Growth of debt
Total debt for ExxonMobil (XOM) and Chevron (CVX) grew by 28% and 36%, respectively, in the last year. Total debt for Gazprom Pao (OGZPY), Gazprom Neft, and Lukoil (LUKOY) rose by 49%, 80%, and 20%, respectively.
The weighted average cost of debt for Russian energy companies stands at 9.6% compared to 1.5% for their US peers. This coincides with the Fed’s effective rate of 0.12% and Russia Moscow Interbank’s rate of 11.4%.
ExxonMobil and Chevron have a total weight of 30% in the SPDR Energy Select Sector ETF (XLE).
ExxonMobil’s EBITDA (earnings before interest, tax, depreciation and amortization) to interest expense ratio stands at 82x. The EBITDA to interest expense ratios of Gazprom Pao (OGZPY), Gazprom Neft, and Lukoil are 10x, 16x, and 28x, respectively. This makes them more interest rate–sensitive compared to their US peers. The EBITDA to interest expense ratio measures a company’s sensitivity toward a change in interest rates.
The free cash flow to total debt ratios of ExxonMobil, Chevron, Gazprom Pao, Gazprom Neft, and Lukoil are 0.12x, -0.28x, 0.18x, -0.05x, and 0.09x, respectively. The free cash flow to total debt ratio measures a company’s ability to serve its debt from free cash flows.
Russian economy versus crude oil
The chart above illustrates Russia’s GDP’s (gross domestic product) YoY (year-over-year) growth rate and Brent crude oil’s YoY price.
According to Russia’s state statistics, in 2014, the mining of energy producing minerals attracted 14.7% of total fixed capital investment in the country. As per the EIA (U.S. Energy Information Administration), in 2013, crude oil constituted 68% of Russia’s total export revenues at 16.4% of its GDP.
Europe and Asia account for 98% of crude export. Russia’s main trading partners are Germany and China. In 2014, Russia’s exports constituted 4.7 million barrels per day of crude oil and lease condensate.