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Press Conference Background
GAZPROM’S FINANCIAL AND ECONOMIC POLICY
(June 26, 2008)
(Data is quoted here as provided in the consolidated financial (accounting) statements of OAO Gazprom and its subsidiaries for the year 2007, prepared in compliance with the Russian legislation in force.)
RECEIPTS FROM SALES OF GOODS, PRODUCT, WORK AND SERVICES
Receipts from the sales of goods, products, work and services (net of VAT, excise duties and similar obligatory payments) totaled RUB 2,522,428 mln, which is RUB 317,540 mln (14 per cent) more than in 2006. The receipts growth was mainly driven by the following factors:
· a RUB 81,365 mln, or 18 per cent (26 per cent of gross receipts growth), increase in the net receipts from gas processing products sales;
· a RUB 59,926 mln, or 29 per cent (19 per cent of gross receipts growth), increase in the net receipts from gas sales to the former Soviet Union states;
· a RUB 43,419 mln, or 12 per cent (14 per cent of gross receipts growth), increase in the net receipts from gas sales in the territory of Russia;
· a RUB 27,543 mln, or 3 per cent (9 per cent of gross receipts growth), increase in the net receipts from gas sales in foreign countries;
· a RUR 86,161 mln, or 62 per cent (27 per cent of gross receipts growth), increase in the net receipts from miscellaneous gas sales. The receipts from miscellaneous gas sales have mainly increased as a result of the growth in the amount of materials sold to the contractors in charge for construction, repair and maintenance, as well as in the amount of power and heat energy, miscellaneous work and services, products and goods sold by Gazprom-Media Group, Gazprom Germania Group and Gazprom Neft Group.
If compared to 2006, the receipts from gas sales in 2007 increased by 9 per cent. That is mainly stipulated by an increase in the amount of gas supplies to foreign countries, as well as in the tariffs set by the Federal Tariff Service for gas sales in Russia, and in the prices for the gas supplied to FSU states.
SALES RECEIPTS AND NET PROFIT
As of the end of 2007, sales receipts increased by 2 per cent and totaled RUB 769,922 mln.
In 2007 net profit amounted to RUB 492,747 mln (a RUB 59,632 mln or 11 per cent drop if compared to 2006).
PRIME COST OF GOODS, PRODUCTS, WORK AND SERVICES
In 2007 the prime cost of goods, products, work and services sold including commercial and management costs totaled RUB 1,752,506 mln. An increase in the prime cost of goods, products, work and services totaled RUB 305,653 mln or 21 per cent if compared to 2006. The prime cost growth was mainly driven by the following factors:
Purchased gas. An increase of RUB 111,132 mln, or 55 per cent (36 per cent of gross costs growth) was observed. Purchased gas value mainly increased due to the growth of price for the gas purchased in Central Asia and Europe for reselling it to the consumers in West Europe and FSU states.
Labor compensation and social charges. An increase of RUB 27,367 mln, or 16 per cent (9 per cent of gross costs growth) was observed. An increase in labor compensation and social charges was mainly related to the growth of an average salary and other payments to employees.
Materials. An increase of RUB 25,981 mln, or 33 per cent (9 per cent of gross costs growth) was observed.
Taxes included in the prime cost. An increase of RUB 24,582 mln, or 13 per cent (8 per cent of gross costs growth) was observed. The Mineral Extraction Tax included in the “Taxes included in the prime cost” section amounted to RUB 165,176 mln and RUB 158,586 mln in 2007 and 2006 respectively.
Depreciation of capital assets and intangible assets. An increase of RUB 22,528 mln, or 9 per cent (7 per cent of gross costs growth) was observed.
Repair and maintenance costs. An increase of RUB 21,868 mln, or 21 per cent (7 per cent of gross costs growth) was observed.
Purchased oil. An increase of RUB 14,582 mln, or 19 per cent (5 per cent of gross costs growth) was observed.
Thus, an increase in the prime cost of goods, products, work and services in 2007 was mainly stipulated by the growth of expenditures for the purchased gas, labor compensation and social charges, materials, tax payments, depreciation, repair and maintenance, as well as purchased oil.
DEBT. GAZPROM’S DEBT BURDEN
As of December 31, 2007, Gazprom’s gross debt (defined as the sum of long-term and short-term indebtedness under credits and loans, long-term and short-term bills of exchange payable and restructured indebtedness to the budget) accounted for RUB 1,137,978 mln having increased by RUB 375 bln over 2007.
As of December 31, 2007, the net debt (defined as the difference between the gross debt and the financial assets remaining on the reporting date exclusive of the financial assets restricted to be withdrawn for other purposes except for those provided for by the terms of certain credits and loans) accounted for RUB 967,797 mln having increased by RUB 354 bln over 2007.
An increase in debt volume by the end of 2007 was conditioned by major strategic acquisitions made by Gazprom Group such as Sakhalin II, Mosenergo and other energy assets.
CREDIT RATINGS
In 2007 Gazprom’s credit ratings were not revised. Thus, as of the end of 2007, the Company retained the ratings assigned by the three world’s leading rating agencies in 2006.
Rating Agency / Date of Last Rating Affirmation/Forecast / Rating / ForecastStandard Poor’s / 29.11.2006. / BBB / Stable
Moody’s / 19.12.2006 / A3 / Stable
Fitch Ratings / 05.12.2006 / BBB- / Positive
In April 2008, Fitch Ratings raised Gazprom’s credit rating to the “BBB” level. The investment level of credit ratings enhances the Company’s capability of raising funds and decreases the cost of loans.
SHARE MARKET
In 2007 Gazprom’s shares retained positive quotation dynamics. By the end of the year, the Company's ordinary shares had gained 13 per cent on the Moscow Interbank Currency Exchange (MICEX), while ADRs for Gazprom's shares gained 23 per cent on the London Stock Exchange (LSE).
Increased Prices for Gazprom’s shares and ADRs
Trading Session Close Price / 2006 / 2007 / Change, %Price per share on MICEX, RUB
As of year end / 302.89 / 342.88 / 13.2
Price per ADR* on LSE, USD
As of year end / 46.00 / 56.70 / 23.3
* 1 ADR entitles the holder to 4 OAO Gazprom’s ordinary shares
The average daily volume of Gazprom’s shares traded on MICEX reached RUB 13.4 bln in 2007, which means an increase of RUB 123.5 mln compared to 2006. The maximum daily volume of Gazprom’s shares traded on MICEX was recorded in mid-December 2007 at RUB 44.6 bln (compared to RUB 43.0 bln in 2006). During the same period Gazprom’s ordinary share value at the domestic market reached an absolute record: its closing price was RUB 357.2.
In 2007 ADRs for Gazprom’s shares were mostly traded on the London Stock Exchange. The average daily trading volume accounted for USD 320 mln in 2007 which is an 80 per cent surplus if compared to the previous year. The maximum daily ADRs for Gazprom’s shares traded on the LSE in 2007 amounted to USD 1.4 bln, which is twice as much as in the previous year.
By the end of 2007 Gazprom’s capitalization equaled USD 330 bln, representing a 21 per cent growth compared to 2006 year-end. Thus, in terms of market capitalization Gazprom became the leading European company over the reporting year and was ranked third (after PetroChina and ExxonMobil) among the world’s largest energy companies.
DIVIDENDS
From 2002 through to 2006 Gazprom has been constantly increasing the amount of dividend payments. Dividend per share has grown by 6.4 times over this period.
Based on the year 2007 results the Board of Directors recommends paying out a per-share dividend of RUB 2.66 to the shareholders, which is 4.7 per cent higher than in 2006. The amount of dividends is defined in compliance with the Gazprom Dividend Policy adopted by the resolution of the Board of Directors #219 dated April 24, 2001.