Streetwise Professor

March 21, 2013

Rosneft: Production Behemoth, Market Cap Shrimp. Which Speaks Volumes.

Filed under: Economics,Energy,Politics — The Professor @ 2:50 pm

Rosneft closed the TNK-BP deal today, and is crowing that it is now the world’s largest publicly traded oil company.  Measured by production and reserves that’s true.  By market capitalization-not even close.  And that disparity between size measured by production and size measured by market cap is very, very telling.

Per its press release announcing the original deal, Rosneft compares itself to ExxonMobil (XOM).  It notes that Rosneft’s production will be nearly double XOM’s, which is in turn substantially larger than the production of Chevron, Shell, Total, etc.  Its reserves will also outstrip XOM’s and all the other non-NOCs.

Market cap? Totally different story:

Rosneft market cap: $82 billion.

XOM Market cap: $397 billion.

Chevron Market cap: $233 billion.

Shell Market cap: $210 billion.

BP Market cap: $129 billion.

Total Market cap: $112 billion.

So Rosneft produces more than XOM, and has more reserves, and has about 1/5th of the market cap.  It has a smaller capitalization than other firms that it dwarfs in terms of production and reserves.

And that’s Russia in a nutshell.  It is grossly inefficient at creating value.  Think of what ExxonMobil or Chevron or ConocoPhillips could do with access to Rosneft’s reserves-in a world where property rights and the rule of law were respected.  Think of what their market caps would be if Rosneft’s reserves were in North America, rather than Russia.

In other words, the yawning gap between Rosneft’s standing in the production table, and its placement in the market cap table is a damning indictment of Russia.

And, believe it or not, as bad as Rosneft is, it’s not the worst Russian energy behemoth.  That dubious distinction goes to my fave, Gazprom.  Check out this article from the Economist that provides the gory details.  But this shouldn’t be news if you’ve been hanging out here at all over the past 7 years.

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  1. That must mean Saudi Aramco is totally worthless. After all it’s not publicly traded at all.

    Comment by S/O — March 22, 2013 @ 3:27 pm

  2. S/O. Don’t be an idiot. That comment was truly moronic. The fact that a company is not publicly traded does not mean it is worthless, for one thing. For another, regardless of whether Saudi Aramco is publicly traded or not, Rosneft is, and that makes it possible to compare value.

    Note that Rosneft’s own propaganda (linked in the post) touts that it is the largest *publicly traded* oil company.

    The ProfessorComment by The Professor — March 22, 2013 @ 3:33 pm

  3. The autocracy haircut? Interesting addition to Graham & Dodd!

    Comment by sotos — March 23, 2013 @ 8:01 am

  4. Fine posts

    Comment by Cristina — March 28, 2013 @ 9:02 pm

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