Neptun Deep And Iernut Projects Will Shape Future Energy Landscape

Key Takeaways

• Progress on major production projects and infrastructure upgrades is driving increased efficiency, higher reserves, and strengthened long-term earnings potential.
  
• Regional energy demand, market expansion, and power generation initiatives provide stable revenues, improved pricing, and reduced exposure to domestic regulatory risks.
  
• Regulatory caps, project delays, rising taxes, and field depletion threaten profitability and growth, while long-term demand faces pressure from decarbonization and policy changes.

Catalysts

Explores for, produces, and supplies natural gas in Romania.

• Progress on the Neptun Deep offshore project is on schedule, with first gas production expected in 2027; this will significantly boost Romgaz's production volumes and reserves, supporting a structural increase in long-term revenues and earnings.
  
• Persistent energy security concerns in Europe are driving preference for regional gas suppliers, positioning Romgaz-Romania's leading gas provider-to benefit from contract stability, robust demand, and improved pricing power, which should underpin recurring revenue growth.
  
• Ongoing modernization and rehabilitation of onshore fields and infrastructure has already increased production efficiency, as seen with reactivation of wells and condensate output growth; this trend should support stable to growing production and expand operating margins over time.
  
• The near-completion and impending commissioning of the Iernut gas-fired power plant will open new revenue streams and improve earnings stability, while also providing a platform to mitigate gas price volatility via power sales.
  
• Expansion into new neighboring markets, such as Moldova, along with vertical integration opportunities (e.g. possible Azomures acquisition), is set to diversify revenue sources and reduce reliance on domestic regulated sales, potentially enhancing both total revenues and net margins in the medium term.

SNGN Romgaz Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming SNGN Romgaz's revenue will grow by 9.4% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 36.2% today to 34.8% in 3 years time.
• Analysts expect earnings to reach RON 3.7 billion (and earnings per share of RON 0.85) by about May 2028, up from RON 2.9 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting RON4.6 billion in earnings, and the most bearish expecting RON2.5 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 8.6x on those 2028 earnings, up from 8.3x today. This future PE is lower than the current PE for the GB Oil and Gas industry at 13.8x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.01%, as per the Simply Wall St company report.

SNGN Romgaz Future Earnings Per Share Growth

Risks

• The company faces persistent regulatory risk, as 83% of 2025 gas volumes are expected to be sold at regulated (capped) prices (RON 120/MWh until March 2026), potentially limiting top-line growth and compressing margins even if overall demand rises.
  
• Delays and contractor financial difficulties in completing the Iernut power plant project, combined with historic multiple postponements, increase execution risk for new revenue streams from power generation and could lead to further CapEx overruns, hindering future earnings growth.
  
• Windfall profit taxes and related government levies increased by 86% year-on-year, and this rising tax burden-coupled with fluctuating percentages of gas volumes sold at regulated versus free-market prices-could erode net profits and reduce funds available for dividends and reinvestment.
  
• Despite short-term stabilization, management guides for a maximum 2.5% annual production decline as domestic fields mature; absent significant new large discoveries, this secular depletion could result in falling volumes, revenue stagnation, and increased capital expenditure requirements to maintain output.
  
• The group's net profit in Q1 2025 was down 24% compared to a year ago due to lower realized pricing and higher taxes, evidencing vulnerability to macroeconomic and policy shifts, and suggesting that declining mid/long-term demand (as a result of decarbonization, renewables expansion, and EU policy pressure) may put ongoing pressure on future profitability.

Valuation

• The analysts have a consensus price target of RON5.832 for SNGN Romgaz based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of RON6.5, and the most bearish reporting a price target of just RON5.21.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be RON10.5 billion, earnings will come to RON3.7 billion, and it would be trading on a PE ratio of 8.6x, assuming you use a discount rate of 12.0%.
  
• Given the current share price of RON6.24, the analyst price target of RON5.83 is 7.0% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.