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Novatek Third-Quarter Net Rises 37%, Beating Estimates

OAO Novatek, Russia’s second-largest natural gas producer, said third-quarter profit increased 37 percent, beating analyst estimates on higher sales and prices.

Net income rose to 10.1 billion rubles ($328 million) from 7.35 billion rubles a year earlier, the Tarko-Sale, Siberia-based gas producer said. That beat the 9.6 billion-ruble average estimate of 10 analysts surveyed by Bloomberg News.

Novatek, Russia’s fastest-growing gas producer, has this year ramped up production at existing facilities, acquired new assets and received government support for potential tax breaks, while benefiting from higher energy prices.

“Novatek’s recently aggressive M&A activity and its ability to ramp up production are the main factors supporting the company’s high valuations,” Pavel Sorokin and Alexander Bespalov, analysts at Alfa Bank, said in a note this week. “Novatek’s ability to increase its domestic market share, in contrast to the overall decline in Russia’s natural gas production, is another major factor.”

In October, Novatek expanded production at the Yurkharovskoye field. The producer added reserves on the northern Yamal Peninsula by buying a license holder of the Malo-Yamalskoye field in July and has also approved the acquisition of controlling stakes in two Siberian gas projects.

Sales Gain

Sales advanced 34 percent to 29.4 billion rubles as prices and volumes of natural gas, liquefied petroleum gas and gas condensate increased.

Natural-gas production and purchase volumes rose to 8.36 billion cubic meters in the period from 8 billion a year earlier. Liquids output and purchase rose to 889,000 metric tons from 744,000 tons.

Urals crude prices averaged about $75.60 a barrel in the quarter compared with about $67.95 in the same period the previous year, according to data compiled by Bloomberg. Average gas prices for end-consumers excluding transportation costs climbed 4.3 percent to 1,185 rubles per 1,000 cubic meters, Novatek said.

Earnings before interest, tax, depreciation and amortization advanced 39 percent to 13.9 billion rubles.

“Apart from the strong third-quarter results, Novatek’s near-term share price performance will be supported by the M&A-related news-flow,” Luis Saenz, the London-based director of Otkritie Financial Corp., said by e-mail.

Novatek fell as much as 2.2 percent today, the most since Sept. 27 and traded at 276.07 rubles at 5.15 p.m. in Moscow today, down 1.1 percent from the previous close.

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