woensdag 7 maart 2012

Natural Gas Market between West and East

Natural gas prices around the world, in contrast to oil prices, do not have the same price level. For example, natural gas prices in Russia (Chart 1) have been steadily going up in price since 2010 (almost up 100%), while natural gas prices in the United States (Chart 2) have been going down since 2010 (almost down 50%).

Natural Gas Russia
Chart 1: Natural Gas Price (Russia) US dollars/1000 cubic metres of gas

Natural Gas US
Chart 2: Natural Gas Price (U.S.) US dollars/1000 cubic metres of gas

To illustrate how this can affect domestic natural gas companies we will compare the biggest natural gas producers of Russia and the United States in valuation and price level. These companies are Gazprom (OGZPY) and Chesapeake Energy (CHK) respectively (Chart 3).

Chart 3: Comparison between Gazprom (OGZPY) and Chesapeake Energy (CHK)
Since 2010, Gazprom has outperformed Chesapeake Energy by 15% and will continue to do so if the price trends of natural gas in Russia and the United States keep going their way.

Gazprom's net sales grew 31% and net income grew 41% from 2010 to 2011, while Chesapeake Energy's natural gas and oil sales were stagnant and net income available to common stockholders even dropped 20% from 2010 to 2011.

This is again, evidence that Gazprom will outperform Chesapeake Energy if this trend in natural gas prices continues onwards.

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