Gazprom 1Q 20 - Other operating costs cut significantly, but maybe one-off
Today, Gazprom released its 1Q 20 financial results, which came in almost in line with our estimates on revenue and net income, while EBITDA exceeded our forecasts. Compared to consensus, the results turned out to be stronger on both EBITDA and net income, with revenue being close to the market estimates. In turn, we believe that better than expected results on EBITDA were caused mainly by a significant positive effect from FX differences on operating items (USD 1.74 bn or +42.7% compared to our estimates) and by a considerable yoy decline in other expenses (- 34.5% yoy to USD 1.37 bn). At the same time, net operating cash flow (adjusted on deposit changes) came in weaker than projected due to lower than expected effect from changes in working capital. Overall, FCF before interest came in at USD 287 mn, which was lower than expected; excluding the effect from WC changes free cash flow beat our estimates.PJSC Gazprom is a gas company based in Russia. Co.'s principal activity is the sale of gas. Co. is also involved in other types of activities which include leasing of assets, gas transportation and storage services, sale of gas condensate and refined products. Co. and its subsidiaries and associates operates gas pipelines systems in Russia. Co. is responsible for substantially all gas production and high pressure gas transportation in the Russian Federation. Co. is also a major exporter of gas to European countries. Co. is directly involved in exploration and drilling for hydrocarbons, production of gas and other hydrocarbons and domestic and export sale of gas and other hydrocarbons.
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