Gazprom PAO

Why I Chose to Invest in Gazprom PAO (GAZP.MOEX)

I had never anticipated taking Baron Rothschild’s saying, “the time to buy is when there’s blood in the streets“, quite so literally. However, when the Russian-Ukrainian conflict ignited, I didn’t anticipate it turning into such a protracted situation. The Crimea incident, for instance, lasted just about a month, and as an investor, my primary focus was acquiring undervalued stocks, not advancing any political agenda. In retrospect, I question whether heavily investing in Russian stocks was prudent, but as things stand, my only option is to await a resolution to the conflict. I must underscore that my thoughts are with all those directly affected by these events.

Investing in Gazprom felt instinctive to me, having previously invested in the company and gained a deep understanding of its operations. Setting political considerations aside, Gazprom is an attractive proposition – it boasts a robust balance sheet, a conservative management style, and a broad spectrum of revenue streams that are challenging to fully comprehend.

Furthermore, Gazprom’s policy of distributing 50% of their profits as dividends boosts my confidence in their financial stability. With the Russian government holding roughly a 50% share in the company, I believe in the sustainability of these dividends. This assurance is further fortified by Gazprom’s extensive reserves. As the world’s largest natural gas company, Gazprom is in an exceptional position to sustain long-term stability.

In addition to their stake in Mosenergo, a company in which I hold an interest too, Gazprom has vested interests in numerous other entities. Gazprom Neft, Russia’s third-largest oil producer, and Gazprombank, the country’s third-largest bank, are prominent examples, but a comprehensive list of their vast range of subsidiaries is available on Wikipedia. Furthermore, they virtually own a network of pipelines stretching approximately 180,000 kilometers. To grasp the scale of Gazprom’s pipeline network, compare it with the Earth’s circumference of around 40,000 kilometers.

Disclaimer: This is not financial advice. Always conduct thorough due diligence before making any investment decisions.

Financial Data Analysis

The following financial data were relevant when I made my initial investment in Gazprom’s shares (further details about my trading activity is provided below). The calculated “Key Metricsprovide a window into my approach to valuation. For a deeper understanding of this approach, as well as comprehensive explanations on what these revealing ratios truly signify, I encourage you to read the following article.

For my due diligence, I primarily focus on the most recent annual Cash Flow and Income Statements to gauge the company’s performance relative to the previous years. However, when reviewing the Balance Sheet, I always refer to the most recent quarterly statements. This allows me to accurately understand the present state of the company’s assets and liabilities, essentially giving me a snapshot of what I’m investing in at that moment.

Selected Quarterly Balance Sheet Data as of December 31, 2021Key Metrics
Total Inventory1,009,323.00Current Ratio6,214,283.00 / 4,022,945.00 = 1.55
Total Current Assets6,214,283.00Quick Ratio(6,214,283.00 – 1,009,323.00) / 4,022,945.00 = 1.29
Total Goodwill120,768.00Book Value per Share16,251,519.00 / 23,645.00 = 687.31
Total IntangiblesN/ATangible Book Value per Share(16,251,519.00 – 120,768.00) / 23,645.00 = 682.21
Total Assets27,047,230.00Price to Book Value137.50 / 687.31 = 0.20
Total Current Liabilities4,022,945.00Price to Tangible Book Value137.50 / 682.21 = 0.20
Total Equity16,251,519.00Total Equity / Total Assets16,251,519.00 / 27,047,230.00 = 0.60
Total Common Shares Outstanding23,645.00Total Tangible Equity / Total Tangible Assets(16,251,519.00 – 120,768.00) / (27,047,230.00 – 120,768.00) = 0.60
Selected Annual Income Statement Data as of December 31, 2021Key Metrics
Diluted Net Income2,093,071.00Diluted Normalized EPS2,093,071.00 / 23,645.00 = 88.52
Diluted Weighted Average Shares23,645.00Price to Earnings Ratio137.50 / 88.52 = 1.55
Selected Annual Cash Flow Data as of December 31, 2021Key Metrics
Total Cash Dividends Paid313,396.00Dividend per Share313,396.00 / 23,645.00 = 13.25
Dividend Yield13.25 / 137.50 * 100% = 9.64%

Catalysts for Future Revaluation

Given Gazprom’s vast and enduring reserves, I’m confident that it’s merely a matter of time before the market reassesses the company’s value. Potential catalysts for this revaluation could be the spin-offs of subsidiaries into independently listed companies. Amid the ongoing conflict, Europe has been sourcing most of its natural gas from more expensive providers than Russia. But what if Europe resumes its gas purchases from Russia?

Currently, Gazprom is extending its reach into eastern markets. However, if Europe becomes a more active customer again, Gazprom’s market share could expand significantly, potentially driving profits to unprecedented levels.

It’s worth mentioning, however, that discussing catalysts is arguably futile as long as the current sanctions persist. Consequently, I plan to update this section in the future, once the prevailing circumstances have normalized.

Company Information

Gazprom PAO is a Russia-based operator of gas pipeline systems. The Company’s principal activities include exploration and production of gas; transportation of gas; sales of gas within the Russian Federation and abroad; gas storage; production of crude oil and gas condensate; processing of oil, gas condensate and other hydrocarbons, and sales of refined products, and electric and heat energy generation and sales. The Company’s segments include Production of gas, Transportation, Distribution of gas, Gas storage, Production of crude oil and gas condensate, Refining, Electric and heat energy generation and sales, and Other. The Production of gas segment is engaged in the exploration and production of gas. The Transportation segment is engaged in the transportation of gas. The Distribution of gas segment is engaged in the sales of gas within the Russian Federation and abroad. The Gas storage segment is engaged in the storage of extracted and purchased gas in underground gas storages.

Company Website:

Trading Activity – When I Bought These Shares

  • February 24, 2022 – RUB 173.17
  • February 28, 2022 – USD 3.01*
  • March 01, 2022 – USD 1.86*
  • (Average price – RUB ~137.50)

Note*: Any purchases referenced in USD pertain to the ticker “OGZPY”, an American Depositary Receipt (ADR) of Gazprom where each ADR represents two ordinary shares (GAZP). Given the current sanctions, my broker, Interactive Brokers, was unable to convert these to the original shares trading on the Moscow stock exchange. Fortunately, I discovered a solution with Mind-Money.

Thanks to the exceptional help of Mr. Igor Yurov, the conversion was successfully executed despite the complexity of the process under the current geopolitical environment. Prior to this experience, I was unfamiliar with, but I now recognize them as a distinct class apart. They offer a unique suite of brokerage services that’s genuinely impressive.

While the Russian shares remain listed on the MOEX, I assume the associated issues are only temporary. Presently, they cannot be traded, and dividends cannot be received. However, I maintain optimism that once the sanctions are lifted, the dividends will be accessible. Although Interactive Brokers was unable to convert these ADRs to MOEX shares (despite successfully converting my ADRs in Sberbank), it was possible to transfer them to another broker. It is important to note that ADR’s carry the risk of potentially becoming worthless. Therefore, if you still hold any ADR’s, I recommend inquiring with your broker about the possibility of transferring them, as they do not handle the conversion themselves.

Upon receiving confirmation that your broker can facilitate the transfer of the ADR-shares, you can proceed to open a broker account with Mind-Money using my affiliate link. For assistance throughout the process, you can reach out to Igor Yurov, who was highly responsive via WhatsApp, ensuring prompt communication.

I have successfully converted my Gazprom shares to MOEX-listed shares through Mind-Money. I wholeheartedly encourage you to explore the exceptional services they offer by clicking on my affiliate link. Experience firsthand the remarkable services they provide!

(Assuming a conversion rate of 1 USD to 100 RUB as of March 01, 2022, my estimated cost for converting OGZPY ADRs to GAZP shares on the MOEX stands at approximately RUB 120 per share. This calculation doesn’t account for the favorable currency exchange fluctuations I experienced during this period, which yielded a return of around 30%.)

Due to imposed sanctions in relation to the Ukraine “conflict”, I am not allowed to buy or sell these Russian holdings for as long as the imposed sanctions last.

Dividend Activity – When I Received Any Dividends

  • Date of the general meeting of shareholders: September 30, 2022. Payout per share – RUB 51.03 (First Half Year Dividend for 2022)

Should I ultimately receive the dividend announced, my dividend yield would surge to 37.11% (calculated as 51.03 / 137.50 * 100%).

Due to imposed sanctions in relation to the Ukraine “conflict”, I am not allowed to collect any dividends on these Russian holdings for as long as the imposed sanctions last.

Trading Activity – When I Sold These Shares

  • Not Applicable Yet

Recommended Resources to Start Conducting Your Own Research

Due to sanctions related to the Ukraine “conflict”, accessing information about Russian companies through western media resources is limited. This limitation also applies to the Reuters link mentioned above. Alternatively, you can use the Russian search engine to find better search results concerning Russian companies, including Gazprom.

Note: Although I have provided the following price chart for Gazprom from, prices haven’t been recently updated. This discrepancy, I believe, may be attributable to the ongoing sanctions. Meanwhile, you can stay informed about the ongoing stock price by utilizing the Reuters link provided above.

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