Gazprom Company (MCX: GAZP) Is a global vertically integrated energy company and a world leader in natural gas supplies and production.
28 May, the company made public its organized financial statements for the 1st quarter 2021 of the year, where reflected the growth of monetary characteristics on a quarterly basis, when the crisis broke out in the global oil and gas market.
I propose to evaluate the main monetary characteristics of the company in the first three months, to realize, whether the business managed to return to the pre-crisis level.
Position in the gas market
Gazprom is a monopoly in the domestic gas market, therefore, what keeps the main gas pipeline under control and sells more than 50% of total gas sold in the Russian Federation. In addition, the company supplies pipeline gas to more than 30 states of near and far abroad.
In the first three months 2021 the state of affairs on the gas market turned out to be suitable for Gazprom. Back in the 2nd half 2020 years, gas prices have increased against the background of the gradual lifting of restrictions and the recovery of business activity in the world.
To this was added the unexpectedly severe cold of winter 2020-2021. Frosts in Europe and Asia have caused rush demand for hydrocarbons, which led to an increase in the cost of natural gas on global platforms. As a result, demand exceeded supply., gas storage facilities in Europe empty, and replenishment of supplies was slow. Even in May, the occupancy of underground storage facilities is at a historically low level. You can come to the conclusion, that in the summer season the demand for Gazprom products from European countries will remain at the highest level.
For the 1st quarter, the total volume of natural gas sales amounted to 168,1 billion cubic meters - twenty-two percent more quarterly. Of these, the Russian Federation and the states of the former Soviet Union accounted for 103,6 billion cubic meters, and to Europe and other states - 64,5 billion cubic meters. For Russia, this is the highest level of recent years.
In the Russian Federation, the average cost of selling natural gas increased by four percent quarterly to 4335,2 P per thousand cubic meters. Still, prices in the Russian Federation are two,3 times lower, than in the former states of the Soviet Union, and c 3,3 times lower, than in Europe and other countries. The average cost in the states of the former Soviet Union increased by two percent - to 9889,8 P per thousand cubic meters, and in Europe and other states - by thirty-three percent, to 14 423,6 P per thousand m³, in a suitable market environment.
Gas sales in the first three months, billion m³
| the Russian Federation | States of the former Soviet Union | Europe and others | |
|---|---|---|---|
| 2017 | 81,7 | 12,5 | 65,6 |
| 2018 | 88,2 | 14,1 | 71,5 |
| 2019 | 84,3 | 12,2 | 62,4 |
| 2020 | 77,2 | 9,3 | 51,6 |
| 2021 | 91,7 | 11,9 | 64,5 |
Average selling price of natural gas in the first three months, rubles per thousand m³
| the Russian Federation | States of the former Soviet Union | Europe and others | |
|---|---|---|---|
| 2017 | 3819,9 | 9089,7 | 11 226,3 |
| 2018 | 3974,2 | 8809,8 | 13 155,2 |
| 2019 | 4141 | 11 015,7 | 17 053,8 |
| 2020 | 4180,7 | 9739,0 | 10 832,8 |
| 2021 | 4335,2 | 9889,8 | 14 423,6 |
Financial performance of the company
More than half of Gazprom's income comes from the sale and transportation of gas. According to the results of the first quarter 54,3% proceeds came from the sale of gas and 2,5% - for transportation services through the gas transmission system. Almost a quarter of revenues came from sales of oil and gas processing products, and 8 And 8,2% revenue came from the sale of liquid hydrocarbons and electricity and heat, respectively.
Revenue structure of Gazprom
| Natural gas | 54,3% |
| Oil and gas processing products | 24% |
| Electrical and thermal energy | 8,2% |
| Crude oil and gas condensate | 8% |
| Gas transportation services | 2,5% |
| Other | 3% |
As a result of increased demand and prices for hydrocarbons, the company's revenue increased by 31% quarter to quarter — up to 2285,2 billion rubles - and almost returned to record pre-crisis levels 2019 of the year.
Operating expenses increased by 23% - to 1766,9 bln rubles - due to the growth of expenses on research and development, for the purchase of oil and gas, as well as for gas transit, oil and oil and gas products. Besides, the company recorded non-cash expenses from exchange rate differences on operating items in the amount of 26,5 billion rubles - instead of income in the amount of 115,6 billion rubles for the same period last year.
As a result, Gazprom's operating profit for the first quarter increased by 67% quarter to quarter — up to 490,2 billion rubles.
The revaluation of exchange rates also affected the growth of financial income. If in the first quarter of last year, against the background of the devaluation of the ruble, the company recorded a net loss on exchange rate differences in the amount of 551,4 billion rubles, then for the first quarter of this year, the business reflected a profit in the amount of 16,3 billion rubles. As a result, Gazprom's net financial income amounted to 11,9 billion rubles - against net financial expenses in the amount of 548 bln rubles quarter to quarter.
The company's total net profit for the first quarter was 465,6 RUB bln compared to a net loss of 108,1 billion rubles for the same period last year, when Gazprom's financial performance was affected by low demand and prices for hydrocarbons, as well as the devaluation of the ruble.
The company's net debt in the first quarter decreased by 3% - to 3737 billion rubles - due to the growth in the volume of money and their equivalents in accounts. Level of debt burden by net debt ratio / EBITDA "decreased from 2,64 to 2,23.
Company financial results in the first quarter, billion rubles
| Revenue | Operating profit | Net profit | net debt | |
|---|---|---|---|---|
| 2017 | 1815,3 | 294 | 350,4 | 2398 |
| 2018 | 2138,3 | 467,6 | 392,2 | 3014 |
| 2019 | 2291,8 | 458,8 | 559,5 | 3168 |
| 2020 | 1739,8 | 293,5 | −108,1 | 3873 |
| 2021 | 2285,2 | 490,2 | 465,6 | 3737 |
Dynamics of the ratio "net debt / EBITDA»
| 2016 | 1,46 |
| 2017 | 1,63 |
| 2018 | 1,16 |
| 2019 | 1,7 |
| 2020 | 2,64 |
| 2021 | 2,23 |
What's the bottom line?
Gazprom showed strong financial results in the first quarter 2021 year, taking into account the low base of last year, when the company's revenue fell to a multi-year low, and when it recorded a net loss based on performance.
In April-May, the market situation remained favorable for the company: hydrocarbon prices continued to rise amid stable demand. According to management, for the first 5 months of this year, Gazprom increased gas production by 16% - to 221,9 billion cubic meters. At the same time, supplies to the domestic market increased by 18% compared to January - May 2020 of the year, and exports to non-CIS countries increased by 27%. Besides, in early June, we completed the laying of the first string of Nord Stream 2, which allowed the company to diversify supplies to Europe. In addition to the European direction, the company increases supplies to China via the Power of Siberia pipeline. All this speaks of a potentially successful first half of the year 2021 of the year.
I also want to remind, that Gazprom, before the plan, switched to paying dividends to shareholders in the amount of 50% from IFRS net profit. Outcome dividends 2020 years will be 12,55 P per share.
