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The logo of Gazprom company is seen at the St. Petersburg International Economic Forum in Saint Petersburg, Russia on June 2 2021. Picture: REUTERS/EVGENIA NOVOZHENINA
The logo of Gazprom company is seen at the St. Petersburg International Economic Forum in Saint Petersburg, Russia on June 2 2021. Picture: REUTERS/EVGENIA NOVOZHENINA

Russian gas producer Gazprom’s net income surged to an all-time high in the third quarter, when natural gas prices soared to fresh records during Europe’s energy crisis. results showed on Monday.

Net income rose to 581.8-billion roubles ($7.8bn) compared with a net loss a year ago and beat median estimates, the producer reported. Revenue rose 70% from a year ago to 2.37-trillion roubles, also a record-high. 

Gazprom shares gained as much as 3.6% in Moscow trading and were 1.7% higher at 332.82 roubles.

The world’s largest gas producer is benefiting from a historic surge in prices amid a supply crunch in Europe, its largest export market. Russia’s gas deliveries to the continent have been capped as it has prioritised re-stocking domestic inventories. This has led to tougher competition with Asia for liquefied cargoes, with Europe’s storage facilities beginning winter at multiyear lows.

The situation in Gazprom’s key export markets has contributed to record earnings, according to Gazprom deputy CEO Famil Sadygov. “Given the current dynamics, we are expecting even more impressive results in the fourth quarter,” he said in a separate statement.

“The massive rally in European gas prices should see profitability jump significantly again” in the first quarter of next year, Ron Smith, an analyst at BCS Global Markets, said in a note following the earnings report.

Supply crunch

While gas prices in Europe more than doubled in the third quarter of this year, Gazprom’s revenues didn’t surge by nearly as much as they did in the previous three-month period due to its long-term supply contracts. Price formulas in the contracts factor in a range of spot and forward markets, including in some cases the cost of other fuels like crude. 

Gazprom shares have fallen over the past month amid uncertainty on an approval timeline for its Nord Stream 2 pipeline project. The gas link, which is set to ship 55-billion cubic metres a year directly to Europe across the Baltic Sea, would reduce the company’s transit risks and allow Russia to hike volumes delivered to the EU, if needed.

Gazprom’s record earnings signal the producer is on track for the highest dividend payouts in its history. The nine-month results imply payouts of 29.68 rubles per share, according to analysts at Moscow-based Aton.  

The Russian gas giant expects its dividend for 2021 to reach at least 50 roubles per share, Sova Capital analyst Mitch Jennings said, citing remarks Gazprom management made to investors at a recent meeting. If the plan materialises, 2021’s payout will be at least triple the current dividend record of 16.61 roubles per share set in 2018.

Bloomberg News. More stories like this are available on bloomberg.com

Gazprom's Power of Siberia project. Picture: REUTERS/MAXIM SHEMETOV
Gazprom's Power of Siberia project. Picture: REUTERS/MAXIM SHEMETOV
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