Surgutneftegas $28.7 Billion Cash Ignored by Market, Troika Says

OAO Surgutneftegas, the Russian oil producer that reported a 39 percent jump in profit yesterday, may have almost as much cash as its market value, showing that investors are ignoring its ready funds, Troika Dialog said.

The Surgut-based company had an estimated $28.7 billion in cash and liquid assets at the end of June, Oleg Maximov, Alex Fak and Valery Nesterov, Moscow-based analysts at the brokerage, wrote in a research note today. That compares with a market capitalization of about $29 billion.

Investors are “clearly discounting most or all of this cash,” the analysts said. Surgutneftegas fell as much as 3.1 percent to 22.907 rubles in Moscow, and traded at 23.295 rubles as of 12:03 p.m. local time, extending its decline this year to 28 percent.

Surgutneftegas, which explores for oil and gas at fields in Western Siberia, has been cited as a takeover target for Russian state energy producers in the past. Deutsche Bank AG said in December 2006 that the company was “ripe for acquisition” and that a purchase by OAO Rosneft was possible. Surgutneftegas dismissed the claims and a takeover never materialized.

Net income increased to 77.8 billion rubles ($2.71 billion) in the first half from 56 billion rubles a year earlier, the company said yesterday. Surgutneftegas reports earnings based on Russian accounting standards.

Production at the company rose to 1.23 million barrels of oil a day last month, according to the Energy Ministry’s statistic’s unit.

To contact the reporter on this story: Stephen Bierman in Moscow sbierman1@bloomberg.net.

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net.