Romania’s state-backed gas giant Romgaz (BVB: SNG) is standing at a crossroads that could reshape its future, according to a new analysis by investment bank Wood&Company published on BVB Research Hub.
The firm maintained its “Hold” recommendation on Romgaz shares, with a raised price target of RON 8.2, slightly below the current share price of RON 8.45. Year-to-date, Romgaz’s shares have gained 64%, more than double the 27% increase recorded by the Bucharest Stock Exchange’s BET index.
At the heart of the story is Neptun Deep, the offshore Black Sea project that Romgaz is developing together with OMV Petrom. For Romgaz, the project is described as “transformational.” Once fully online, from 2028 onwards, Neptun is expected to boost the company’s natural gas output by around 75% and lift its earnings by roughly 40%.
Cash-heavy project, temporary strain
Until Neptun starts producing, Romgaz will face significant financial pressure. The company, which not long ago enjoyed a cash-rich balance sheet, has turned to debt to finance the massive investment. Wood&Company expects Romgaz’s net debt to peak at RON 6.6 billion in 2027, equal to a manageable 1.5 times its annual operating profit (EBITDA).
This shift also affects dividends. Traditionally, state-owned firms like Romgaz distribute at least half of their profits. But during the investment phase, Romgaz has approval to cut payouts to 30% of net income. That translates into an average dividend yield of about 3.9% over the next three years, well below its historical double-digit payouts. From 2028 onwards, the analysts expect a return to 50% distribution.
Regulatory clouds, price tailwinds
Romgaz has the largest share of Romania’s household gas market, which means it is more exposed than OMV Petrom to government-imposed price caps. The current regulation is due to be lifted in 2026, a move that could boost Romgaz’s margins significantly. Wood&Company estimates gas prices could rise by EUR 5–10 per megawatt hour if the caps are scrapped.
Even so, global gas markets are expected to soften. The report forecasts European gas prices to fall to EUR 30/MWh in 2026 and further to EUR 25/MWh in 2027, down from much higher levels in recent years. The impact on Romgaz should be muted thanks to regulation and its diversified business model.
Other strategic moves
Romgaz is also exploring ways to secure future demand for its gas. One option under study is the potential takeover of Azomureș, Romania’s largest fertilizer producer, which has struggled with high energy costs. Such an acquisition would guarantee a customer for Neptun’s output while diversifying Romgaz’s business.
On the power side, the long-delayed Iernut gas-fired plant is now nearly finished. Expected to begin operations in 2026, the modern facility could help reverse recent losses in Romgaz’s power division by providing balancing capacity to Romania’s growing renewable sector.
Romgaz has also dipped its toe into renewables, signing a memorandum of understanding with Electrica to develop up to 400 MW of green capacity. But given the demands of Neptun, the analysts expect only limited progress in this area in the near term.
Valuation above peers
Despite the challenges, Romgaz trades at a premium to its regional peers. Wood&Company forecasts a price-to-earnings ratio of 9.5 times for both 2025 and 2027, compared to peer averages of 6.5–7.1 times. The analysts argue this is justified, given the scale of the Neptun project.
For now, Romgaz investors face a waiting game: limited dividend income, rising debt, and heavy spending. But if Neptun is delivered on time and on budget, the payoff could be worth the wait. As Wood&Company concludes, Romgaz is “nearly there”, but the hardest work still lies ahead.
BVB Research Hub offers a wide range of reports on Romanian listed companies by local and international brokerage firms and other valuable resources for investors, such as company comparisons, ESG scores, and financial education tools.
editor@romania-insider.com
(Photo source: Inquam Photos/George Calin)
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