Gazprom Profits Surge 71% in Q1 on Exchange Rate Increase
Russian state owned gas giant OAO Gazprom has reported 71% surge in net profits to 382 billion rubles (5.97 billion USD) in the first quarter of this year. According to company filing, Gazprom revenue increased 6% to 1.65 trillion rubles despite a 10% fall in sales volume, while sales to Europe fell 16% to 39.1 billion cubic meters (BCM) in the same period.
‘This is primarily explained by the increase in average prices in RUB terms (including excise tax and customs duties) by 37%. The change is primarily due to increase in exchange rate, which is partially compensated by the decrease in volumes of gas sold by 16 %, or 7.6 bcm’ reads a note released by the Russian top gas producer on Monday.
Net sales of gas increased 10% globally, and 12% for gas to Europe. Sales grew also in former Soviet Union countries.
"The industry operating environment continues to be challenging. The shipments to Europe and Turkey will likely to break an all-time record this year", the company said. Analysts said that the profits will going to decline regarding decreasing gas prices.
"We expect the cash generation capability of Gazprom to reduce towards the year-end as the oil-linked European export gas prices continue to decline," said Pavel Kushnir, an analyst at Deutshce Bank in Moscow, in a research report discussing Gazprom performance.
Meanwhile, Ukraine’s Naftogaz explained what it intends to do with the the $300 million trade finance loan granted by the European Bank for Reconstruction and Development to buy gas on the European market.
‘The proposed project, which has a total estimated cost of up to US$ 300 million, will involve the procurement of natural gas for deliveries via Ukraine’s interconnections with the European Union. Prequalification for the above contract(s) is expected to begin in the third quarter of 2015’ Naftogaz wrote on Monday.
CHANGES IN TURKISH STREAM
Separately, Russian daily Vedemosti reported that Gazprom has revised the configuration of the planned Turkish Stream gas pipeline. The gas transit system could be two, or even four times less than the previously announced size of four lines. The Turkish Stream project involves the construction of a gas pipeline with a capacity of 63 BCM of gas a year from Russia to Turkey via the Black Sea. Russia has submitted two proposals to Turkey regarding the intergovernmental agreements on Turkish Stream, Vedomosti added.
According to analysis by Capital Economics, a researh firm based in London, the energy exports account for about 68% of Russian trade. While the energy revenues provide more than half of Russian budget, the economy is predicted to decline by 3.5% this year, with oil export revenue down by $95 billion, the report said.