Gazprom’s strong financial performance flies in the face of numerous challenges the company faces on multiple fronts. The company has sustainable cash flow breakevens, with an average Brent price of US$51/bbl needed for the company's upstream business to be cash flow neutral in 2017/2018 in our base case. Its gearing of 16% is also one of the lowest in the sector. Despite 2016 being a record year for Russian gas exports to Europe, the company’s share price performance continues to lag the Russian peers. Gazprom now trades at a 67% discount to our base-case valuation.