Gazprom (MCX: GAZP) is one of the largest gas producing holdings in the world. The company owns about sixteen percent of all global natural gas reserves., also one of the largest gas pipeline systems in the world. Gazprom produces approximately 66% gas and twelve percent of oil and gas condensate in the Russian Federation.
The company is usually among the last to present the final organized financial statements for 2020.. As expected, in the context of the crisis in the hydrocarbon sector of the past year, the financial characteristics of the business fell to long-term lows, and net profit decreased by almost 8 times compared to 2019.
Position in spheres and operational indicators
In the first half of 2020, several negative reasons caused a "perfect storm" in the global natural gas market:
- At the start of last year, gas storage facilities in Europe were filled to capacity amid futile fears., that the Russian Federation will not sign a new transit contract on the supply of natural gas through Ukraine in time with 1 January 2020.
- The unusually hot winter of 2019-2020 led to relatively low gas consumption at the moment.
- The Covid-19 virus epidemic and the introduction of restrictions hit the demand for hydrocarbons even harder and caused an imbalance in supply and demand on international trading floors.
These reasons have lowered the cost of oil, gas and products of their processing, because of which the operating and financial characteristics of the company "Gazprom" fell.
According to the results of 2020, Gazprom reduced gas production by nine percent to 454.5 billion m³, what was the worst result since 2016. At the same time, the volume of gas processing decreased by only three percent - to 30.6 billion m³.
The company produces oil through a subsidiary of Gazprom Neft and generates electricity through Gazprom Energy Company. According to the results of 2020, the oil field fell by two percent to 47.1 million tons, and the volume of electricity production fell by eleven percent to 132.1 billion kWh.
Production of natural and associated gas, billion m³
| 2016 | 420,1 |
| 2017 | 472,1 |
| 2018 | 498,7 |
| 2019 | 501,2 |
| 2020 | 454,5 |
2016
420,1
2017
472,1
2018
498,7
2019
501,2
2020
454,5
Processing of natural and associated gas, billion m³
| 2016 | 31 |
| 2017 | 30,8 |
| 2018 | 31,1 |
| 2019 | 31,5 |
| 2020 | 30,6 |
2016
31
2017
30,8
2018
31,1
2019
31,5
2020
30,6
Oilfield, million tons
| 2016 | 47,2 |
| 2017 | 48,6 |
| 2018 | 48,3 |
| 2019 | 48 |
| 2020 | 47,1 |
2016
47,2
2017
48,6
2018
48,3
2019
48
2020
47,1
Generation of electrical energy, billion kWh
| 2016 | 157,51 |
| 2017 | 156,55 |
| 2018 | 153,2 |
| 2019 | 149 |
| 2020 | 132,1 |
2016
157,51
2017
156,55
2018
153,2
2019
149
2020
132,1
Monetary characteristics
In the context of falling sales and prices, Gazprom's revenue decreased by 2020 by 17,5 % — up to 6322 billion rubles. The export direction of the business suffered the most, associated with the sale of hydrocarbons to foreign markets. For example, revenue from sales of natural gas to Europe and other countries fell by twenty-eight percent, oil and gas condensate - by thirty-five percent, oil and gas products - by twenty-five percent.
Revenue structure in 2020
| Natural gas | 48,2 % |
| Oil and gas processing goods | 28,5 % |
| Crude oil and gas condensate | 7,7 % |
| Electrical and thermal energy | 7,9 % |
| Gas transportation services | three and a half percent |
| Other revenue | 4,2 % |
Natural gas
48,2 %
Oil and gas processing goods
28,5 %
Crude oil and gas condensate
7,7 %
Electrical and thermal energy
7,9 %
Gas transportation services
three and a half percent
Other revenue
4,2 %
Operating expenses companies decreased by eleven percent year on year, up to 5666 billion rubles, due to lower spending on the purchase of gas and oil, also reduce the cost of the tax on the extraction of natural resources in the context of low prices for hydrocarbons at this time.
In the end, sales profit fell by forty-five percent - up to 615 billion rubles., what was the worst result over the years.
Cash spending Gazprom has grown by almost 4 Times, from 355 billion to 1366 billion rubles, due to foreign exchange loss of 1292 billion rubles in the context of the devaluation of the Russian ruble. Most of the debt obligations of the holding company are in foreign currency.
As a result, the company's net profit fell by eighty-seven percent to 162 billion rubles..
Dynamics of the company's monetary characteristics, billion rubles
| Revenue | Profit from sales | Unsullied profits | |
|---|---|---|---|
| 2016 | 6111 | 726 | 997 |
| 2017 | 6546 | 871 | 767 |
| 2018 | 8224 | 1930 | 1529 |
| 2019 | 7660 | 1120 | 1270 |
| 2020 | 6322 | 615 | 162 |
Revenue
2016
6111
2017
6546
2018
8224
2019
7660
2020
6322
Profit from sales
2016
726
2017
871
2018
1930
2019
1120
2020
615
Unsullied profits
2016
997
2017
767
2018
1529
2019
1270
2020
162
Debts and investments
In the context of the devaluation of the ruble and the revaluation of loans and credits, the total debt of Gazprom for 12 months of 2020 increased by twenty-seven percent - up to 4908 billion rubles. At the same time, the number of funds and their equivalents on the company's accounts grew by forty-nine percent over the year - up to 1,034 billion rubles.. As a result, the unsullied debt of the holding company 31 December 2020 amounted to 3873 billion rubles, which is twenty-two percent more year on year.
In the context of growing net debt and falling EBITDA, the debt burden of the holding company in terms of the Net Debt / EBITDA ratio in 2020 increased from 1,7 to the highest 2,64.
Dynamics of debt characteristics of the company "Gazprom", billion rubles
| Total debt | Unsullied debt | Unsullied Debt / EBITDA | |
|---|---|---|---|
| 2016 | 2830 | 1933 | 1,46x |
| 2017 | 3267 | 2398 | 1,63x |
| 2018 | 3864 | 3014 | 1,16x |
| 2019 | 3864 | 3168 | 1,7x |
| 2020 | 4908 | 3873 | 2,64x |
Total debt
2016
2830
2017
3267
2018
3864
2019
3864
2020
4908
Unsullied debt
2016
1933
2017
2398
2018
3014
2019
3168
2020
3873
Unsullied Debt / EBITDA
2016
1,46x
2017
1,63x
2018
1,16x
2019
1,7x
2020
2,64x
In recent years, the company has been intensively investing in mining, processing and transportation of hydrocarbons. According to the results of 2020, serious costs amounted to 1,523 billion rubles. This is fourteen percent less investment, than in 2019.
Of the significant number of Gazprom's investment projects in the information space, the main attention is focused on the construction of a gas pipeline from the Russian Federation to Europe - Nord Stream - 2. In May, pipeline construction was again halted until 1 June, now due to the court statement of environmentalists, asserting??, that the laying area is of particular importance for the nesting of birds. At the moment, the project is at the final stage: it remains to lay 120 km of pipes in the waters of Denmark and a little more 30 km - in the waters of Germany. While the completion of work is scheduled for the end of September 2021.
The Gazprom management sees the main points of growth in the coming years not in the European, and in the Asian market. In its presentation, the company predicts, that gas demand in Europe will decrease from 517 to 489 billion m³ by 2030, and in China, against, will grow from 348 to 501 billion m³.
According to the results of 2020, Gazprom occupies about a third of the euro market and plans to reduce its share to twenty-five percent in ten years, which, taking into account the general decline in consumption in Europe, will lead to a reduction in the size of pumping by about thirty percent. The reverse state of affairs with the demand for natural gas - from the PRC.
Gazprom plans to satisfy about a third of China's demand for natural gas in ten years. We are talking about the export of 160-170 billion m³ of gas, which will require an increase in pumping volumes by an order of magnitude and will lead to an expansion of gas transmission capacities over the next ten years.
Income from securities
Gazprom's dividend policy for 2020-2022 provided for a gradual increase in the level of dividend payments from thirty percent of net income in 2019 to fifty percent in 2021. In other words, income from securities based on the results of 2020 would have amounted to more than forty percent of the company's net income for the reporting period..
But management fixed the payout to shareholders at more than fifty percent of IFRS net income and announced income from securities in the amount of 12,55 R per share - fifty percent of 2020 adjusted net earnings.
Dividend amount per share
| 2016 | 8,04 R |
| 2017 | 8,04 R |
| 2018 | 16,61 R |
| 2019 | 15,24 R |
| 2020 | 12,55 R |
2016
8,04 R
2017
8,04 R
2018
16,61 R
2019
15,24 R
2020
12,55 R
What is the end result
Due to external reasons, Gazprom's financial indicators in 2020 turned out to be weak: demand and prices have fallen on some of the largest international trading floors. Nevertheless, already in the second half of last year, the situation on the gas market changed. Cool winter season 2020-2021 in Europe and Asia, also, the recovery of business activity in the face of easing restrictions increased the demand for energy resources and led to a sharp increase in the cost of gas.
At the beginning of 2021, a mirror state of affairs appeared on the gas market in relation to, what was observed a year ago: in cold weather demand for natural gas exceeded supply, gas storage facilities are significantly empty, prices reached local highs. As a result, according to the results of the first quarter, Gazprom increased its exports to far abroad countries by more than thirty percent.
The company's management increased the norms of dividend deductions to fifty percent on net income - a year ahead of schedule. Difficulties with the construction of "Nord Stream - 2", certainly, make a bad background around the company. But, as seen from the forecasts, in the coming years, the company expects a drop in gas consumption from European countries, and China will become the main sales market for Gazprom in the next ten years.
