Gazprom hit by drop in sales to Europe — Financial Times

Russian energy giant Gazprom has announced a sharp rise in profits thanks in large part to a weak rouble.

Net profit was up 71% to 382 billion rubles ($5.97 billion) in the first quarter, the company said Monday.

A Russian offshore gas and condensate field in the Sea of Okhotsk has been added to a US-sanctions list prompted by Russia’s actions in Ukraine. On the one hand, they raise risks for some energy projects.

Gazprom sells its gas in dollars, so a weak currency means the price in roubles rises. Revenue rose 5.7 percent to 1.65 trillion rubles.

Profit before tax climbed to 496.09 billion rubles from 317.95 billion rubles a year ago.

“The first-quarter earnings looked good”, Maxim Moshkov, an energy analyst at UBS Group AG, said by e-mail.

Gazprom, which declined to comment on the restrictions, dropped 1.1% to 139.80 rubles by 3.19 p.m.in Moscow trading. Still, the company confirms its outlook for sales volume in Europe and Turkey, which are “likely to break” an all-time record this year, it said. Its total output may fall to a record low on weaker demand in Russian Federation and Ukraine, the government estimated in July. That exceeded the average 353 billion-ruble estimate from eight analysts, according to data compiled by Bloomberg.

While gas prices in Europe, its key export market, dropped 24 percent to $284.2 per 1,000 cubic meters (35,315 cubic feet) during the quarter, the same figure in ruble terms rose 37 percent.

In June, Kiev suspended purchases of Russian gas from the company in the latest pricing dispute. Shipments have rebounded since the end of May as prices extend declines. “The situation could deteriorate significantly both in free cash flow, and in its ability to pay high dividends” next year, amid higher spending on a planned gas link to China, he said.