11:00AM New York—OAO Gazprom reported fiscal 2007 profit rose 7% to 658 billion rubles on rising gas prices.

Higher Prices Drive Revenue

OAO Gazprom, the Russian gas export firm, reported today full-year 2007 sales increased 11% to 2.39 trillion rubles from 2.15 trillion rubles a year earlier on higher prices, particularly in the core European markets and at home.

The world’s largest natural gas producer said net gas sales reached 1.52 trillion rubles in the year, up 8% from 1.41 trillion rubles in 2006. Volume fell 1% to 572 bcm from 578.8 bcm a year earlier.

Sales of refined products gained 13% to 492.38 billion rubles but crude oil and gas condesante sales declined 2% to 167.75 billion rubles from 171.71 billion rubles a year earlier after the company consumed more oil producing refined products.

In 2007, Gazprom’s gas shipments fell 5.8% although European consumption is this year expected to rise 11%.

Domestic gas prices increased an average 15% in the review year, and have gained by more than 50% in European market over the past twelve months, it said.

Global oil prices have also doubled over the past year, and are up more than 50% since January to a record $143 per barrel.

Earnings Review

Gazprom said profit attributable to shareholders rose 7% to 658.03 billion rubles from 613.34 billion rubles, as operating expenses bulged.

Included in the earnings in a gain of 50.9 billion rubles from the sell of a 20% stake in OAO Gazprom Neft and another 44.7 billion rubles from the consolidation of NPF Gazfund. Gazprom also gained 50.7 billion from fair value adjustments on a call option.

But rising operating expenses weakened the gains. Expenses rose to 1.688 trillion rubles from 1.36 trillion rubles in 2006.

Expenses on oil and gas purchases rose 101.99 billion roubles, as Gazprom had to pay more for imports of gas from Middle Asia.

Staff costs rose 49.3 billion roubles on higher salaries and increased employees, while repairs, maintenance and depreciation chewed up more than 39 billion rubles..

Net debt balance increased 52% to 1.22 trillion rubles from 807.8 billion rubles in 2006 on higher loans and borrowings.

With the help of the Russian government, Gazprom hopes to break into new markets in Asia and North America, delivering liquefied natural gas during fiscal 2009.

Segment Analysis

Gazprom, which provides a third of Europe’s gas needs, said gas sales to European markets gained 3% to 873.41 billion rubles from 845.86 billions rubles in 2006, as prices firmed.

Customers in Europe are paying 50% more in gas than what they paid in 2006. One thousand cubic metres of gas now costs about $410. Despite weakening demand, volume in this region gained 4%.