• State-controlled company faces lower earnings from gas trading
  • Potential deal with Russia's Gazprom may be positive for stock

Poland’s former gas monopoly is heading for the steepest monthly slump on record as it loses market share amid looming liberalization.

The Warsaw-based PGNiG plummeted 3.2 percent to 5.44 zloty at 1:45 p.m. in Warsaw, extending its November decline to 21 percent, the most since its debut in 2005. The stock is trailing a 5.1 percent drop in the benchmark WIG20 Index.

PGNiG share price this year compared with price of oil
PGNiG share price this year compared with price of oil

On Nov. 6, the company, which also produces oil, reported worse-than-expected earnings for the third quarter, with net income missing the average analyst estimate by 45 percent. In addition, PGNiG said then that investors could expect asset write-offs in the current period, blaming retreating oil prices, while margin on gas sales would also fall as competition on the local market rises.

“PGNiG shares were having a good year up until the third-quarter earnings,” Kamil Szlaga, an analyst at Trigon Dom Maklerski SA brokerage, said by phone. “Now, investors are worried about market liberalization and expect profits close to zero on gas trading.”

The company will also need to bear the extra cost of buying liquefied natural gas from Qatar via the terminal that opens next year as Poland seeks to reduce reliance on supplies from neighboring Russia. That is yet another negative factor shareholders may take into account, according to Szlaga.

Poland may free its gas market for companies in the first half of next year as it needs to comply with European Union rules, energy regulator Maciej Bando said earlier this week. It will put more pressure on PGNiG, which has yet to agree on a price cut in the long-term supply contract with Russia’s OAO Gazprom.

“Results for fourth and first quarters will be key for investors’ perception of the stock,” said Szlaga, who advises his clients to buy the stock. “A potential agreement with Gazprom could be a strong positive trigger.”

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