On 22 October 2008 OAO 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 31 March 2008.

The table below presents the unaudited consolidated interim condensed income statement for the three months ended 31 March 2008 and 2007. All amounts are presented in millions of Russian Roubles, unless otherwise stated.

Sales (net of excise, VAT and customs duties) increased by RR 291,416 million, or 48%, to RR 902,944 million in the three months ended 31 March 2008 compared to the three months ended 31 March 2007. More detailed information on our sales for the first quarter of 2008 and 2007 is presented in the table below.

Net sales of natural gas increased by RR 167,359 million, or 39%, to RR 595,792 million in the three months ended 31 March 2008 compared to the three months ended 31 March 2007. This increase was primarily due to the increase of the volume of gas sold to Far Abroad countries and higher FSU and domestic gas prices.

For the three months ended 31 March 2008 net sales of natural gas to Far Abroad countries increased by RR 120,597 million, or 55%, to RR 339,037 million compared to the three months ended 31 March 2007. This mainly results from the increase of the volume of sold gas by 34%, or 13.6 bcm, and the growth of average gas prices.

Net sales of natural gas to FSU countries increased by RR 9,301 million, or 13%, to RR 83,379 million in the three months ended 30 March 2008 compared to the three months ended 30 March 2007. The increase of sales in this segment is explained by higher average realized prices, which was compensated by the decrease of the volume of sold gas by 11%, or 3.1 bcm.

Net sales of natural gas in the domestic market increased by RR 37,461 million, or 28%, to RR 173,376 million in the three months ended 31 March 2008 compared to the three months ended 31 March 2007. This is explained primarily by increased average domestic prices for gas set up by the Federal Tariff Service.

Net sales of oil and gas products increased by RR 56,590 million, or 54%, in the three months ended 31 March 2008. The increase was mainly due to the increase of oil and gas products prices.

Net sales of crude oil and gas condensate increased by RR 25,602 million, or 79%, in the three months ended 31 March 2008.  The increase of net sales of crude oil and gas condensate primarily resulted from the Gazprom Neft activities: net sales of crude oil in the domestic market increased by RR 23,284 million, or 82%, to RR 51,842 million in the three months ended 31 March 2008 compared to the three months ended 31 March 2007.  

Other sales increased by RR 36,759 million, or 108%, to RR 70,940 million in the three months ended 31 March 2008 compared to the three months ended 31 March 2007. The increase of other sales is primarily due to the consolidation of OAO Mosenergo as a subsidiary starting on June, 2007. Net sales of OAO Mosenergo for the three months ended 31 March 2008, included in the Group’s Other sales category, amounted to RR 30,967 million. 

Operating expenses increased by RR 135,584 million, or 34%, to RR 537,317 million in the three months ended 31 March 2008 compared to the three months ended 31 March 2007. 

Major items that drove the increase of the total amount of operating expenses include: Purchased oil and gas (RR 33,076 million), Goods for resale, including oil and gas products (RR 18,593 million), Labor costs (RR 16,822 million), Taxes other than profit tax (RR 13,333 million), Transit of gas, oil, oil and gas products (RR 10,531 million), Repairs and maintenance expenses (RR 10,415 million), and Depreciation (RR 6,319 million). The increase in Purchased oil and gas was mainly caused by the increase in the world oil prices and increase in gas trading on European market and respective increase of gas purchases in Europe. This gas is purchased by the Group at market prices. The increase in Goods for resale, including refined products was driven by general increase in prices for hydrocarbons and increase in volumes of purchases. The increase in Labor costs, Repairs and maintenance expenses, and Depreciation compared to the same period of 2007 was caused by the increase in expenses, capitalized in cost of gas in prior periods and expensed in the current period.

Higher expenses for oil and gas purchases are mainly due to the growth of the purchase price for gas purchased in Central Asia for further resale. The increase of the volume of goods for resale primarily resulted from higher volumes of energy purchased by Gazprom Germany GmbH. The increase in the staff costs was caused by the increase in average base salaries and other payments to employees and the increase in average number of employees.

In the three months ended 31 March 2008 the profit attributable to equity holders of OAO Gazprom for the period totaled RR 273,439 million, which is RR 63,127 million, or 30%, higher compared to the three months ended 31 March 2007.

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 RR 125,287 million, or 10%, from RR 1,228,583 million as of 31 December 2007 to RR 1,103,296 million as of 31 March 2008. This decrease can be explained by a significant growth of cash and cash equivalent balances on bank accounts of the Group.

More detailed information on the IFRS consolidated interim condensed financial information for the three months ended 31 March 2008 can be found here.