How American vaccine turns out to be “vaccination” against Tatneft shares

Economist and blogger Albert Bikbov about the reasons for the growth of shares of the Tatarstan oil giant

For the first time in a long time since the beginning of the pandemic, Tatneft's shares have shown a steady growth. Moreover, by dynamics of the increase in the price of securities, the Tatarstan oil giant was the leader of the Russian stock market with an increase of 5,5% a day. The shares showed a rise by another 2,5% at its peak in the morning on 11 November. On the one hand, this fits into the general trend of increasing the energy companies share price on the news about the American Covid-19 vaccine, but, as well-known blogger and economist Albert Bikbov points out in the author's column for Realnoe Vremya, Tatneft also has its own “trump cards”.

A vaccine against coronavirus to humans and for the market

In the oil companies sector, all stocks are now going up on the news that the stage of clinical trials of the American vaccine of Pfizer and BioNTech, world's giants in the pharmaceutical industry with huge capacities, has ended. And now there is already talk that they promise to give Americans a free vaccination against coronavirus. This is a strong statement, and against this background, oil companies' shares are now growing all over the world. As you can see, oil price is also rising. So this is such an echo of what people are now expecting: a vaccine will lead to a small but victory over all that we are currently seeing.

For other companies, this is not so pronounced — for oil refining companies, if we take Russia, they are very squeezed by the tax press. These are the results of the tax maneuver, and these endless perturbations with the reverse excise tax, and so on. The efficiency of oil refining today is squeezed by the state. Oil production is now in a better position — there are expectations that the economy will unfreeze, restrictions will ease due to that the vaccine will enter circulation.

Besides, Putin adds encouraging news about our Russian vaccines. We must understand the following: the oil market is an international, globalised market, and the appearance of the Russian vaccine — it certainly made an impression, but still the capacity of one country is not enough to satisfy the need for a vaccine on a global scale. But when Pfizer and other leading pharmaceutical companies get involved, this news affects the market more. This news will have an impact not on life in Russia, but on life around the world.

Information policy played into Tatneft's hands

At the same time, Tatneft shows even greater growth than other Russian oil companies. I would single out Tatneft's competent PR strategy here. There were many briefings with the participation of the first person and deputies, large materials in the media, where the leaders of Tatneft talked about the state of the company's business, and spoke frankly. This has a positive impact on the market — when they see that this is not just a public joint-stock company, but a real public company.

There was also open talk of production cuts due to the OPEC agreement. The company's situation is now quite difficult, their profits have fallen. But they are not hiding like many Russian oil companies, which are not visible or heard now, they are working on problems, they see the future, and this has an impact on the market. We underestimate the PR component in the growth factor of shares.

Besides, Tatneft has never demonstrated a departure from the generous dividend policy that it has adopted in recent years. If there was even a slight hint of this, it would be like a bolt from the blue.

Tatarstan is the owner of Tatneft, as well as other shareholders. And the policy of Tatneft is aimed at shareholders, the company exists for no other purpose than the benefit of shareholders. Accordingly, it makes generous payments, including to the budget of the republic. They fuel interest in the company — for example, they give the opportunity to feel better with some debt instruments. The higher the company's capitalisation, the more opportunities it will have.

By Albert Bikbov