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Surgutneftegas SWOT & PESTLE Analysis

ID : 52742953| Sep 2020| 15 pages

COMPANY PROFILE -Surgutneftegas

Business Sector :Oil and Gas

Operating Geography :Russia, Europe

About Surgutneftegas :

Surgutneftegas Public Joint Stock Company is a Russian oil and gas industry that primarily engages in the production of hydrocarbon and petroleum. Its activities include operating oil and gas fields, manufacturing and marketing of petroleum and petrochemical products, gas processing, retail sales of fuel, and related goods and services. Furthermore, it provides banking, insurance, engineering, and television and radio broadcasting services; and manufactures wood construction products. The company is headquartered in Surgut, Khanty-Mansi Autonomous Okrug, Russia and it employs 114000 people as of 2020. Surgutneftegas was founded in 1993 after merging numerous former state-owned companies possessing large oil and gas reserves in Western Siberia. The company operates through various segments: Exploration & Production, Refining & Sale, and Other Activity. Surgutneftegas is the leading oil supplier to Belarus and it also engages with other foreign countries like Iran, Libya and pre-war Iraq. It accounts for approximately 13% of the country’s crude output and 25% of gas produced by domestic oil companies.

Surgutneftegas’s unique selling proposition or USP lies in it being one of Russia’s top-five integrated oil and natural gas companies, accounting for 10% of the country’s oil production. “Surgutneftegas” PJSC is one of Russia’s largest vertically integrated oil companies (VIOCs) playing a vital part in the fuel and energy ecosystem of the nation. “Surgutneftegas” PJSC retains one of the leading positions in the industry in development drilling as well as in prospecting and exploratory drilling. The Company accounts for 10.8% of the country’s oil output and 6.5% of the oil refining amount. Surgutneftegas received the title of “the company of the year” in the annual professional competition “Black Gold of Ugra”. It has also secured the #251 spot on Forbes Global 2020 lists.

Surgutneftegas Revenue :


RUB 1555 million - FY ending 31st December 2019 (y-o-y growth 2%)
RUB 1524 million - FY ending 31st December 2018

Ownership / Major shareholders :

Surgutneftegas’s, Russia’s fourth-largest oil producer, ownership is an issue of wide speculation. It has been run for more than three decades by Vladimir Bogdanov, who has been on the U.S. Treasury’s sanctions list since 2018, and is owned mostly by its employees, according to public statements from government officials.

Competitive Analysis of Surgutneftegas

SWOT
PESTLE
The SWOT analysis of Surgutneftegas is presented below in a matrix followed by the detailed analysis report:
StrengthsWeaknesses
1. Unbeatable low debt to equity ratio with proven strong financials
2. Strong assets and waste utilization scale
3. Giving an all round solution to the Russian oil and gas demand
4. One of the largest Russian oil companies
5. Effective income through the additional services in gas stations
6. Self sufficiency in fulfilling energy requirements
7. Focusing on innovation for multidimensional benefits
1. Low productivity of natural gas
2. Aging assets affecting production
3. High dependency on Russia for overall business
OpportunitiesThreats
1. Prospects in natural gas industry
2. Steady growth in demand of petrochemicals
3. Increasing profitability through cost reduction program
1. Declining demand of fuel in Russia
2. Fluctuating oil prices pulling business sentiments down
3. High influence in global supply from OPEC and USA
4. Forced to cut production due to OPEC+ agreements
5. Sanctions aimed at curbing Russian energy export pipelines to Europe, such as Nord Stream 2.
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Detailed SWOT Analysis of Surgutneftegas

Strength

1. Unbeatable low debt to equity ratio with proven strong financials: Surgutneftegas is a state owned company in Russia. Oil industry supports Russian economy more than any other sector, hence, oil companies enjoy favoritism in government circles. Added to that, Russia is one of the developed nations in the world with high requirement of energy. All these benevolent factors allow the Russian oil companies to grow. The same could be reflected in the financial result of Surgutneftegas also. External factors, like agreement with OPEC+ to limit oil exploration to control oil price, overall slowdown in demand and falling oil prices caused the company’s revenue, in. fiscal 2019, to grow marginally by 2% to RUB 1555 million and operating profit declined by 4.2% to RUB375 million, but the interesting part lies in its asset management. The company has mind blowing long-term debt to equity ratio of 0.058 and current ratio of 8.65. This means that the company has almost zero debt and its current assets are on high surplus by over 8 times to current liabilities, which means it can clear off its dues quite easily without any affect to long term assets in most adverse situations. The company is highly cash rich as it sits on a whopping $51.6 billion cash pile as of 2020. It can absorb the risks of low oil prices, as low prices of oil play a vital role for in the earnings of companies dealing with upstream business of fossil fuels.

2. Strong assets with high waste utilization scale: Surgutneftegas is the leading oil company in Russia in terms of development drilling as well as exploratory drilling. Development drilling includes oil and gas drilling in areas where fossil fuel reserves are proven and exploratory drilling involves drilling in new areas. Chances of getting dry wells are higher in exploratory drilling. Among Russian companies, Surgutneftegas executes 21.1% (0.24M m~) of exploratory drilling, which is highest among its peers, and 18.1% (5M m~) of development of development drilling, which is 2nd highest among peers after Roseneft. Percentage of idle wells is lowest among peers, which is 6.8%, whereas industry standard is 14%. Oil fields emanate combustible gas along with crude oil, which is known as associated petroleum gases (APG). They could be used as natural gases or released into the atmosphere after flaring. In conventional contexts, it is a waste for oil industry but in economical and ecological contexts, it is quite useful and could be harmful if wasted. Flaring reduces APG utilization and also reduces long-term profitability of companies. It could be used as natural gas after refining for various purposes, from cooking to running power plants. Surgutneftegas has the highest APG utilization scale among peers. The company utilizes 99% of APG, whereas industry standard was 81% in 2019 in Russia. Surnutneftegas is well on its way to become the topmost oil company in Russia in the near future as it has secured largest number of deliverable assets and follows effective methods to maximize the utility of byproducts

The remaining section of “Strength” is available only in the 'Complete Report' on purchase.

Weakness

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Opportunity

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Threats

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Major Competitors :

  • Rosneft
  • LUKOIL
  • Gazprom neft
  • Tatneft
  • Bashneft
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Check Out Analysis of Other Relevant Companies

TABLE OF CONTENTS
DELIVERY AND FORMAT
WHY CHOOSE US?
References used in Surgutneftegas Analysis Report

1. Annaul Report 2019 - file:///C:/Users/Acer/Desktop/GO%202019En.pdf
2. U.S. Sanctions on Russia Updated January 17, 2020 - https://fas.org/sgp/crs/row/R45415.pdf
3. Coronavirus crisis will erase nearly a decade of oil demand growth this year, IEA says - https://www.cnbc.com/2020/04/15/coronavirus-to-erase-nearly-a-decade-of-oil-demand-growth-in-2020-iea.html
4. Oil Prices Crash 25% As Oil War Begins - oilprice.com/Energy/Energy-General/Oil-Prices-Crash-20-As-Oil-War-Begins.html
The detailed complete set of references are available on request in the 'Complete report' on purchase.

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SWOT & PESTLE.com (2020). Surgutneftegas SWOT & PESTLE Analysis - SWOT & PESTLE.com. [online] Available at: https://www.swotandpestle.com/surgutneftegas/ [Accessed 24 Sep, 2020].

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Surgutneftegas SWOT and PESTLE analysis has been conducted by Tej Narayan Shaw and reviewed by senior analysts from Barakaat Consulting.

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