In a situation of sanctions pressure, two “sworn colleagues” Leonid Mikhelson and Alexei Miller, as well as their subordinates, are desperately fighting for budget support and their own pockets.
According to the correspondent The Moscow Post, top managers of PAO NOVATEK began to actively buy up the company’s shares. The company also implements a buyback of its own shares. Apparently, NOVATEK is trying in this way to contain a multiple drop in the value of securities. So far not very successful.
At the same time, Leonid Mikhelson, Chairman of the Board of NOVATEK, has to think about competition with Gazprom. In conditions of shrinking sales markets, budget support can become decisive. And here it is important not to lose the hardware war. Right now, both are especially counting on help from the treasury. The problem is that there will not be enough for everyone, and the managers of the same Novatek seem to have shown a serious craving for speculation in the stock market.
To support pants
Yesterday, on March 1, PAO NOVATEK received a notice from its Deputy Chairman of the Board, Director for Geology Vladimir Kudrin, that on February 24 he had purchased the company’s shares on the Moscow Stock Exchange for almost 39.5 million rubles. A day earlier, a similar message was received from an independent member of the board of directors of NOVATEK, Robert Castaigne. On February 24, he purchased NOVATEK’s global depositary receipts (GDRs) for $84,000 on the London Stock Exchange. Most likely, the top manager of NOVATEK, buying the company’s securities, was fulfilling Leonid Mikhelson’s request.
Leonid Michelson. Photo: TASS / Nail Fattakhov
It is indicative that NOVATEK’s top managers preferred to buy the company’s shares after a significant drawdown that began on February 17 amid geopolitical risks amid the aggravation of the situation in Ukraine. So the deputy chairman of the board of NOVATEK, Vladimir Kudrin, bought shares at a price of 1,178 rubles, while on February 16 the price at the close of trading was 1,621 rubles. That is, Kudrin bought shares at a discount of about 27% to this price.
At the same time, the price of NOVATEK’s shares on February 24, that is, the day when Vladimir Kudrin decided to buy, fell to 1,001.4 rubles at the close of trading. At the same time, on Monday, February 28 and Tuesday, March 1, the Central Bank of Russia decided not to open trading on the Moscow Exchange and the price of NOVATEK shares froze at 1,133.6 rubles, that is, at the closing level on Friday, February 25.
However, trading did not stop on the London Stock Exchange. And during Monday-Tuesday, the dynamics of the price of NOVATEK’s shares indicated a sharp drop. If on Friday, February 25, trading burrowed at $124.7 per GDR, then on March 1, trading was closed at $16.24 per GDR. That is, the fall in prices in this time period occurred almost 8 times!
It is logical to assume that if trading were also held on the Moscow Stock Exchange, then the price of NOVATEK shares would fall no less, and perhaps even more, given that the shares are denominated in rubles. In this regard, it should be noted that Vladimir Kudrin’s investment could have been premature.
At the same time, it should be noted that NOVATEK has launched a buyback program for its own shares. The program was launched on December 17, 2021. NOVATEK reported that between February 21 and February 25, 2022, more than 5.118 million ordinary shares (including in the form of GDRs) were purchased on the open market. From February 14 to February 18, 2022, NOVATEK bought back a little more than 883 thousand ordinary shares (including in the form of GDRs) on the open market. As you can see, NOVATEK is trying to support the value of its securities through a buyback, but this support, judging by the dynamics of the price drop, does not help much.
Europe “threw” problems
At the same time, NOVATEK and its chairman of the board, Leonid Mikhelson, not only need to keep the value of the company’s securities, but also to resist Gazprom. In a certain sense, NOVATEK may now have some advantage over Gazprom. Given that Europe may completely abandon Russian gas, Gazprom will obviously suffer more than NOVATEK. Germany has already turned out to be ready to completely abandon Nord Stream 2. In this sense, Alexei Miller, Chairman of the Board of PJSC Gazprom, should worry more than Leonid Mikhelson.
Alexey Miller. Photo: RIA Novosti / Vladimir Astapkovich
Therefore, with the reduction of the “food base”, the old conflicts between NOVATEK and Gazprom run the risk of flaring up with renewed vigor. As previously written The Moscow Post , allegedly Leonid Mikhelson has long dreamed of taking over the levers of management of Gazprom. It was even rumored that Alexander Dyukov, the head of Gazprom-Neft, who had worked for Mikhelson for a long time at Sibur, might be lobbied by him (Mikhelson) to replace Miller. True, this did not happen, the contract with Alexei Miller was extended.
However, many other factors played against Miller. So in August 2021, it became known about a serious fire at the Urengoy plant of Gazprom for the preparation of condensate. The emergency could lead to a shortage of liquefied petroleum gas (LHG) in the domestic market and problems in the fuel and petrochemical sectors. At the same time, Leonid Mikhelson’s Sibur was and remains the largest producer of LPG. Thus, the accident at the Gazprom plant only strengthened Mikhelson’s position and provided a new pretext for an apparatus struggle.
Bolivar can’t stand two
Another point of application in the conflict of interest between Gazprom and NOVATEK is the principles of gas transportation. Gazprom’s pipeline transport is cheaper, but NOVATEK is actively developing the delivery of liquefied natural gas (LNG) by giant offshore gas carriers. In this connection, NOVATEK’s Yamal LNG project was actively criticized by Gazprom.
As wrote “Kommersant” , Gazprom speculated on the allegedly low budget efficiency of the Yamal LNG project. Such reasoning could easily be explained by the fact that LNG from NOVATEK’s Yamal LNG project displaced Gazprom’s gas from the European market. Allegedly, because of this, the budget received less than 30 billion rubles in taxes and export duties. But now, in the context of the developing new unprecedented round of sanctions pressure, the volume of sales to European markets is still an open question.
In this regard, the efficiency of the two main producers of Russian gas can become their main advantage in making key decisions. So, according to the results of 2020, NOVATEK showed a record profit for 10 years in the amount of 377 billion rubles (an increase of 139 billion rubles in just a year). For Gazprom, on the contrary, 2020 was extremely unsuccessful financially. Moreover, last year was the worst for the company in its entire history in many respects. The net loss of the company headed by Alexei Miller for this period amounted to 707 billion rubles with revenues of over 4 trillion. rubles.
However, now that the domestic consumer and China may become top priorities for both Gazprom and Novotek, all of yesterday’s introductory conditions may largely become irrelevant. Perhaps one of the main sources of support now can be the budget. And here the question is, whose managerial and lobbying abilities will be stronger – Michelson or Miller.