Gazprom’s Profit Registers 86% Plunge in 2014, NOVATEK Moves on in Q1
The Russian oil and gas industry has reported mixed results, with NOVATEK and Gazprom at the opposite ends of the spectrum.
The independent natural gas producer led by Alexander Natalenko registered a 23.5% year-on-year increase in profit for the first quarter, while Gazprom put on paper that the mix of weak rouble and the fall in oil prices hit its 2014 profits, which were down 86% from RUB 1,165,705 millions to 157,192 millions.
Gazprom suffered the loss of one its key markets - Ukraine - and a 8.5% decline in sales to Europe.
On the other hand, ‘total sales (net of VAT, excise tax and customs duties) increased by RUB 339,846 million, or 6%, to RUB 5,589,811 million in the year ended December 31, 2014 as compared with the prior year,’ reads a note released on Wednesday.
On Tuesday, NOVATEK’s results for the first quarter depicted a completely different picture, despite foreign exchange losses.
‘Our profit dynamics was negatively impacted by non-cash foreign exchange losses due to depreciation of the Russian ruble against the US dollar of 3.9% and appreciation of the Russian ruble against the Euro of 7.3% during the reporting period. Net of these non-cash foreign exchange losses our Normalized Profit increased by 52.2% year-on-year’ Russia’s largest independent natural gas producer wrote on its website.
BACKGROUND: OTHER COMPANIES ARE SUFFERING TOO
Despite the good signals coming from NOVATEK, a recent flurry of bad news has emerged for energy companies. BP and ENI were two examples of how low oil prices can impact global companies.
Italy’s main energy company, whose long-term rating was downgraded from A with CreditWatch to A- with stable outlook by Standard & Poor’s last week, approved the results for the first quarter of 2015 on Wednesday, saying that net profit were down 46% to €0.70 billion in the first quarter.
Claudio Descalzi, Chief Executive Officer, commented on results by saying that positive signals come from the Upstream market. Production of oil and natural gas increased by 7.2% in the first quarter with respect to the same period of 2014.
“Upstream production is increasing, and development plans supporting 2015-2016 production growth are in line with our forecasts. Further, all mid-downstream businesses have returned to profitability benefitting from our actions as well as the positive trading environment” he commented in a note released on Wednesday, reminding that the Brent oil price plunged in the period.
Also on Wednesday, Saipem reminded of other problems the industry has to deal with.
‘Saipem has received notice of legal proceedings before the Court of Milan by 64 investors claiming compensation for damages of approximately EUR 174 million allegedly incurred following the purchase of Saipem shares in the period between 13 February 2012 and 14 June 2013’ ENI-subsidiary wrote.