LUKOY - Lukoil

[ERICOPOLY]

Personally, I take a political stance on Russian companies and I won't buy any single one of them if my investment has a chance to support Putin's regime. My country has suffered Russian occupation in the past and there's a high likelihood of another one coming.

 

From investment point of view, the likelihood that Putin will nationalize or otherwise usurp foreign investor holdings is more than 30% IMHO.

 

As for avoiding Russia as a matter of principle...

 

Could you not invest in an oil company in the US and pair it with Fannie and/or Freddie common?  This way you are getting the best of Putin (the Democrats) and still playing the oil price casino.

[Jurgis]

I have to say I did not understand Ericopoly's suggestion. :)

[ERICOPOLY]

I meant that the Kleptocracy discount is priced into Fannie/Freddie.  Hinges on the success of the lawsuits in a Government court.  We have the government debating permanent seizure of common stock property right here in the USA!

 

So my comment is that the Democrats give you the best of Putin -- they provide you with the opportunity to speculate on the seizure of your common stock without supporting Putin's regime.

 

Lukoil is priced where it is for those two reasons (the other reason being the oil crash).  So my joke is that if you pair up a US oil stock with a FNMA common stock, you have a LUKOY.  You have depressed oil trade paired with nationalization discount.  And underneath, you have a cash flow monster in Fannie Mae.

[TwoCitiesCapital]

http://www.bloomberg.com/news/articles/2015-03-03/exxon-s-russia-exposure-surges-as-long-view-outweighs-sanctions

[60North Investments]

Lukoil reported H1 numbers. 13% EBITDA margin, 30% drop in sales YoY. On track to do something like $13b EBITDA for the year with these oil prices, with EV of $39b. Cheap I would say. If oil some year happens to go back closer to 3-digits they'll quite likely get close to $20b EBITDA.

 

http://www.lukoil.com/new/finreports/2015

[TwoCitiesCapital]

Lukoil reported H1 numbers. 13% EBITDA margin, 30% drop in sales YoY. On track to do something like $13b EBITDA for the year with these oil prices, with EV of $39b. Cheap I would say. If oil some year happens to go back closer to 3-digits they'll quite likely get close to $20b EBITDA.

 

http://www.lukoil.com/new/finreports/2015

 

Yea - all of these Russian companies got extremely cheap recently. I added to Gazprom and Sberbank, but haven't picked up any more Lukoy yet. If oil rebounds, you'll get all of the added benefits from a higher price of oil, but it will also likely carry with it currency appreciation factors that could leverage your return (offset some by an increase in costs).

[SI2020]

Any new thoughts on Lukoil?