MOSCOW Zoya Danilina, who owns some 700 shares in Gazprom (GAZP.MM), says investors don't have to look far to understand that Russia's most powerful company has lost its way.
Danilina remembers when her shares were worth over 300 roubles each. Now they fetch about 100 roubles.
"There have been much better days, when tables were served with black and red caviar," she said on the sidelines of Gazprom's annual general meeting in Moscow on Friday, looking at a plate of boiled buckwheat, a popular staple food in Russia.
In the caviar era, Gazprom head Alexei Miller, a close ally of President Vladimir Putin, was overseeing a company with the world's third-largest market value at $360 billion. In 2007, he promised to boost it to $1 trillion.
Fast forward several years and Gazprom, still the world's largest gas producer and holder of 15 percent of global gas reserves, is worth $77 billion and could fall further as it faces a series of setbacks.
The biggest blow came from a shale gas revolution that has unlocked vast reserves in the United States.
U.S. prices have crashed, closing America as a prospective market for Gazprom, diverting cheaper liquefied natural gas (LNG) cargoes not needed in the United States to Europe, undermining Gazprom's position in its core market.
Europe, tied to Gazprom by a Soviet-built pipeline network, has balked at its contracts that tie gas prices to more expensive oil.
Last year, Miller was forced to offer billions of dollars in what Gazprom described as "rebates" to European buyers.
On Thursday, Germany's RWE (RWEG.DE) said it won an arbitration case against Gazprom, which further loosened the price link to oil and raised the prospect of more price concessions.
Gazprom expects its 2013 earnings to fall by 10 percent, marking a second yearly decline.
The stock market now values Gazprom - the world's third-biggest company by earnings behind ExxonMobil (XOM.N) and Apple (AAPL.O) - at only two times its 2012 earnings of $38 billion. That makes it the cheapest large-cap stock on an already cheap Russian market.
LNG, HOME PRICE SETBACKS
Investors could possibly forgive those setbacks if they were confident Gazprom could expand in the fast growing global LNG markets, while charging rising prices at home.
"Our goal is to control around 15 percent of the global market for liquefied natural gas," Miller, 51, told the annual general meeting on Friday.
But such hopes were dealt heavy blows over the past month.
Putin signaled last week the gradual end of Gazprom's monopoly on exports of LNG and opened the way for rivals Novatek (NVTK.MM) and Rosneft (ROSN.MM) to compete for huge new Asian markets.
"We offer to lower restrictions gradually on liquefied natural gas exports," Putin said in a speech at an economic forum in St Petersburg, both his and Miller's hometown.
Putin also said that monopolies would be able to raise prices only in line with inflation, reducing hopes for much higher returns on the domestic market.
Gazprom's domestic industrial customers pay $114 per 1,000 cubic meters - little more than half of the $201 it receives for exports after being adjusted for transportation and duties.
"Investors are structurally underweight Gazprom as they do not believe in significant change at the company," said Kingsmill Bond, chief strategist at Sberbank Investment Research in Moscow.
Under Miller, hired by Putin in 2001, Gazprom often served as a Kremlin political tool, as described by EU officials.
"The Kremlin has decided that Gazprom is part of Russia's national security and geopolitics - not a commercial company," said Chris Weafer, founder of Macro Advisory, a Russia-focused consultancy.
"We are going back to Soviet days, when Gazprom was a government ministry. The market is valuing it like a ministry."
Using Gazprom as a weapon has proved to be a double-edged sword, poisoning relations with Ukraine, the transit route for most of Gazprom's Europe-bound gas, after several pricing disputes, which cut gas flows to Europe during several winters.
Gazprom is now investing billions of dollars in new export routes to circumvent is ex-Soviet neighbor - Nord Stream to Germany and the still-to-be built South Stream to Italy.
Investors fear those projects may never pay out.
Finally, Gazprom has failed to sign a supply deal with China, the world's largest energy market, despite first signing a memorandum of understanding as long ago as 2006.
Should the deal be signed before the end of the year, it may still not be enough to revive the appetite of investors, who have long criticized Gazprom's for overspending.
"The mega-projects will guarantee rapid growth in costs, while future revenues are absolutely uncertain," said Mikhail Korchemkin of consultancy East European Gas Analysis.
(Corrects to one trillion dollars from one billion in fourth par)
(Additional reporting by Denis Pinchuk and Douglas Busvine; Editing by Dmitry Zhdannikov and Jane Baird)