Gazprom Second-Quarter Net Jumps to $10 Billion on EU Demand
OAO Gazprom, the world’s biggest gas producer, increased second-quarter profit 79 percent after prices, output and exports rose an increase in European demand and prices during Middle East and North Africa unrest.
Net income climbed to 304 billion rubles ($10 billion) from 170 billion rubles a year earlier, Gazprom said today on its website. That almost matched the average estimate of 305 billion rubles in a Bloomberg survey of 10 analysts. Revenue climbed 35 percent to 1.03 trillion rubles.
Gazprom, which reports international-standard results months later than peers OAO Rosneft and OAO Novatek, benefited as demand and prices recovered in Europe, its biggest market by revenue. Unrest boosted oil and gas prices, amid disrupted supplies from Libya. The company, which yesterday opened the Nord Stream link to Germany, plans to spend 1.28 trillion rubles this year as it expands pipelines.
“The capex surge remains investors’ most important concern with regards to Gazprom,” analysts led by Dmitry Loukashov at VTB Capital in Moscow said in a note today. “The company trades at a significant discount to fundamentals, as the market is pricing in constant capex hikes, which are to be translated into uninspiring free cash flow.”
‘Record’ Year
Free cash flow slumped by more than half to 29 billion rubles in the second-quarter from 70 billion rubles a year earlier, according to a presentation on Gazprom’s website today.
Gazprom almost doubled capital expenditures in the first half to 662 billion rubles from a year earlier as it builds export pipelines to bypass transit countries such as Ukraine and expands its domestic network, and develops new gas deposits.
Earnings before interest, taxes, depreciation and amortization will probably rise 30 percent this year, after increasing 41 percent, the company said. Ebitda reached $14.9 billion, and the Ebitda margin climbed to 41 percent from 39 percent a year earlier, the VTB Capital analysts said.
In June, Gazprom Chief Executive Officer Alexei Miller forecast record earnings this year. Gazprom’s prices are linked to a basket of oil and refined products with a time lag of as long as nine months.
“Gas prices in Europe in the second half will probably be higher,” Maxim Moshkov, an analyst at UBS AG in Moscow, said by phone today.
Output, Sales
Sales volumes to Europe and Asia increased 14 percent to 40 billion cubic meters in the second quarter, while the average price advanced to $383 per 1,000 cubic meters. The company has said its average price under long-term contracts in Europe may reach about $400 this year, compared with $306 last year. Gas output rose 9 percent to 129 billion cubic meters in the second quarter, according to the presentation.
The European debt crisis has since damped oil prices and raised concerns that the global economic recovery will stall. Gazprom’s contracts are under pressure as customers seek arbitration to lower prices and after European Union regulators raided some of its trading units and customers at the end of September looking for antitrust violations.
Gazprom is continuing talks with European customers, including RWE AG, and may reach agreements this year or before the end of arbitration, Sergei Chelpanov, deputy head of Gazprom’s export unit, said today on a conference call.
Finance costs, including income expenses and exchange losses, dropped 62 percent to 24.4 billion rubles from a year earlier, according to Gazprom’s report. Net debt fell to 812 billion rubles at the end of June from 871 billion rubles at the end of last year as the ruble appreciated, Gazprom said.
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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