Weak Ruble Boosts Gazprom Profits

MOSCOW—Russian state gas giant PAO Gazprom said net profit in the first quarter jumped more than two-thirds compared to last year, as a weaker ruble boosted revenues from sales in Europe even as volumes declined.

The 71% rise in net profit to 382 billion rubles ($5.97 billion) came despite a 10% fall in volumes and was also helped by poor results last year, when the company was hit by a large foreign-exchange loss and wrote off some debt for gas owed by Ukraine.

The results released on Monday—as usual, well after other Russian listed companies released theirs—reflect the increased competition that Gazprom is facing at home and in Europe, its most lucrative market.

Shipments in Europe slid 16% because of increasing competition and as European customers waited until the second half of the year to buy gas for the winter, as the price will drop in line with recent oil price declines. Deliveries on the domestic market, long Gazprom's dominion, also fell amid pressure from rivals such as OAO Novatek.

The increasing competition led the Russian Economy Ministry last month to forecast that Gazprom's output could fall to an all-time low this year of 414 billion cubic meters, from 444 billion last year.

Analysts say that could be pessimistic, given that Gazprom is likely to ship more fuel in the second half of the year—albeit at a cheaper price—as European clients fill up their stores before winter. Gazprom said deliveries to Europe and Turkey in July were the largest ever.

"Gazprom gas is attractive for European customers now ahead of the winter season," said Alexander Kornilov, an analyst at Alfa Bank in Moscow.

Gazprom's position in Europe, where it accounts for around one-third of imports, is also under pressure from the competition regulator, which has filed antimonopoly charges against the company. It is also being challenged by other forms of fuel. Shipments of liquefied natural gas from North America could further press the company if they start reaching Europe at the end of next year, Mr. Kornilov said.

Gazprom has turned eastward to decrease its dependence on Europe, sealing an agreement to make China its second-largest customer. But talks on delivering larger volumes via a second route have dragged. The U.S. on Friday placed sanctions on a huge offshore oil-and-gas field in Russia's east, likely scuppering Gazprom's hopes of increasing the capacity of its LNG facility there, which delivers gas to Asia.

Write to James Marson at [e-mail]

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