Story by Reuters
Russian natural gas and oil producer Gazprom <GAZP.MM> suffered an 86 percent fall in net income in 2014 because of the rouble’s weakness, the fall in global oil prices and a dispute with Ukraine.
The state-run company, which generates about 8 percent of Russia’s gross domestic product, said on Wednesday higher impairment charges had also contributed to the drop in net income to 159 billion roubles (2 billion pounds).
Russian oil and gas producers have suffered from weaker oil prices in recent months and the rouble’s fall against the dollar has inflated their dollar-denominated debts.
Gazprom, the world’s largest gas producer, has also reduced sales of gas to Ukraine, which had been one of its most important markets, because of a long-running dispute over debt and pricing.
Shares in Gazprom rose 1 percent early on Wednesday, slightly outperforming the broader MICEX index <.MCX>.
“They’ve generated good cash flow for the second year in a row, it was $5.9 billion only in the fourth quarter,” Alex Fak from Sberbank CIB in Moscow said.
According to his estimates, Gazprom sustained a loss of $8.3 billion in the fourth quarter, more than most analysts expected.
The company said it sustained foreign exchange losses of 1.1 trillion roubles ($21.2 billion) last year, while charges for impairment and other provisions rose by 245.5 billion roubles, including for provisions related to its spat with Ukraine.
Despite the pressure from the weaker rouble, the company increased investment by $4 billion from initial plans for 2015.
Total sales increased to 5.59 trillion roubles from 5.25 trillion roubles in 2013, Gazprom said in a statement.
SALES TO EUROPE
Gazprom generates more than half of its revenues from gas sales in Europe. It faces possibly large fines over accusations by the European Commission that it is overcharging buyers in eastern Europe and hindering competition.
Gazprom has also had to deal with the falling price of long-term contracts, the backbone of agreements with European companies. Gazprom pegs its gas prices in long-term contracts to the prices of oil, which almost halved from their June’s peaks, with a lag of six to nine months.
The company said on Wednesday that gas sales to Europe and other countries declined by 8.5 percent to 159.4 billion cubic metres, while the average price it charged rose 11 percent to 13,478 roubles per 1,000 cubic metres.
The Russian Economy Ministry expects the average Russian gas price for Europe to fall by more than one third to $222 per 1,000 cubic metres in 2015.