Gazprom Quarterly Net Jumps to Record $16 Billion on Prices

OAO Gazprom’s first-quarter profit jumped 44 percent to a record, more than expected, as gas prices and foreign sales drove the Russian export monopoly’s earnings to a record.

Net income climbed to 468 billion rubles ($16 billion), from 325 billion rubles a year earlier, the Moscow-based natural-gas exporter said in a financial report posted on its website today. That beat the average estimate of 406 billion rubles from seven analysts surveyed by Bloomberg.

Gazprom benefited from recovering demand and higher prices in Europe, its biggest market by revenue, in the first three months. Rising capital expenditures left the company with negative free cash flow, according to the statement.

Enthusiasm over record earnings may be damped by a Gazprom spending spree, said Alexei Kokin, senior oil and gas analyst at UralSib Financial Corp. “They’ve already spent half of what we expect for the whole year,” he said.

Gazprom declined 0.3 percent to 177.18 rubles in Moscow. The stock has gained 11 percent in the past year.

Capital expenditures jumped 82 percent to 397 billion rubles, giving the company a negative cash flow of 7 billion rubles, according to Gazprom’s cash flow statement. Revenue increased 38 percent to 1.32 trillion rubles.

Gazprom Investments

Gazprom may boost investments 52 percent to 1.24 trillion rubles this year, compared with an initial plan, as it builds pipelines and infrastructure and after a retrenchment from nuclear power following Japan’s Fukushima disaster helped boost gas demand. In November, Gazprom’s board had planned to cut spending this year from 2010 in anticipation of a slack market.

Sales volumes to Europe and other countries outside the former Soviet Union advanced 12 percent to 46.6 billion cubic meters in the first quarter, the Russian gas export monopoly said. Shipments to Europe and Turkey may reach 158 billion cubic meters this year and export revenue will probably rise to a record, Chief Executive Officer Alexei Miller said in June.

The average gross gas price on those sales increased 17 percent to $343.10 per 1,000 cubic meters from the first quarter of last year, according to Gazprom’s statement. The company has said the price may average $400 this year, compared with $306 last year.

The world’s largest gas producer links its gas prices to oil and products with a lag of as long as nine months. Brent averaged $105 a barrel in the first quarter, compared with $77 a barrel in the year-earlier period.

Gazprom reports financial results to international standards months later than peers OAO Rosneft and OAO Novatek.

To contact the reporter on this story: Anna Shiryaevskaya in Moscow at ashiryaevska@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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Gazprom Boosts First-Quarter Profit 44%

Andrey Rudakov/Bloomberg

An employee adjusts a valve at the OAO Gazprom gas compressor facility in Volokolamsk, Russia. Revenue increased 38 percent to 1.32 trillion rubles.

An employee adjusts a valve at the OAO Gazprom gas compressor facility in Volokolamsk, Russia. Revenue increased 38 percent to 1.32 trillion rubles. Photographer: Andrey Rudakov/Bloomberg

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Aug. 30 (Bloomberg) -- Alexei Kokin, a senior oil and gas analyst at UralSib Financial Corp., talks about the outlook for OAO Gazprom after the world's biggest gas producer said first-quarter profit jumped 44 percent. He speaks from Moscow with Francine Lacqua on Bloomberg Television's "On the Move." (Source: Bloomberg)

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Gazprom First-Quarter Profit Increases 44%

Andrey Rudakov/Bloomberg

Employees stand on a platform at the OAO Gazprom gas compressor plant at Volokolamsk, Russia.

Employees stand on a platform at the OAO Gazprom gas compressor plant at Volokolamsk, Russia. Photographer: Andrey Rudakov/Bloomberg