Due to the fall in oil prices and the revision of contracts tied to him, Gazprom in 2016, will lose more than $7 billion of net profit, which is about 50% of the previous year. Thus in 2017 the company will have at least two of the proceedings of a price correction.
Binding long-term gas contracts to oil prices significantly affects the financial results of Gazprom. The price of gas responds to the decrease of the oil price with a lag of six to nine months. And if in 2015 the average price of a barrel was about $53,4, this year it will be much lower (the most optimistic forecast is about $50 per barrel, however, in most cases, they say about $45). On Friday, the price of a barrel of Brent on the Intercontinental exchange ICE in London stood at $49,6, but now there is a tendency to increase (although, according to most forecasts, above $55 a barrel will not rise). In January, for example, oil prices fell below $29.
Assessment of national energy security Fund, the average annual price of Russian gas supplied abroad in 2016 will be $170 for 1 thousand cubic meters, while in 2015, it was $240.
At the end of last year, the revenue of “Gazprom” amounted to $99,6 billion, EBITDA (profit before taxes and excluding depreciation) of $32 billion and a net profit of $15.4 billion
“For 2016, we forecast revenues to reach $74 billion, EBITDA — about $20 billion, net profit of about $7 billion,” — says the analyst of Raiffeisenbank Andrey Polischuk.
However, most likely, figures will be slightly higher, as the projections based on the average price of a barrel at $42. Gazprom itself, for example, said earlier he expects the EBITDA level for the year 2016 to about $25 billion.
In “Gazprom” have refused comments.
Due to the constantly changing market conditions, “Gazprom” is forced to constantly renegotiate the agreements with their counterparties. For example, in March 2016, the Russian monopoly has agreed about the price adjustment with the German Uniper (a division of E. ON group). Details were not disclosed, although E. ON said that the change in the agreement will allow it to clear the reserves that the company has done in the past: in the first quarter the positive effect on EBITDA was to be €380 million, the second €800 million In April, the Russian company signed the agreement on adaptation rates, with the French Engie. Details are also not disclosed.
In this and in another case, changes were made only after the clients of “Gazprom” appealed to the Stockholm arbitration.
In 2017, Gazprom is waiting for court proceedings with the Polish PGNiG and the Turkish Botas, which also require to adjust the price.
But with Belarus for the next year “Gazprom” has already agreed. On Friday has informed “Kommersant”. And in this case it was not on adjustment of the contract, and to change the pricing formula, which will be now fully and ruble will be based on the average price of the domestic market of Russia plus the multiplying factors. The result is compared to the current price will be reduced by about 30% and will amount to 6 thousand rubles (about $100) per 1 thousand cubic meters. Now the price for Belarus is $132.
If you focus on last year the volume of deliveries to Belarus (18.8 billion cubic meters), the revenue of “Gazprom” only because of this agreement will be reduced by about $600 million.
At the same time, the agreement can be considered a compromise, as earlier, the Belarusian side has stated that it considers a fair price for Russian gas of $73 per 1 thousand cubic meters. This was in may, said the Minister of energy of Belarus Vladimir Potupchik.
But, according to Andrei Polischuk, losses from the revision of contracts for Gazprom secondary. The main revenue decrease associated with lower oil prices pulling gas.
Deputy head of the national energy security Fund Alexei Grivach says that if the price of a barrel will remain at the current level, that next year export prices for gas will grow. Grivach also noted that decrease in financial indicators “Gazprom” in the U.S. in 2016 will be partially offset by the devaluation of the ruble and the majority of the costs the company incurs in rubles.
