Bloomberg News

Gazprom Gains in N.Y. on Lower Investments, Cold Europe Weather

February 02, 2012

Feb. 1 (Bloomberg) -- OAO Gazprom, the world’s biggest producer of natural gas, rose to the highest price in three months in U.S. trading after Renaissance Capital said the company vowed to cut investment spending and as cold weather returned to Europe and Russia, spurring demand for the fuel.

American depositary receipts advanced 2.7 percent to $12.37 at 12:46 p.m. in New York, the highest since Nov. 8. The stock in Moscow gained 0.9 percent to 185.70 rubles, or $6.16. One depositary receipt is equal to two ordinary shares. The Bloomberg Russia-US 14 Index of Russian companies traded in New York rose 2.6 percent.

“Gazprom vowed to cut their investment program by 35 percent during their conference call with investors today,” Ilya Balabanovsky, an analyst at Renaissance Capital in Moscow, said via telephone. “The market could read this a sign of improvement in capital discipline, which could raise free cash flow generation and potentially lead to further dividend increases. A return of cold weather in Europe could also help the market’s sentiment.”

Colder-than-normal weather across Europe, where Gazprom supplies about 25 percent of the gas market, has led customers to seek more fuel in past days. Temperatures may fall to 4 degrees Celsius (39 degrees Fahrenheit) in Rome tomorrow and to minus 13 degrees in Prague, according to CustomWeather Inc. data on Bloomberg.

Gazprom sells about 30 percent of its gas output to Europe. Renaissance Capital estimates the price of gas sold by Gazprom to European customers in 2011 was at an average $400 per 1,000 cubic meters, compared with an average $90 it charged Russian domestic customers in 2011, Balabanovsky said.

--Editors: Marie-France Han, Brendan Walsh

To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at Eobrien6@bloomberg.net


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