Russia’s state-owned gas producer Gazprom is emerging as one of the big winners from the global energy crunch with surging profits paving the way for a record 2021 dividend payment, with a forecast of even more impressive results to come.
The company posted record profits for the first nine months of the year on the back of soaring gas prices, which are expected to boost profits further in the final quarter of the year.
The company’s deputy chair Famil Sadygov said earnings of Rbs1.55tn ($20bn) in the nine months to the end of September were “already higher than in any full calendar year in the company’s history”.
“Given the current dynamics, we expect even more impressive results in the fourth quarter,” he said.
The company’s gas export prices have already set a historical record in roubles, and in the fourth quarter, they will set a record high in dollars, according to Alexander Ivannikov, the head of Gazprom’s economic department. “High gas prices are not a temporary phenomenon,” he said.
Given the record-high free cash flow of $9bn for the first nine months of the year and the 50 per cent payout ratio, Gazprom said it will pay an annual dividend of Rbs29.71 a share, up from Rbs12.55 last year.
That will deliver a huge windfall to the Kremlin, which directly holds 38 per cent in the company with an additional 12 per cent owned by two other state companies.
Gazprom, which holds a monopoly on Russia’s pipeline gas exports, has benefited from a surge in gas prices in Europe, its main export market. While it has been fulfilling its contracted obligations it has added no additional sales in the spot market, helping sustain high prices caused by strong demand from consumers in Asia.
Gas prices have risen for six consecutive quarters and third-quarter prices nearly tripled year on year to $304 per 1,000 cubic metres, according to Gazprom.
Revenues from overall gas sales in the first nine months rose 77 per cent from the same period in 2020 to Rbs3.5tn. Sales to Europe and Turkey rose 117 per cent to Rbs2.5tn. Prices have surged since then, holding out the prospects of further earnings growth.
“The market environment tells us that in any case, based on our expectations and our calculations, next year’s average weighted price will in no way be lower than . . . this year,” said Gazprom Export’s deputy department head Andrey Zotov.
Relatively low volumes of gas in European underground storage, including Gazprom’s storage in Germany and Austria, have also been supporting high prices.
Gazprom said it did not see keeping the gas in European storage as commercially attractive given the storage prices, and held off boosting the volumes until earlier this month.
Shares in Gazprom were up 4 .76 per cent at Rbs341.51 on Monday.
A report released on Monday by the human rights group Global Witness showed the world’s biggest gas companies, most of which also produce oil, reported $65bn profits in the third quarter of 2021, up 24 per cent from the same period in 2019.
“These eye-watering profits made by already extremely wealthy gas companies show that, whilst not of our making, it is citizens who are being forced to pay for the energy crisis,” said Jonathan Gant, senior gas campaigner at Global Witness.
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