Gazprom's 1Q profit down 62 pct to $3.3 bln

Russian gas monopoly Gazprom on Wednesday reported a 62 percent drop in net profit for the first quarter of 2009, when the company was hit hard by disruptions of gas supplies to Europe and the plunging value of the ruble.

Net profit at the world's largest gas producer dropped to 103.7 billion rubles ($3.3 billion) during the January-March period from 273.4 billion a year earlier. Sales rose 2 percent to 931.4 billion rubles ($29.7 billion).

The company reported a 140.4 billion ruble ($4.5 billion) foreign exchange loss as the ruble's value declined dramatically since last fall, when Russia entered its first recession in a decade. The currency's drop caused net debt to rise 17 percent in the first quarter to 1.2 trillion rubles ($38 billion).

A gas price dispute with Ukraine in January also contributed to the massive drop in Gazprom's earnings. At the time, Russia suspended gas shipments to Europe via Ukraine - about 20 percent of Europe's total gas consumption - for two weeks.

Gazprom's export volumes to Europe and other countries excluding former Soviet Union republics dropped 31 percent in the first quarter to 31.7 billion cubic meters compared to a year earlier. They increased, however, by 28 percent in value terms - to 433.2 billion rubles ($13.8 billion) - due to higher gas prices.

The company's deputy chief executive Alexander Medvedev said in late June that Gazprom sales volumes are expected to decline by about 40 percent this year despite increased consumption in Europe in recent months.

The company earlier said it would slash its $29.4 billion investment program by 30 percent this year, citing inadequate demand for the planned capacities.

Gazprom also revealed in its first quarter report that it spent $1.7 billion between April and June this year to double its stake in mid-sized oil producer Sibir Energy to 55 percent.

Sibir Energy, a Russia-focused oil producer that also runs the Moscow Refinery with Gazprom Neft, agreed to a takeover bid from Gazprom Neft, Gazprom's oil arm, in May. Gazprom Neft proposed a cash offer for the company's shares, except for the 40 percent owned by Bennfield Ltd., the Central fuel company and the Bank of Moscow.

Sibir Energy stocks were delisted from the London Stock Exchange last week after trading in its shares was suspended in February pending the settlement of a legal dispute over alleged suspicious trading and the diversion of company funds. The company is suing Shalva Chigirinsky, a shareholder in Sibir, to return funds he received as part of a failed and controversial deal to sell his Russian real estate portfolio to the company.

Chigirinsky, who fled Russia earlier this year, has pledged his Sibir stake as collateral to Sberbank.