Lukoil - Closing Pair Trade Idea Versus Novatek

We are closing the Lukoil/Novatek pair trade idea that we opened on April 27. The trade has returned 3% since inception, as Lukoil shares have generated a total return of 16% versus 13% for Novatek (including paid dividends).WHY WE ARE CLOSING THE TRADE IDEA NOWWe opened the trade idea expecting Lukoil to outperform Novatek on the back of a stronger improvement in its 1H21 financials. And while both companies published solid 1Q21 numbers on the back of stronger oil and gas prices and operating growth, Lukoil significantly outperformed Novatek on most financial metrics. Lukoil's EBITDA almost doubled and FCF more than tripled y-o-y in 1Q21, while Novatek's EBITDA rose by 27% y-o-y and FCF remained negative. On balance, we now expect the 2Q21 earnings season and prevailing strong European gas pricing amid the recent correction in crude oil prices to provide more benefits to Novatek.