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Bloomberg: Gazprom says profit climbs 52% on higher prices

By Lucian Kim and Torrey Clark Bloomberg News
Published: February 14, 2007
 
MOSCOW: Gazprom, the world’s largest producer of natural gas, on Tuesday reported a 52 percent jump in third-quarter profit because of higher prices charged to former Soviet neighbors and increased demand from Western Europe.

Net income climbed to 120.8 billion rubles, or $4.6 billion, from 79.3 billion rubles a year earlier. Sales soared 68 percent to 489.9 billion rubles. The results were calculated according to International Financial Reporting Standards.

Gazprom, which supplies natural gas to a quarter of Europe, has benefited from rising exports to the region as well as higher prices paid by former Soviet republics like Belarus and Georgia.

“The results were higher than the market expected because sales outpaced forecasts,” said Dmitry Lukashov, an analyst at Alfa Bank in Moscow.

European customers accounted for sales of $37.2 billion in 2006, or virtually all of the company’s export revenue, Gazprom’s deputy chief executive, Alexander Medvedev, said in January. Gazprom plans to begin selling gas to East Asian customers next year from its Sakhalin-2 project, which it took control of from Royal Dutch Shell in December.

“The most important quarter will be the fourth, when Gazprom sometimes has negative surprises for investors, such as a jump in salary expenses or write-offs,” Andrei Gromadin, an oil and gas analyst at MDM Bank in Moscow, said before the results were released.

While Russia has the world’s largest natural gas reserves, Gazprom is struggling to keep up production to meet foreign and domestic demand.

Last week Gazprom agreed to merge assets with Siberian Coal Energy, the country’s largest coal miner, in an effort to free up more natural gas for the lucrative foreign market.

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