Gazprom Profits Hold Firm, Despite Weak Prices
Russia's Gazprom has said it expects only a 8.9% dip in net profits for 2019, despite weaker gas prices in its core export market of Europe, it announced at an investor day in New York on February 11.
Net income for the year is estimated at $21.4bn, Gazprom said in a presentation, down from $23.3bn in 2018. The company's profits were much lower in 2016 and 2017, at $14bn and $12.2bn respectively.
Gazprom expects to gross $126bn in revenues for 2019, down from $132bn in 2018 but up from $112bn in 2017. The company should generate positive free cash flow from last year's operations, it said.
The stable result for 2019 comes despite bearish conditions on the European gas market during the year. Gazprom cut its sales to the continent from 202bn m³ to 199bn m3 last year, while the average price it fetched for these supplies fell from $246/'000m³ to $203/'000 m3.
The company is expected to publish its full financial report for 2019 later this month. But its results for the first nine months of the year indicate that a fall in European revenues was partly offset by increased earnings from gas sales in Russia and other former Soviet states, as well as from sales of oil, condensate, refined products, electricity and heating sales.
Looking ahead, Gazprom said it was too early to say the average price it would sell its gas at in 2020. The coronavirus outbreak in China is expected to cut into demand, exacerbating the global supply glut. Prices at European hubs are almost too low to make US exports economic, unless shipping costs are discounted. US Henry Hub prices themselves are very low, thanks to a mild winter so far.
Gazprom expects to ramp up gas production by 21% over the next decade, from around 500bn m3 at present, with new projects on the Yamal Peninsula driving this growth. Exports are seen climbing 34%, primarily thanks to rising sales in Asia.
The company plans to pay out at least 30% of its adjusted net income for 2019 in the form of dividends, up from 23% in 2018. It will reward shareholders with 40% or more of profits from 2020 and 50% from 2021.