Oct. 22 (Bloomberg) -- OAO Gazprom's first-quarter profit jumped 30 percent, as Russia's largest energy producer reaped record earnings from higher prices and greater natural-gas sales to Europe.

Net income increased to 273 billion rubles ($10.1 billion) from 210 billion rubles in the year-earlier quarter, Moscow-based Gazprom said in an e-mailed statement today. That exceeded the 221 billion-ruble median estimate of eight analysts in a Bloomberg survey.

Gazprom's prices in dollar terms rose 28 percent for gas sales to Europe, where it has a quarter of the market and makes most of its profit. Price increases on the domestic market and in former Soviet republics such as Ukraine are starting to make a once money-losing business more profitable.

``These are great numbers, the best numbers they've ever had, but they are more than half a year out of date, and the world is changing beneath our feet,'' said Ronald Smith, chief strategist at Moscow-based Alfa Bank.

Operating expenses in the first quarter increased 34 percent to 537 billion rubles, while sales advanced 48 percent to 903 billion rubles. European gas prices, trailing the oil market, reached all-time highs this year as crude broke the $100 a barrel mark. At the same time, physical deliveries to western Europe rose by more than a third in the first quarter.

Credit Crunch Impact

While most analysts expected a record quarter, Troika Dialog said before the results were published that managers would need to explain how they plan to reduce debt, cap costs and respond to the effects of a global economic slump on energy demand and the credit crunch.

``Such circumstances could affect the ability of the group to obtain new borrowings and refinance its existing borrowing at terms and conditions similar to those applied to earlier transactions,'' Gazprom said today in a statement on its Web site.

Earlier Chief Executive Officer Alexei Miller said the company would feel no effect from the worldwide lack of liquidity. ``For a giant like Gazprom, the financial crisis isn't a troubling factor,'' Miller said in a televised interview over the weekend. ``We feel absolutely certain.''

Shares of state-run Gazprom, which aims to become the world's biggest company with a $1 trillion market value, have tumbled about 70 percent since May as investors pulled their money out of emerging markets because of the global credit crunch. Gazprom slid 4.2 percent at 10:55 a.m. to 113.21 rubles on Moscow's Micex Stock Exchange.

The state-run company is reviewing its spending program amid tightening credit markets and lower revenue expectations. Gazprom plans to spend more than $30 billion this year on new projects as output drops at mature fields in western Siberia.

Gazprom and the country's three largest oil companies earlier this month appealed to Prime Minister Vladimir Putin to provide financing for energy projects should it become necessary.

To contact the reporter on this story: Lucian Kim in Moscow at lkim3@bloomberg.net; Greg Walters in Moscow gwalters1@bloomberg.net

Last Updated: October 22, 2008 03:40 EDT