Austria has moved to acquire Russian oil and gas assets, to the chagrin of some of its European neighbors.
This is the case with OMV AG (OMVKY) , a Vienna-based integrated oil and gas company, which just announced the acquisition of a 24.98% stake in Siberian gas assets from Russian gas giant Gazprom (OGZPY) .
This transaction is a capitulation of a long asset swap dispute with Norway over OMV's Norwegian assets, which were originally earmarked to be swapped with Gazprom back in 2016. Our main conclusion here is that Russia has greater support of its Western European allies than the Trump Administration is assuming it has.
As we've emphasized in our column, we have a strong positive view on Gazprom shares given the company's unstoppable growth of Russian natural gas exports to Europe. As we've also mentioned, Gazprom and its financial partners, among them OMV, are poised to benefit from the operation of the controversial Nord Stream 2 pipeline, which has received much criticism from the United States.
Gazprom shares have rallied more than 15% since the announcement of the Russia sanctions and the China-U.S. trade wars and we think they'll continue to outperform as the company delivers on production and the depreciation of the ruble delivers increased revenue for oil and gas sales.
As for OMV, we do not think their shares have as much upside as Gazprom does, given the firm's diversified footprint. OMV has a very strong presence in Eastern Europe, Russia and the Middle East. Its shares are listed on the Vienna Stock Exchange, and its market cap of about $16 billion is equivalent to roughly half of the value of the Permian Basin's champion, Pioneer Natural Resources (PXD) . We prefer to take risk on U.S.-based shale companies rather than European names. For ETF traders, we prefer to own the SPDR Oil & Gas Exploration & Production ETF (XOP) .
We think that Russian gas companies like Gazprom and Novatek (NOVKY) are positioning themselves, with the support of their European and Asian counterparts, to grow their natural gas trading and delivery hubs on both sides of their borders - and there's nothing the U.S., nor its allies, can do to prevent that. Even the specter of further sanctions from the Trump Administration is downplayed as these sanctions could backfire on European countries and businesses that depend on Russia, or have risked too much capital with Russian companies to let it go.
Stateside, LNG export players like Cheniere Energy, Inc. (LNG) and Tellurian Inc (TELL) are expected to face stringent pricing competition following this week's announcement from Shell (RDS.A) about the building of its LNG Canada terminal.
For now, given geopolitical dynamics, we prefer long positions in OGZPY and NOVKY, over LNG and TELL, for a global gas trade. However, Cheniere and Tellurian continue to be our U.S. LNG champions and their growth story is one for long-term investors.
