OREANDA-NEWS. On October 08, 2007, OJSC Gazprom issued its unaudited consolidated interim condensed financial information prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting” (“IAS 34”) for the three months ended March 31, 2007, Gazprom's press-service reported.  

According to the data provided, the revised accounting treatment of the non governmental pension fund, NPF Gazfund, has a significant impact on the Group’s financial information for the three months ended 31 March 2007. In connection with the latest developments in the legislation regulating pension funds activity, NPF Gazfund was deconsolidated from the consolidated financial information of OJSC Gazprom in the first quarter 2007. As a result of this deconsolidation, the Gazfund investment assets are now accounted for as plan assets on the OJSC Gazprom consolidated interim condensed balance sheet under IAS 19 “Employee Benefits”. The principal balance sheet line items affected are short term financial assets, other non-current assets, provisions for liabilities and charges, minority interest and equity including treasury shares. In addition, where NPF Gazfund continues to hold ownership interests in OJSC Gazprom subsidiaries (for example, AB Gazprombank (CJSC), OJSC Sibur-Holding), those interests are reflected as minority interest in the accompanying financial information.

The aggregate effect of NPF Gazfund deconsolidation results in recognition of income of RUR 44,692 million in the line “Deconsolidation of NPF Gazfund” in the Consolidated interim condensed statement of income and the increase in equity of RUR 111,015 million in the line “Deconsolidation of NPF Gazfund”.

Net sales of natural gas increased by RUR 14,793 million, or 4%, to RUR 428,433 million in the three months ended March 31, 2007 compared to the three months ended March 31, 2006.  This increase was primarily due to higher FSU and domestic prices for gas. Net sales of natural gas to the Far Abroad decreased by RUR 9,900 million, or 4%, to RR 218,440 million in the three months ended March 31, 2007, compared to the three months ended March 31, 2006. This is explained primarily by the fact that the volume of sold gas decreased by 13% or 5.7 bcm which was partially offset by increased average prices. Net sales of natural gas to FSU countries increased by RUR 12,842 million, or 21%, to RUR 74,078 million in the three months ended 31 March 2007 compared to the three months ended March 31, 2006. The increase of sales in this segment is explained by higher average prices. Net sales of natural gas in the domestic market increased by RUR 11,851 million, or 10%, to RUR 135,915 million in the three months ended March 31, 2007 compared to the three months ended March 31, 2006.  This is explained primarily by the increased average domestic price for gas established by the Federal Tariff Service, which was partially offset by a 5% reduction in the volume of sold gas.

In the three months ended March 31, 2007 net sales of crude oil and gas condensate decreased by RUR 12,773 million, or 28%, compared to the three months ended March 31, 2006. This decrease in the sales of crude oil and gas condensate is due to Gazprom Neft’s activities: in the three months ended March 31, 2007 net sales of crude oil decreased by RUR 12,046 million, or 30%, to RUR 28,558 million compared to the three months ended March 31, 2006.  Operating expenses increased by RUR 46,466 million, or 13%, to RUR 401,733 million in the three months ended March 31, 2007 compared to the three months ended  March 31, 2006.  The component which accounted for the major part (or 96%) of the increase in operating expenses was higher expenses for purchased oil and gas. Expenses on purchased oil and gas increased by RUR 44,377 million, or 74%. Expenses on purchased natural gas increased by RUR 43,423 million and on purchased oil - by RUR 954 million.

In the three months ended March 31, 2007 the profit for the period attributable to equity holders of OJSC Gazprom totaled RUR 210,312 million which is RUR 25,155 million, or 14%, higher compared to the three months ended March 31, 2006.

Net debt balance (defined as the sum of short-term borrowings, current portion of long-term borrowings, short-term promissory notes payable, long-term borrowings, long-term promissory notes payable and restructured tax liabilities, net of cash and cash equivalents and balances of cash and cash equivalents restricted as to withdrawal under the terms of certain borrowings and other contractual obligations) decreased by RUR 340,009 million, or 42%, from RUR 807,814 million as of December 31, 2006 to RUR 467,805 million as of  March 31, 2007. This decrease can be explained by a significant increase of cash and cash equivalent balances in bank accounts of the Group primarily due to temporary placement of funds in AB Gazprombank (CJSC) from third parties.