Q2 statement posted by Gazprom correlated with the market expectations

Alexey Kokin, Uralsib

Gazprom’s Q2 statement was within our expectations; it was quite predictable. As for the unfavorable factors, we can point out a negative free cash flow in the amount of USD 1 billion. In addition, a 17 per cent drop of EBITDA in dollar terms as compared to Q2 of the last year is a good result at first thought, because it is better than the EBITDA at other companies of the sector. But the main reason for a minor EBITDA decline is the accumulated reserve for Ukraine’s impaired debt in Q2 2014.

As for the bright spots, an increase in gas export beyond the CIS should be noted. Coupled with the data provided by Gazprom’s management on higher gas supplies beyond the CIS at the beginning of Q3, the Company’s plans for exporting 158 billion cubic meters of gas this year seem quite realistic.

In my opinion, Q3 will make it clear what this year will be like for Gazprom.

Evgenia Dyshlyuk, Gazprombank

Overall, Q2 statement posted by Gazprom correlated with the market expectations. Quarter- and year-wise, the profit has declined mainly because of seasonal effects and a downfall in gas prices, which followed a drop in oil price. A seasonal slump in sales negatively affected the return on EBITDA. A high income (app. RUB 100 billion) generated by exchange rate difference has kept afloat the Company’s net profit.

As we predicted, the free cash flow turned to be negative (RUB 52 billion in Q2) for the first time since 2012. The capital costs amounted to nearly RUB 341 billion (RUB 700 billion in 1H).

We’d like to stress that Gazprom manages to retain a very stable debt position. The net debt still makes up RUB 1.5 trillion, including RUB 508 billion of short-term debt. Gazprom’s cash accounts exceeded RUB 1 trillion.

Andrey Polishchyuk, Raiffeisenbank

Gazprom’s 2H EBITDA slightly dropped against the consensus forecasts and market expectations. The free cash flow turned negative, but that was an expected result.

All in all, the outcomes have no significant impact on the quotations. Today the general attention is directed to the 2H performance. We suppose that in this period of time Gazprom’s securities have more chances to show positive dynamics due to a possible export growth enhanced by the replenishment of gas storages and also caused by signing of a supplementary agreement with Ukraine, that will also boost the Company’s quotations.

The opinions expressed in this section may not necessarily coincide with the official position of Gazprom