Russia and Ukraine continue bilateral gas negotiations at expert level

The negotiations on gas between Russia and Ukraine continued today in Vienna in accordance with the agreements reached the day before to intensify joint work on a bilateral basis.

The negotiations were conducted at the expert level and involved representatives of Gazprom and Gas Transmission System Operator of Ukraine.

The parties discussed technical aspects related to the terms of transiting Russian gas to Europe from 2020 onward.

An agreement was reached to continue joint work the following week.

Gazprom and Wintershall Dea discuss current issues of cooperation

A working meeting between Alexey Miller, Chairman of the Gazprom Management Committee, and Mario Mehren, Chairman of the Board of Wintershall Dea, took place in St. Petersburg today.

The meeting was focused on the current issues of cooperation between the companies. Particular attention was paid to natural gas deliveries. The parties noted the contribution of the Nord Stream gas pipeline to the reliability and safety of gas supplies to consumers in Germany and Europe.

Special emphasis at the meeting was placed on the progress of the Nord Stream 2 project and the development of the German gas transmission system.

In addition, the parties discussed the ongoing interaction between the companies on developing deposits located in Russia. Alexey Miller and Mario Mehren expressed their appreciation for the joint efforts on the projects for the development and exploration of Blocks 1A, 4A and 5A in the Achimov formations of the Urengoyskoye oil, gas and condensate field and the Yuzhno-Russkoye oil and gas field.

Background

In 2018, Gazprom’s gas supplies to Germany hit a record high of 58.5 billion cubic meters, an increase of 5.1 billion cubic meters (9.5 per cent) against the 2017 record of 53.4 billion cubic meters.

Wintershall Dea GmbH is Europe’s largest independent oil and gas producer, formed by the merger of Wintershall Holding GmbH (subsidiary of BASF) and DEA Deutsche Erdoel AG (subsidiary of LetterOne).

Nord Stream 2 is the construction project for a gas pipeline with the annual capacity of 55 billion cubic meters from Russia to Germany across the Baltic Sea. In 2017, Nord Stream 2 AG signed agreements with ENGIE, OMV, Royal Dutch Shell, Uniper, and Wintershall to provide financing for 50 per cent of the total cost of the project.

 

Alexey Miller and Francois Fillon discuss development trends of French and European energy markets

A working meeting between Alexey Miller, Chairman of the Gazprom Management Committee, and Francois Fillon, French politician, took place in St. Petersburg today.

The parties discussed the current development trends of the French and European energy markets, while also stressing the importance of the Nord Stream 2 project for reliable supplies of Russian gas to European consumers.

Alexey Miller and Francois Fillon gave special consideration to Gazprom’s cultural projects.

Background

The under-construction Nord Stream 2 gas pipeline runs from Russia to Germany across the Baltic Sea. The design capacity of the pipeline is 55 billion cubic meters of gas per year.

 

Gazprom’s financial information under International Financial Reporting Standards (IFRS) for the nine months ended September 30, 2019

Today PJSC Gazprom issued its unaudited consolidated interim condensed financial information prepared in accordance with International Accounting Standard 34 Interim Financial Reporting (IAS 34) for the nine months ended September 30, 2019.

The table below presents the unaudited consolidated interim condensed statement of comprehensive income for the nine months ended September 30, 2019 and for the nine months ended September 30, 2018. All amounts in the table are presented in millions of Russian Rubles.

 Nine months ended
September 30,
 20192018

Sales

5,698,339

5,901,591

Net (loss) gain from trading activity

(20,391)

7,048

Operating expenses

(4,617,986)

(4,450,034)

Impairment loss on financial assets

(87,331)

(73,654)

Operating profit

972,631

1,384,951

   

Finance income

534,853

416,893

Finance expense

(287,964)

(635,122)

Share of profit of associates and joint ventures

179,934

149,180

Profit before profit tax

1,399,454

1,315,902

   

Current profit tax expense

(242,426)

(181,390)

Deferred profit tax expense

(50,080)

(70,426)

Profit tax

(292,506)

(251,816)

   

Profit for the period

1,106,948

1,064,086

   

Other comprehensive income (loss):

  

Items that will not be reclassified to profit or loss:

  

Gain arising from changes in fair value of financial assets measured at fair value through other comprehensive income, net of tax

37,598

154,315

Remeasurement of provision for post-employment benefits

(84,595)

84,316

Total other comprehensive (loss) income that will not be reclassified to profit or loss

(46,997)

238,631

   

Items that may be reclassified subsequently to profit or loss:

  

Share of other comprehensive (loss) income of associates and joint ventures

(5,020)

3,315

Translation differences

(137,745)

148,670

Gain from hedging operations, net of tax

4,654

35,292

Total other comprehensive (loss) income that may be reclassified subsequently to profit or loss

(138,111)

187,277

Other comprehensive (loss) income for the period, net of tax

(185,108)

425,908

Comprehensive income for the period

921,840

1,489,994

   

Profit for the period attributable to:

  

Owners of PJSC Gazprom

1,048,286

1,017,250

Non-controlling interest

58,662

46,836

 

1,106,948

1,064,086

   

Comprehensive income for the period attributable to:

  

Owners of PJSC Gazprom

872,366

1,434,403

Non-controlling interest

49,474

55,591

 

921,840

1,489,994

Sales (net of excise tax, VAT and customs duties) decreased by RUB 203,252 million, or 3%, to RUB 5,698,339 million for the nine months ended September 30, 2019 compared to the same period of the prior year. The decrease in sales was mainly due to a change in volumes sold and average prices.

More detailed information concerning the main items of the sales structure for the nine months ended September 30, 2019 and September 30, 2018 is presented in the table below.

in RUB million (unless indicated otherwise)

Nine months ended
September 30

 

2019

2018

Sales of gas

  

Europe and other countries

  

Net sales (net of excise tax and customs duties)

1,883,980

2,140,525

Volumes in bcm

171.4

185.4

Average price, RUB per mcm (including excise tax and customs duties)

13,966.2

14,647.3

Former Soviet Union countries

  

Net sales (net of customs duties)

250,612

235,608

Volumes in bcm

27.0

27.1

Average price, RUB per mcm (including customs duties)

10,361.2

9,635.4

Russian Federation

  

Net sales (net of VAT)

666,125

636,873

Volumes in bcm

162.9

163.0

Average price, RUB per mcm (net of VAT)

4,089.5

3,906.5

Total gas sales

  

Retroactive gas price adjustments

8,009

37,686

Net sales (net of excise tax, VAT and customs duties)

2,808,726

3,050,692

Volumes in bcm

361.3

375.5

   

Net sales of refined products (net of excise tax, VAT and customs duties)

1,591,926

1,586,225

Net sales of crude oil and gas condensate (net of VAT and customs duties)

573,381

550,711

Electric and heat energy net sales (net of VAT)

373,195

361,769

Gas transportation net sales (net of VAT)

160,020

168,292

Other sales (net of VAT)

191,091

183,902

Total sales (net of excise tax, VAT and customs duties)

5,698,339

5,901,591

Net sales of gas decreased by RUB 241,966 million, or 8%, to RUB 2,808,726 million for the nine months ended September 30, 2019 compared to the same period of the prior year. The change was mainly due to a decrease in volumes of gas sold and a decrease in average prices on sales of gas in Europe and other countries.

Net sales of gas to Europe and other countries decreased by RUB 256,545 million, or 12%, to RUB 1,883,980 million for the nine months ended September 30, 2019 compared to the same period of the prior year. The change was due to the decrease in volumes of gas sold by 8%, or 14.0 bcm, and the decrease in average prices (including excise tax and customs duties) denominated in the Russian Ruble by 5%. At the same time average prices denominated in the US Dollar decreased by 10%.

Net sales of gas to Former Soviet Union countries increased by RUB 15,004 million, or 6%, to RUB 250,612 million for the nine months ended September 30, 2019 compared to the same period of the prior year. The change was mainly due to the increase in average prices (including customs duties) denominated in the Russian Ruble by 8% (average prices denominated in the US Dollar increased by 2%).

Net sales of gas in the Russian Federation increased by RUB 29,252 million, or 5%, to RUB 666,125 million for the nine months ended September 30, 2019 compared to the same period of the prior year. This change is mainly explained by the increase in average prices denominated in the Russian Ruble.

Operating expenses increased by RUB 167,952 million to RUB 4,617,986 million for the nine months ended September 30, 2019 compared to the same period of the prior year.

The increase in operating expenses is primarily explained by a change in the item “Foreign exchange rate differences on operating items”. Foreign exchange rate loss on operating items amounted to RUB 68,013 million for the nine months ended September 30, 2019 compared to the foreign exchange gain in the amount of RUB 20,573 million for the same period of the prior year. The change was mainly due to the revaluation of accounts receivable from foreign customers.

The increase in the item “Depreciation” by RUB 48,908 million for the nine months ended September 30, 2019 compared to the same period of the prior year was mainly due to charging of depreciation of right-of-use assets caused by the application of IFRS 16 Leases since January 1, 2019.

The increase in the item “Taxes other than on profit” by RUB 8,218 million for the nine months ended September 30, 2019 compared to the same period of the prior year mainly caused by the increase in mineral extraction tax by RUB 45,371 million that was partially compensated by the decrease in excise tax by RUB 39,639 million for the nine months ended September 30, 2019 compared to the same period of the prior year.

The balance of foreign exchange rate differences reflected within the item “Net finance income (expense)” produced the gain in the amount of RUB 230,816 million for the nine months ended September 30, 2019 compared to the loss in the amount of RUB 234,374 million for the same period of the prior year.

Profit attributable to the owners of PJSC Gazprom amounted to RUB 1,048,286 million for the nine months ended September 30, 2019, which is by RUB 31,036 million, or 3%, more than for the same period of the prior year.

Net debt balance (defined as the sum of short-term borrowings, current portion of long-term borrowings, short-term promissory notes payable, long-term borrowings, long-term promissory notes payable, net of cash and cash equivalents) decreased by RUB 156,648 million, or 5%, from RUB 3,014,403 million as of December 31, 2018 to RUB 2,857,755 million as of September 30, 2019. This change was mainly due to an increase in cash and cash equivalents balances.

More detailed information on the IFRS consolidated interim condensed financial information for the nine months ended September 30, 2019 can be found here.

Russia and Ukraine hold bilateral gas negotiations

Vienna hosted today the negotiations on gas between Russia and Ukraine involving Alexander Novak, Minister of Energy of the Russian Federation, Alexey Orzhel, Minister of Energy and Environmental Protection of Ukraine, Alexey Miller, Chairman of the Gazprom Management Committee, as well as the heads of Naftogaz of Ukraine and Gas Transmission System Operator of Ukraine.

The parties discussed Russian-Ukrainian cooperation in the gas sector, including the settling of mutual claims related to the execution of contracts, the terms of transiting Russian gas to Europe from 2020 onward, and the outlook for direct purchases of Russian gas for Ukrainian consumers.

Following an exchange of proposals regarding the issues facing the parties, an agreement was reached to intensify joint work on a bilateral basis in the coming days.

Working meeting held between Alexey Miller and Vladimir Semashko, Ambassador Extraordinary and Plenipotentiary of Belarus to Russia

A working meeting between Alexey Miller, Chairman of the Gazprom Management Committee, and Vladimir Semashko, Ambassador Extraordinary and Plenipotentiary of the Republic of Belarus to the Russian Federation, took place in Moscow today.

The parties discussed the current lines of cooperation between Gazprom and Belarus in the gas sector. Special attention was paid to the supplies of Russian gas to Belarus and gas transportation across the country after 2019.

It was noted in particular that Gazprom had in a timely fashion prepared the gas transmission system of Belarus for operation in the 2019–2020 autumn/winter period, with sufficient working gas inventories created in Belarusian UGS facilities.

Background

The contracts between Gazprom and Gazprom Transgaz Belarus for gas supplies to and gas transportation across Belarus are valid until the end of 2019.

 

Gazprom commences construction of modern satellite manufacturer with support from Roscosmos

  • First fully integrated enterprise in history of modern Russia for spacecraft assembly and testing.
  • Facility will be able to manufacture up to 4 large or 100 small batch-produced satellites per year.
  • Roscosmos is taking part in this project.

A ceremonial event celebrating the start of construction by Gazprom of a spacecraft assembly facility (SPKA) took place today in Shchelkovo, Moscow Region.

Taking part in the event were Vitaly Markelov, Deputy Chairman of the Gazprom Management Committee, Yury Urlichich, First Deputy Director General of the Roscosmos State Space Corporation, and Vadim Khromov, Deputy Head of the Government of the Moscow Region.

The first fully integrated enterprise in the history of modern Russia for the assembly and testing of satellites will be situated near the Telecommunications Center of Gazprom Space Systems. The facility will use cutting-edge technologies to produce civil spacecraft for the Gazprom Group and other customers, including the Roscosmos State Space Corporation. This will help, inter alia, expand the Yamal orbital satellite constellation and the SMOTR remote sensing satellites. These space systems provide for technological communication and monitoring of the Company’s production facilities. In addition, it is planned to engage the enterprise in implementing Sphere (Sfera), a forward-looking program aimed at creating a multi-satellite orbital constellation to ensure data transmission on a public-private partnership basis.

The SPKA assembly sites will be furnished with state-of-the-art and highly automated equipment. All products will undergo multistage checking procedures, with unique test benches providing simulations of space exposure and forces that occur during rocket vehicle launches.

The enterprise will have the capacity to manufacture up to 4 mid-sized and large communications and remote sensing devices or up to 100 small batch-produced devices per year. It is planned to bring the facility into operation in 2022, with Gazprom SPKA as the operator. Gazprom intends to launch 14 Company-owned satellites into orbit before 2035.

In the course of the event, Dmitry Sevastiyanov, Director General of Gazprom Space Systems, and Yury Urlichich, First Deputy Director General for the Development of the Orbital Group and Priority Projects at the Roscosmos State Space Corporation, signed an Agreement on the basic principles of participation in the SPKA project.

The document reflects the intention of the Roscosmos State Space Corporation to acquire a stake in the authorized capital of Gazprom SPKA. The stakes of the shareholders are to be specified in a special corporate agreement at a later stage.

Background

The Yamal telecommunications and broadcasting satellite constellation consists of five units, including the Yamal-601 satellite, which was launched into orbit on May 30, 2019. The units are actively used by television companies, communications providers, and government entities.

The concept of the Sphere program devised by the Roscosmos State Space Corporation envisages integrated development of space information technologies, which includes the creation of multi-satellite systems. The program encompasses navigation, communications and geodata, with satellites to be produced for the orbital constellations of Gazprom.

In October 2018, Gazprom and Roscosmos signed a Cooperation Agreement as part of the Company’s project aimed at setting up a spacecraft assembly facility in the Moscow Region.

In February 2019, the parties updated the roadmap for Roscosmos to develop and launch the production of advanced equipment, including import-substituting products, for the needs of Gazprom. The document was extended until 2022.

 

Year-to-date gas exports to Austria exceed record supplies of 2018

A working meeting between Alexey Miller, Chairman of the Gazprom Management Committee, and Rainer Seele, Chairman of the Executive Board of OMV, took place in St. Petersburg today.

The parties discussed the topical issues of cooperation, highlighting in particular the growth of gas supplies to Austria, which has continued for the fifth year in a row. According to provisional data, from January 1 to November 21, 2019, Gazprom delivered to the country 12.7 billion cubic meters of gas, which was 2.8 per cent more than in the entire year of 2018, a record-breaking year in terms of Gazprom’s exports to Austria. The increase from the same period of the previous year made up 33.5 per cent (3.2 billion cubic meters).

Special attention was paid to the implementation of the Nord Stream 2 project.

Furthermore, potential cooperation in the LNG segment under the Memorandum of Understanding signed in June 2019 was also discussed at the meeting.

Background

OMV AG is Gazprom’s main partner in Austria. The companies cooperate in gas production, transportation and supplies.

In 2018, Gazprom supplied to Austria 12.3 billion cubic meters of gas, an increase of 34.8 per cent (3.2 billion cubic meters) from 2017 (9.1 billion cubic meters).

In June 2018, an Agreement was signed to extend until 2040 the existing contract between Gazprom Export and OMV Gas Marketing & Trading GmbH for Russian gas supplies to Austria.

In June 2019, Gazprom and OMV entered into the Memorandum of Understanding on cooperation in the LNG sector.

Nord Stream 2 is the construction project for a gas pipeline with the annual capacity of 55 billion cubic meters from Russia to Germany across the Baltic Sea. In 2017, Nord Stream 2 AG signed agreements with ENGIE, OMV, Royal Dutch Shell, Uniper, and Wintershall to provide financing for 50 per cent of the total cost of the project.

 

Results of selling 3.59 per cent of Gazprom’s ordinary shares

Gazprom Gazoraspredeleniye, a company controlled by Gazprom, successfully completed the sale of 850,590,751 ordinary shares of Gazprom (3.59 per cent of the share capital).

The placement was carried out using the trading platform of the Moscow Exchange.

Gazprombank (Joint Stock Company) acted as the arranger and broker of the offering.

As the shares were sold in their totality, Gazprom Gazoraspredeleniye reduced its stake in Gazprom’s capital to zero. As a result, the free float of Gazprom increased to an estimated 49.61 per cent of the share capital.

The sale price was RUB 220.72 per ordinary share.

During decision-making on the distribution of shares among investors, priority was given to major institutional investors oriented toward long-term investments.

Famil Sadygov, Deputy Chairman of the Gazprom Management Committee, commented:

“We are satisfied with the results of the executed sale of Gazprom’s shares, which has become the largest one in the Russian market since 2007 and the second major placement conducted solely at the trading platform of Moscow Exchange.

The overall demand demonstrated by the buyers during the bids collection procedure was significantly higher than the supply of stocks.

Due to a high level of interest in the Company’s shares among investors, the batch of shares was sold at good price levels, with a discount of 11 per cent as compared to the closing price of the trading session preceding the placement.

It should also be noted that, despite a considerable volatility of shares observed in the second half of 2019, the placement was performed with a discount of 7.1 per cent as compared to the weighted average price of shares for the last three months and 5.5 per cent as compared to the weighted average price of shares for the last six months, which clearly indicates a high quality of the placement.

As a result, one major all-or-none bid was awarded for the whole batch. The bid represented 79 per cent of the overall demand. It should be noted that the deviation of the offering price from the weighted average price in the bid book amounted to 1.8 per cent.

Thanks to the deal format we had chosen, there was no need to adjust the price of shares, which typically happens during secondary offerings. The closing price on the day of the offering was higher than the one the day before by 2.6 per cent.

The placement caused an increase in Gazprom’s free float. As a result, we expect an increase in the share liquidity as well.”

Alexey Miller and Moldova’s Prime Minister Ion Chicu review cooperation-related issues

A working meeting between Alexey Miller, Chairman of the Gazprom Management Committee, and Ion Chicu, Prime Minister of the Republic of Moldova, took place today in Moscow.

The parties reviewed, among other things, issues related to cooperation in the gas sector from 2020 onward.

Background

In 2018, Gazprom’s gas deliveries to the Republic of Moldova totaled 2.9 billion cubic meters of gas, an increase of 8.4 per cent against 2017 (2.7 billion cubic meters).

The contracts between Gazprom and Moldovagaz for gas supplies to and gas transit across Moldova are valid until the end of 2019.

Moldovagaz is a joint Russian-Moldovan company set up by Gazprom, the Moldovan Government, and the Ministry of Industry of Transnistria.

 

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