Changing times for Gazprom as it reports a big drop in annual profits

Newsroom 30/04/2015 | 11:24

Russian group Gazprom, the world’s largest producer of natural gas, announced that its net profit, calculated according to international accounting standards IFRS, dropped last year by 86 percent to 159 billion rubles (USD 3.07 billion), because of unfavorable exchange rate developments, according to Agerpres.

Gazprom said the 86 percent drop in profits was triggered by the depreciation of the ruble as well as frictions with Ukrainian gas operator Naftogaz.

The results reflect lower demand in Europe, Gazprom’s largest export market, the high temperatures in early winter and increased supplies of liquefied natural gas weighed on prices. Also, European consumers preferred to use natural gas in storage before buying from Gazprom, waiting for the moment when the decrease in oil prices will have an impact on their natural gas supply contracts.

Also, Gazprom announced that its total sales increased by 6.47 percent in 2014 while operating expenses rose by 10percent. Instead, the amount of natural gas sold to Europe and other countries decreased by 8.5 percent while the average price rose by 11 percent up to 13,478 rubles per 1,000 cubic meters.

At the end of 2014, Gazprom’s net debt amounted to 1.650 billion rubles, by 48 percent compared to the end of 2013, as the ruble depreciated against the US dollar and the euro.

2015 seems to be a tough year for Gazprom as the export price of natural gas dropped due to the fall of global oil prices. In addition, the Russian group is subject of an investigation by the European Commission accusing it of abusing its dominant position.

Laura Grigore