Bill Cara: Support for one of the world's great oil companies, Fri., June 30, 2006, 9:32 AM

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June 30, 2006

Support for one of the world's great oil companies, Fri., June 30, 2006, 9:32 AM

UBS analysts really like the continuing prospects of Lukoil. This was formerly a component of the Cara Global Best 100 Companies list, only removed because Mom & Pop can't easily trade it. But that's not to say financial institutions should not be keen.

Download UBS June 30 report on Lukoil.

The Company is described in the UBS report as follows:

Lukoil is Russia's largest vertically integrated oil producer in terms of reserves, with 15.3 bn bbl of oil and 4 bn BOE of gas reserves. Some 57% of production is from mature West Siberian fields. Over the past four years, the company has been active in acquisitions in the Timan Pechora basin and along the Northern Caspian, which should be key growth areas in the next 10 years. The company operates four major refineries in Russia, with total capacity of 890,000 bbl/d and a further 356,000 bbl/d in three refineries in Eastern Europe. Lukoil also operates 1,700 retail stations in Russia and a further 2,380 abroad.

When I first wrote up Lukoil (prior to starting the BillCara Blog), I noted the comparative values of the assets and operations, citing country risk as the reason, but which was, in my opinion, unwarranted.

I have also written up Lukoil in this blog on more than one occasion.

Today, I'll let you read the UBS report, and determine if in fact you agree with their (and my) "Buy 1" rating.

Posted by Posted by Bill Cara on June 30, 2006 09:32:30 AM | Category: 10 Energy , Russia

Discourse

Seeing what happened to Yukos, I have to wonder - isn't it too great a risk to invest in an oil company that exists solely at the sufferance of Tsar Vladimir in the Kremlin? Nobody has ever accused Russia of operating under the rule of law.

Posted by: Novalawyer at June 30, 2006 10:16 AM [link]

Novalawyer,

I suspect you are drinking that Kudlow lemonade again (lol).

ConocoPhilips invested billions in LUKoil for investment reasons. Portfolio traders like you and I (who can sell at any time), ought not worry about who is running the govt there.

But I can assure, Bush at 39 pct in the American polls is about 50 pct what Putin is receiving in Russia.

The only thing of consequence that Russia fears is that the USD falls off the cliff, and causes a global recession.

Russia btw is a debtor nation, quite the opposite of the USA.

Posted by: Bill Cara at June 30, 2006 10:26 AM [link]

When Putin threatened to cut off the natural gas lines to Europe, I lost all respect for him. Russia is not a democracy yet, and Putin, a wolf disguised in lamb's clothing, must be watched very carefully. While a recession in the US would cause a lot of pain here, it would probably crash all commodities including oil, something that would be very detrimental to the Putin regime.

Posted by: alan at June 30, 2006 2:36 PM [link]

I never watch Kudlow, or anything on CNBC for that matter (except maybe Maria Bartiromo's legs when she gets out from behind the desk). :-) But your point about small investors is well-taken. If the Russian government takes punitive action against Lukoil the way it destroyed Yukos, there will be plenty of warning to get out without losing everything. And I'll take your word on it that the upside potential for the company is substantial.

Posted by: Novalawyer at June 30, 2006 3:02 PM [link]