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. Last Updated: 07/27/2016

Gazprom Misses Its Profit Forecast, Responds to IEA

Gazprom reported Friday a 49 percent rise in net profit due to greater gas sales, higher prices and new oil assets, but the results missed expectations and the shares fell.

The world's largest gas producer, which covers a quarter of Europe's needs in the fuel, said its net profit audited to International Accounting Standards rose to 311 billion rubles ($11.56 billion) in 2005 from 209 billion rubles in 2004. Sales climbed to 1.38 trillion rubles ($51.3 billion) from 977 billion rubles, while operating expenses rose 30 percent to 930 billion rubles. Taxes, salaries and costs for oil and gas purchases all were higher, as were costs for repairs and maintenance and depreciation.

"We believe the results are weak as they met our expectations on the top line, but were 7 percent lower than our net profit estimates," said Kakha Kiknavelidze from UBS.

Citigroup had expected Gazprom to report a net profit of $13.8 billion, with Alfa Bank at $12.3 billion, Renaissance Capital $12.1 billion and Troika Dialog $11.9 billion.

Kiknavelidze said he was disappointed by Gazprom's low cash flow generation on the back of high cost increases.

The stock closed down 1.9 percent at $10.40 in Moscow.

The firm's net debt rose by 60 percent to over $28 billion as it spent more than $13 billion in the fourth quarter to buy control of oil firm Sibneft from Roman Abramovich.

The head of Gazprom's export division on Friday accused the head of the International Energy Agency of attempting to "destroy" the company by organizing European governments to thwart Gazprom's interests, Dow Jones Newswires reported.

IEA executive director Claude Mandil has sent a letter to European governments recommending they resist Gazprom's attempts to expand downstream into Europe and that they jointly pressure Gazprom to abandon its monopoly on Russian natural gas exports, Alexander Medvedev said, according to the report. Mandil sent a letter to ministers of industry and energy of European countries "calling on the European Union to pressure Russia and actually destroy Gazprom, including its export monopoly," Medvedev was quoted as saying.

Mandil has called on Gazprom to open up its gas export pipelines to other gas producers and questioned whether it is investing enough in developing its reserves to meet its European supply commitments.

Medvedev said the company would have no problems meeting demand in the future.

"Our reserve base is sufficient to meet not only the demand of Europe, but also our new markets: China, Korea, and the United States," Dow Jones Newswires quoted him as saying.

Medvedev also rejected allowing independent Russian gas producers to export gas from Russia.

The IEA was not available to comment late Friday.

(Reuters, AP)