Gazprom’s surprise 71% profit surge soured by US sanctions

US sanctions against the world's biggest natural gas producer soured a surprise 71 per cent surge in profit at Gazprom PJSC to push its shares lower in Moscow.

The stock sank to the lowest in more than a week after first-quarter net income rose to 382 billion roubles from a year earlier, 8 per cent above the average of analyst estimates compiled by Bloomberg.

The shares fell as much as 2.4 per cent as the US announced sanctions against one of Gazprom’s largest offshore fields late on Friday.

Sanctions imposed on Russia over deadly fighting in Ukraine are both helping and hindering Gazprom. On the one hand, they raise risks for some energy projects. At the same time, the rouble’s slump amid the sanctions boosts the value of the company’s overseas earnings in the local currency.

Business is still suffering as slumping oil prices, linked to rates Gazprom charges for its gas exports, smother profit.

The first-quarter result may be "the last positive period for Gazprom in the new price environment" as foreign-currency revenues decline, Pavel Kushnir, a Deutsche Bank energy analyst in Moscow, said on Monday.

Sales rose 5.7 per cent to 1.65 trillion roubles, Gazprom said in a statement on Monday. In dollar terms, though, revenue slid 40.5 per cent to $26.5 billion, Bloomberg calculations based on Bank of Russia exchange rates show.

The rouble averaged 62.16 a dollar in the quarter, compared with 34.95 a year earlier.

"The first-quarter earnings looked good," Maxim Moshkov, an energy analyst at UBS Group, said. The problem for the shares is the US sanctions announcement, Mr Moshkov said.

The US on Friday said it would curb supplies of equipment to Gazprom’s Yuzhno-Kirinskoye field, putting at risk plans to start up the deposit after 2018 and use its production to expand output of liquefied natural gas at the Sakhalin-2 plant, the only such facility in Russia.

Gazprom didn’t give an outlook for total earnings this year.

Gas shipments to Europe and Turkey, key revenue regions, will probably reach record highs for the full year, Gazprom said. But its total output may fall to a record low on weaker demand in Russia and Ukraine, the government estimated in July.

– Bloomberg