Gazprom's 4Q net profit slides 84 percent

Russia's state-owned natural gas company Gazprom said Wednesday that its full-year net profit rose by 13 percent to 743 billion rubles ($22.2 billion) in a year that saw gas and oil prices soar, then fall. But the recession appeared to hit its earnings hard at the end of the year.

The full-year figures, subtracting already published nine-month earnings, imply a net profit in the fourth quarter of only 37.5 billion rubles ($1.1 billion), a plunge of 84 percent from 232 billion rubles the previous year as the company battled with sliding demand for its exports and the fall in the ruble against other currencies.

The company admitted that 2009 would be a difficult year. Gas exports have dropped dramatically in the first quarter, with analysts estimating they fell by as much as 57 percent.

"The negative macroeconomic background characterized by the slump in global oil prices in the second half of 2008 and an ongoing decrease in demand for fuel in export and domestic markets will have a significant impact on the group's financial results in 2009," said Gazprom in a statement.

Yearly sales advanced to 3.8 trillion rubles ($114 billion) in 2008, a 45 percent increase on the previous year.

As of Dec. 31, net debt stood at 1.37 trillion rubles ($41 billion), making it the country's biggest debtor. It recently raised $2.25 billion in a eurobond issue, suggesting some initial easing on international debt markets. Gazprom said it planned to take tighter control over its debt situation, and rely on internal resources to make sure it is able to finance priority projects.

These include the massive Shtokman field in the Arctic and the Nord Stream pipeline, which will pipe Russian gas to Germany and eventually to Britain.

Gazprom insisted that it has no plans to delay key projects despite the drop in earnings and the difficult financing climate because of the crisis hitting the world's banks.

"In view of the expected medium-term revival of world economy and restored demand for hydrocarbons, this approach will give the group a competitive advantage over those oil and gas companies which will have to significantly delay their strategic projects," Gazprom said.

Gazprom is the world's largest producer of gas, but it has been hard hit by sliding demand for gas at the same time as competing liquefied natural gas carried by ship floods European markets. Gazprom relies on pipelines and long-term pricing agreements.

Analysts have said the gas giant must trim its ambitious spending plans if it is to ride out the global economic downturn.