Gazprom profit down 9pc as costs rise

City A.M. Reporter
Russia's top gas producer Gazprom reported a fall in third-quarter profits after its costs for purchasing oil and gas rose by nearly a third.

Gazprom, which buys gas from Central Asia and resells it mainly to Europe, said the purchase costs for oil and gas rose 29 per cent, but did not elaborate further.

Third-quarter net profit attributable to shareholders fell 8.9 per cent to 159 billion roubles (£3.7bn), missing expectations for 160 billion seen by a Reuters poll of analysts.

The company said gas sales to Europe, its prime market, decreased to 291 billion roubles from 312 billion in the 2009 period, while operational costs rose 12 per cent to 592 billion roubles on the back of increasing oil and gas purchases.

Gazprom also disclosed more details of a sale of shares in Novatek, Russia's largest non-state gas producer, to Gazprombank that took place in December.

The company said it sold 9.4 per cent of Novatek for 57.5 billion roubles (£1.22bn), well below the market price at the time.

As of the market close on December 20, when the sale to Gazprombank was announced, the stake was worth $2.84bn (£1.77bn) according to the share price at the time.

"In our view, Gazprom could have struck a better deal by offering shares into the open market (rather than selling to Gazprombank which then sold an option to buy the stake to Novatek's management)," J.P.Morgan said in a note obtained by Reuters.

"In our view, the transaction may well be viewed poorly by Gazprom minority shareholders."

Gazprom shares were down 2.5 per cent at 1440 GMT, underperforming a 2.1 per cent decline on the broader Moscow market, where the company is the main contributor.

Subsequently, Novatek Chief Executive Leonid Mikhelson and board member Gennady Timchenko obtained the right to buy the 9.4 per cent stake from Dhignfinolhu, a vehicle of Gazprombank.