Gazprom 2012 Dividend Set to Drop 22% From Record as Net Slides

OAO Gazprom, the biggest natural-gas producer, sees its 2012 dividend falling as much as 22 percent after weaker natural-gas sales in all markets reduced earnings.

Gazprom estimates a 7 ruble to 8 ruble dividend, after 8.97 rubles a share for 2011, according to an investor presentation obtained by Bloomberg News. Executives are holding its Investor Day today at its headquarters in Moscow. Sergey Kupriyanov, a spokesman for Gazprom, confirmed the document and its contents.

“The market’s really disappointed,” Elena Savchik, an analyst at Aton Capital in Moscow, said by phone. “Last year they paid really generous dividends, investors were rewarded. As net income has declined, they reduced their dividend payouts.”

Net income probably fell 15 percent to $38 billion as sales slid 5 percent to $150 billion, the presentation showed. Gazprom pays out a quarter of net under Russian accounting standards. It plans to base the dividend on international standards from 2014.

Exports to Europe, making up 51 percent of gas revenues, sank 7 percent to 138.8 billion cubic meters, it said. Use of gas for power and industry fell and regional output of the fuel rose 1.1 percent, the presentation showed. Volumes to former Soviet Union nations and Russian consumers also fell. Exports may rebound to 151.8 billion cubic meters in 2013, it said.

Gazprom posted 133.2 billion rubles ($4.4 billion) of retroactive discounts for customers including EON SE and Eni SpA as of Sept. 30, according to its third-quarter results.

RWE Liabilities

Gazprom also booked liabilities for payments to RWE AG, amid talks and arbitration on pricing with the German company, according to two people with knowledge of the matter who asked not to be identified because discussions are private. European customers buying gas under long-term contracts linked to oil prices aim to change their terms after gas-market prices fell.

The dividend yield will gain to 5 percent to 5.6 percent, from 5.2 percent, even with the lower payout, the presentation showed. This year’s dividend may rise to 8 to 9 rubles, or a yield of 5.6 percent to 6 percent, according to the document.

“Yield should be at an attractive level,” given the slump in Gazprom’s market capitalization, Lev Snykov, a partner at Greenwich Capital in Moscow, said today by phone.

Gazprom sees total capital spending falling to $40 billion in 2013 from an estimated $44 billion including the oil and power generation units, according to the presentation.

“The overall trend isn’t changing yet,” Snykov said. “There are no grounds to expect the capex to stay at that level as usually Gazprom increases spending from initial levels.”

Gas production may rise 1.8 percent to 495.7 billion cubic meters this year, less than the initial estimate, according to Gazprom. Output at the company’s Shtokman field in the Arctic, repeatedly delayed because of costs and technology challenges, may start after 2019, according to the presentation document.

Gazprom expects to report a $1 billion slump in free cash flow in 2012 from $2.9 billion, the presentation showed.

Before it's here, it's on the Bloomberg Terminal.