Bloomberg News

Novatek 3rd-Qtr Net Rises 42% to 4.09 Billion Rubles

November 27, 2006

OAO Novatek, Russia's second-largest natural gas producer, said third-quarter net income rose 42 percent as it sold more gas directly to customers and exported more gas condensate at higher prices.

Net income rose to 4.09 billion rubles ($155 million), or 1.35 rubles a share, from 2.88 billion rubles, or 0.95 rubles, in the third quarter of last year, the Tarko-Sale, Russia-based company said today in a statement.

Total revenue rose 28 percent to 12.96 billion rubles, based on International Financial Reporting Standards, including other income of 42 million rubles. Other income included 24 million rubles from the sale of asset and equipment sales.

``Their Ebitda and income margins were 4 percent quarterly, which is good and may continue,'' said Artyom Konchin, an oil and gas analyst at Aton Capital in Moscow. ``It's a solid company.''

Exports of gas condensate, which is similar to light crude oil, rose 42 percent to 436,000 tons. Prices increased 28 percent to 10,898 rubles ($406.5) a ton.

Novatek benefited from selling more natural gas to Russian consumers at a price higher than traders paid, the company said. The average price for consumers, excluding transportation costs, was 739 rubles per 1,000 cubic meters compared with 658 rubles for gas sold to traders.

Novatek Production

Novatek produced 7.2 billion cubic meters of natural gas in the period, a 15.4 percent increase, and 592,000 tons (4.3 million barrels) of liquids, a 10 percent increase.

The company sold 7.1 billion cubic meters of natural gas in the period, of which 41 percent went to consumers.

``They have good potential to increase output, benefit from increasing gas and condensate prices and have efficient management,'' said Kaha Kiknavelidze, an oil and gas analyst at UBS AG in London.

Operating expenses rose 24 percent to 7.53 billion rubles, led by transportation costs, which increased 58 percent as the government raised oil and gas pipeline and rail tariffs and the company shipped more. Gas consumers absorbed some of that cost increase as the price they pay includes shipping, Novatek said.

Novatek shares rose as much as 2.4 percent today to a record high, before paring gains to trade at $61.50 as of 3:15 p.m. in London. The shares closed at that price yesterday.

To contact the reporter on this story: Torrey Clark in Moscow at tclark8@bloomberg.net.

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.


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