We treat 2013 as quite a successful year for Gazprom

We treat 2013 as quite a successful year for Gazprom. To our view, the Company’s ability to generate sufficient positive cash flow turned to be one of the basic advantages.

The confident European sales growth by 20 per cent shown in Q4 last year versus the same period of 2012 should be noted as the main positive factor of the statements. It’s worth mentioning that the growth was generally provided by in-house gas supplies, because Central-Asian gas purchases remained unchanged. Positive cash flow and net debt reduction can also be treated as a good result for Gazprom. To our mind, Gazprom’s outcomes would be much better, if the Company didn’t build up extensive reserves against accounts receivable devaluation in Q4 2013.

The outcomes for Q1 2014 should also be positive, because export supplies to Europe kept on growing, while the CIS market showed slight negative fluctuations. It should provide for favourable basement for solid financial outcomes.

Gazprom’s financial outcomes for Q4 2013 overran our EBITDA expectations by 36 per cent. However, due to high capital costs exceeding our assessments, the free cash flow turned to be much lower than our predictions. We still believe that Gazprom is not capable of generating sufficient free cash flows. Without this, the Company’s capitalization growth can’t be expected. Moreover, a lack of clear plans for enhancing dividends reduces the investment attractiveness of Gazprom’s shares.

Solid outcomes of Gazprom are unlikely to affect the Company’s share quotation. These results were predictable, therefore, the market accounted for it while setting the share value. It’s notable that the Company’s share value is currently pressurized by the current situation in Ukraine, and until the ‘gas issue’ is solved, Gazprom’s securities discount will surpass all the advantages displayed by financial outcomes, as it is already happening now.