Communications’
  • Rating Report Watch

    Debut in top reports

    with ‘B’ rating
  • Expert PA annual report contest

    Winner in the nomination

    ‘Best Interactive Annual Report’

    Winner in the nomination

    ‘Best Design and Printing’

    Laureate in the nomination

    ‘Best Annual Report (Non-financial Sector)’
  • LACP (USA)

    8 certificates

    including joining the global Top-100

1 Established in 1980, the Investor Relations Society (IR Society) is an international community of investor relations experts and includes more than 750 participants and representatives of major companies and organisations. The IR Society’s mission is to promote best practice in investor relations and to support the professional development of its members. The IR Society Best Practice Awards contest is held each year and included more than 170 representatives of international business in 2016.

Interaction with analysts and a consensus forecast

Analyst Recommendations
Broker Analyst Date Recommendation Tgt Px, RUB
BrokerCreditService Kirill Tachennikov 21/01/2017 Buy 225
Gazprombank Yevgeniya Dyshlyuk 23/11/2016 Buy 210
Sberbank Alexander Fek 26/01/2017 Buy 333
Deutche Bank Pavel Kushnir 22/02/2017 Buy 220
Bank of America ML Karen Kostanyan 24/02/2017 Buy 248
Goldman Sachs Geydar Mamedov 24/02/2017 Buy 276
Aton Alexander Kornilov 23/01/2017 Buy 278
Raiffeisen Andrey Polishchuk 10/01/2017 Hold 237
Renaissance Capital Ildar Davletshin 24/11/2016 Buy 230

Analysts’ statements for Q4 2016

Source: Thomson Reuters
In 2016 G-neft delivered 8% YoY oil production growth primarily driven by the new projects, Prirazlomnoye and Novoport. In October 2016, in addition to these fields, Gneft and Rosneft launched jointly developed East Messoyakha field. The contribution from these fields should exceed 14MMt of oil by 2019 driving total G-neft’s oil production up by 19% vs 2016. More importantly, all three projects obtained significant tax exemptions making production up to 2x more value-accretive than conventional brownfield developments.
The company expects significant growth in production at new projects in 2017-2019, including the Novoportovskoye and Prirazlomnoye fields as well as the Messoyakha group. As a result of the increased production, management is forecasting an increase in net profit, which will lead to growth in dividends taking into account the Company's payout rate of 25% per IFRS. At the same time, capital investments in new production projects should decrease as the latter reach full capacity, making it possible to generate a positive free cash flow.
While Gazprom Neft will likely remain FCF neutral in 2017 as this will be the final year of the greenfield investment cycle, we expect it to be able to deliver a 13% average FCF yield from 2018 following a capex decline from peak levels and earnings growth. At the same time, an uplift in earnings creates upside for dividends: we expect the dividend yield to grow from 4% in 2016 (at the current price) to 7% in 2018 under the current dividend policy of a 25% IFRS net income payout. Valuation remains attractive: the stock is trading at 4.0x 2017E EV/EBITDA vs. an industry average of 4.8x. We reiterate our Buy rating.
We view the 2016 results as strong and positive and specifically note the higher EBITDA than expected. We maintain our BUY recommendation for Gazprom Neft shares.