Gazprom once again pleases us with strong free cash flow

Gazprom’s results exceeded our expectations. EBITDA somewhat surpassed our forecasts (by about six per cent), net profit is considerably higher, but the main thing is that Gazprom once again pleased us with a strong free cash flow, which amounted to USD 4 billion.

However, we believe that this will produce no effect on the Company’s quotations, because it is the year-end results that are more important. We remember that Gazprom has not once lowered its production forecasts for this year. It is quite likely that there will be another downgrade due to a drop in consumption, first of all, in Ukraine.

I think that in Q3 and Q4 Gazprom will be regaining the sales volumes which were low in Q1.

Gazprom’s results met our expectations in terms of revenues and somewhat disappointed us in terms of EBITDA. I’d like to mention that the free cash flow result was rather decent, even though it dropped by 13 per cent year-on-year. But if we compare this result with the free cash flow generated in the first quarters of the last couple of years, the result of Q1 2015 is above the average even in dollar terms.

Q2 was difficult because of the drop in gas prices under the pressure of the drop in oil prices, that’s why I think that Q2 results won’t be very good. But Q3 brings some hope due to a considerable build-up of gas export to Europe.

Gazprom’s Q1 net profit under the IFRS exceeded the forecasts because the results of subsidiary companies turned out to be higher than anticipated, while the losses from currency differences were lower than expected.

It is hard to say what results we shall shortly see. Yet it is clear even now that Q2 will be inauspicious for Gazprom in the context of falling sales and feedstock prices. In the meantime, we see that already in June and August there have been discernible positive trends in export.