Gas business of “Gazprom” was unprofitable in the first half of the year

A sharp drop in gas export sales revenue against the background of rising costs and capital investments led to the fact that Gazprom’s gas business, the core element of the group’s activities, turned out to be unprofitable in the first half of the year. This state of affairs was observed before in the first half of 2020 at the height of the pandemic, and before that in 1998. As gas prices continue to fall in Europe, the situation may worsen.

The reduction in gas exports to Europe against the backdrop of lower export prices and higher taxes has turned Gazprom’s gas business into a loss for the first time since the pandemic and for the second time in the last 25 years.

Gazprom on the evening of August 28 disclosed its financial statements (.pdf) according to IFRS and financial statements according to RAS. According to the latter, the net loss of the parent company in the first half of the year amounted to 255 billion rubles. According to IFRS, the Gazprom Group received 296 billion rubles. profit, however, in fact, this figure was provided exclusively by the oil business – Gazprom Neft, which disclosed its IFRS statements on August 25, earned 304 billion rubles in the first half of the year. arrived.

A similar situation is observed with revenue. Thus, the revenue of all companies of the group, except for the parent company – the conditional “non-gas business” – practically did not change, declining in the first half of the year by only 2.1%, to 2.4 trillion rubles. (of which 1.55 trillion rubles are accounted for by Gazprom Neft).

The revenue of PJSC Gazprom itself fell by 65%, to 2.74 trillion rubles, including revenue directly from the sale of gas fell 2.1 times, to 1.7 trillion rubles.

In general, the financial results of the parent company are similar to the first half of 2020, when Gazprom’s loss under RAS was even slightly larger – 277 billion rubles. The significant difference is that at that time world prices for hydrocarbons were at the lowest level over the past 20 years: for example, the average price of Brent was $39.9 per barrel, and the average export price of Gazprom’s gas was $124 per 1,000 cubic meters. This year, oil and gas prices were several times higher: Brent oil – $78.5, and the average gas price in Europe – about $510 per 1,000 cubic meters.

Gazprom no longer discloses its average export price, as well as gas export volumes.

According to Kommersant’s estimate, exports to Europe in the first half of the year could amount to about 16.1 billion cubic meters, to Turkey – 9 billion cubic meters, to China – 11.1 billion cubic meters.

In the first two cases, sales are mainly pegged to European gas prices, while deliveries to China are pegged to oil, the price could be about $309 per 1,000 cubic meters. The volume of gas exports to non-CIS countries in the first half of the year could fall by 47% yoy, while the average price of deliveries to Europe also decreased.

The unprofitability of the gas business is caused not only by a reduction in sales, but also by an increase in production costs, as well as capital investments. In the first case, the cost of sales of gas transportation services can serve as an illustration, which increased by 76.6%, to 234 billion rubles, and exceeded the revenue from the sale of such services by 62% – apparently, this reflects the reduction in gas transportation through the gas transmission system, coupled with an increase in the capacity of the system itself after the commissioning of gas pipelines for Nord Stream-2 that did not work. The company’s capital investments rose to 1.2 trillion rubles, but Gazprom did not disclose the exact dynamics of growth, as well as a breakdown of costs by category.

Analysts of My Investments, commenting on the results of the company, note that “costs for materials and repairs remain at higher levels than historical ones, thus continuing the trend set in the annual report.” “We view the results as more neutral for the stock, but we note high operating and capital expenditures, which could negatively impact results going forward,” they add.

Yuri Barsukov