Thursday, July 10, 2014

Seeking Alpha: Lukoil Not Out Of The Woods Yet

Like Gazprom (OTCPK:OGZPY), which I recently covered here, the shares of oil-focused Russian oil giant Lukoil (OTCPK:LUKOY) have struggled to make much headway amidst concerns about production growth, taxation, and geopolitical tensions. That the shares have done about as well as Gazprom and Tatneft (OTCPK:OAOFY) and better than Rosneft (OTC:OJSCY) isn't much comfort, as valuation multiples remain stubbornly low due in part to investors continue to avoid Russian equities.

A long-awaited production ramp in Iraq is now threatened by insurgency and while a partnership with Total (TOT) bodes well for the future, the company is still disadvantaged when it comes to growing production via exploration within Russia. I do continue to believe that the Street undervalues the cash flow streams that Lukoil is likely to produce, as well as the comparatively better shareholder policies here. Multiples can stay low for frustratingly long times, but I continue to believe that Lukoil is priced to generate above-average returns for long-term shareholders.

Read more here:
Lukoil Not Out Of The Woods Yet

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