The profit of Gazprom Neft for 2017 increased by 29% in line with our forecast.

Altynay IbraimovaMarch 01, 2018

As a result of last year, Gazprom Neft's revenues (excluding duties and excise tax) amounted to 1858bn rubles, an increase of 20% yoy, which was accompanied by an increase in operating expenses by 19% to 1,555bn rubles. The profit for the year in the amount of 270bn rubles is higher than in 2016 by 29%.

The increase of revenue by 20% to 1858bn rubles was ensured mainly by the price factor, whilst physical volumes also had a partial effect.

So, in comparison with 2016, the sales of oil in 2017 increased by 17% (27mn tons), gas sales increased by 4% (14bcm), and sales of oil products decreased by 0.3% (43.48 mn tonnes).

Meanwhile, average oil export sales prices, which account for 69% of total oil sales, rose by 10%. Sale of oil products, the bulk of which falls on the domestic market (64%), was accompanied by an increase in the average selling price by 13%.

Due to the increase in oil prices, the main items of the Company's expenses, namely the cost of purchasing oil, gas and petroleum products (29% of Opex) and taxes, except for income tax, (32% of Opex) increased by 30% yoy and 29% yoy, respectively, having the greatest impact on the increase in operating expenses (+ 19% yoy).

As a result, the Company's operating profit amounted to 303bn rubles (+ 27% yoy), net profit reached 270bn rubles (+ 29% yoy).

Fig. 1. Separate financial indicators for 2017.

RUB bn




HF forecast



1 546

1 858


1 802



-1 307

-1 555


-1 507


Operating profit






Net profit






Source: Company data, HF forecsts

Our view

Gazprom Neft's results for 2017 were mainly in line with our expectations, showing only a slight deviation from our forecasts (Fig. 1.).  In the environment of the OPEC+ agreement, the price of oil had a strong support for the company's financial results and the dynamics of the share price. Since our recommendation for purchase, Gazprom Neft’s shares have appreciated by 16% due to the growth in oil prices. The Company's investment program for 2018 is based on the oil price of $ 50 / bbl. Given the current price levels that are above $ 60/bbl, we are optimistic about the results of the current year and we maintain our recommendation to Buy Gazprom Neft shares with 12M TP of 319 rubles/share.