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. Last Updated: 07/27/2016

Gazprom Declares 147Bln Ruble Loss

Gas giant Gazprom posted a hefty net loss of 147.22 billion rubles in 1998, but a company official and independent analysts said Friday that this year's first quarter was showing more promise.

The analysts said they were not too concerned by the 1998 loss, which compared with a net profit of 20.01 billion rubles in 1997. The consolidated results were calculated to international accounting standards.

"Gazprom's partners are expressing understanding about the reasons for such a significant loss, which was largely due to foreign exchange rate differences," an official in the company's securities and finance department told Reuters.

"At the same time, Gazprom received positive results in the first quarter of 1999 and Gazprom's partners see an undoubted plus in this," he said.

The 1998 results were based on the equivalent purchasing power of the ruble as of Dec. 31, 1998. The ruble has lost more than 70 percent of its value since its effective devaluation at the peak of last year's crisis on Aug. 17.

Gazprom, Russia's largest company and biggest taxpayer, said it had been hit by the devaluation and other consequences of economic instability, such as a steep decline in domestic debt and equity prices.

"The operations of the [Gazprom] Group have been significantly affected by these factors and may continue to be so for the foreseeable future," it said in its results statement.

Analysts were not worried by the 1998 loss. "For me these figures are absolutely acceptable and were no shock," said Pavel Teplukhin, president of Troika Dialog Asset Management.

"In a high inflation economy, it is not worth paying attention to such things as pretax or net losses," he added.

Gazprom reported an operating loss of 41.76 billion rubles in 1998, compared with a 1997 operating profit of 10.38 billion. Sales rose to 252.80 billion rubles from 252.45 billion, while operating expenses rose to 294.56 billion from 242.08 billion.

Gazprom's shares on the Moscow Stock Exchange fell 3.49 percent to 3.957 rubles Friday. Its American Depositary Shares in London were off $0.45 at $8.375 at 3 p.m. London time.

Fleming UCB analyst Vladimir Nosov also attributed part of the 1998 losses to currency conversion factors, although credits taken in dollars were largely covered by gas export earnings.

The analysts were encouraged by the first quarter 1999 unconsolidated results, calculated to Russian accounting standards, which showed pretax profits up to 10.68 billion rubles from 1.50 billion rubles in the same period one year ago.

These figures, representing up to 70 percent of the consolidated accounts, reflected tighter spending discipline, with efforts concentrated mainly on completing building the new Yamal-Europe pipeline and the "Blue Stream" pipeline project from Russia to Turkey.