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. Last Updated: 07/27/2016

Gazprom's Profit Soars to $10.5Bln in Q4 2009

Gazprom posted an eightfold increase in profit Thursday as fuel consumption in Russia and Europe started to recover and finance expenses fell.

Net income in the fourth quarter rose to 309 billion rubles ($10.6 billion) fr om 37.5 billion rubles ($1.28 billion) a year earlier, the company said Thursday. That beat the average estimate of 212 billion rubles in a Bloomberg survey of six analysts. Third-quarter net was 175 billion rubles.

“The results reflect the recovery in demand in Russia and Europe,” said Maria Radina, a gas analyst with Nomura International. “Everything is good, not bad. There are no reasons to worry.”

Exports to Europe, hurt by the economic crisis, picked up in the second half to increase more than 19 percent in the fourth quarter from a year earlier, Gazprom said in January. Russian demand has also risen with economic growth and colder weather, Bank of America Merrill Lynch said in February.

Earnings before interest, taxes, depreciation and amortization rose to $11.3 billion from $10.5 billion a year earlier, Radina said. EBITDA is a relevant indication of profitability because it was not affected by one-off items such as an asset swap with E.On Ruhrgas last year, foreign-exchange volatility and a loss in 2008 as a stake in Gazprom Neft declined in value, she said.

Gazprom shares closed up 2.3 percent at 174.45 rubles.

Sales volumes rose “on the back of a record decline in the gas price in Europe,” Radina said.

An average price for Gazprom’s gas in Europe stood at $287.50 per 1,000 cubic meters last year, compared with $407.40 per 1,000 cubic meters in 2008, Gazprom said. Revenue fell 9 percent to 2.99 trillion rubles in 2009.

Sales probably dropped to $580 billion in the fourth quarter. Gazprom reported only annual earnings and restated sales for 2008. Analysts said Gazprom excluded operations by German trading subsidiary, Gazprom Germania, last year.

Gazprom sells gas to Europe under long-term contracts linked to crude and oil product prices with a lag of up to nine months. Urals reached a record-high level of $142.50 in July 2008 before plummeting to as low as $34.32 in December the same year.  The gas export monopoly agreed to adapt contracts earlier this year after a rise in spot-market supplies to Europe at lower prices. Gazprom, which aims to supply 32 percent of Europe’s gas in 2020 from about a quarter now, said it will give weight to spot prices in its contracts.

Gazprom said Thursday that it considered temporarily reducing the “take-or-pay” lim it during a “significant decrease of demand for gas and excessive supply.” The reduction will be compensated by additional purchases in the future when gas demand recovers.

“The significant change of market conditions makes it justifiable to revise prices under the long-term contracts,” Gazprom said.

Finance expenses declined 71 percent to 58.2 billion rubles, after the ruble strengthened.

Net debt rose 35 percent to 1.37 trillion rubles in the year ending Dec. 31, the company said.

Gazprom boosted proven gas reserves about 2.2 percent last year through exploration and including estimates for the Kruzenshtern offshore field, the company said. Proven reserves under SPE-PRMS methodology rose to 18.6 trillion cubic meters at the end of last year from 18.2 trillion cubic meters a year earlier.