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Gazprom Cancels Party as Profit Falls

Gazprom may pay some of its lowest dividends for a second straight year and has canceled a corporate party for 2010 after its profit continued to melt, board chairman and First Deputy Prime Minister Viktor Zubkov said Friday.

The world’s largest gas company paid just 5 percent of its 2008 profit to Russian accounting standards — the smallest payout in the previous seven years — as it was trying to save money for investment in the crisis-battered economy.

“I can’t say now what the dividends will be for 2009, but most likely they will about the same,” he said at a news conference, referring to the payout for last year. “We aren’t planning for big dividends yet. There is a clear understanding among the shareholders that investment in the company’s development is a priority.”

Gazprom’s profit for the first nine months of the year plunged 56 percent to 189 billion rubles ($6.4 billion) from the same period a year earlier, according to Russian accounting standards. If things continue this way, the company may end up paying out half of its 2008 dividends, or 18 kopeks per share, said Alexander Nazarov, an analyst at financial company Metropol.

That would be Gazprom’s lowest dividend payment since 2000. It usually pays 17.5 percent of Russian accounting standards profits.

“We recommend that you refrain from buying Gazprom shares because there is little likelihood of getting high dividends on these securities,” Nazarov wrote in a note for investors.

Zubkov’s announcement did not appear to sour the market, however. Gazprom’s stock closed up 0.9 percent on the MICEX, while the exchange’s benchmark index increased 0.4 percent on the day.

Gazprom will even sacrifice a corporate holiday party in 2010 to save value for investors, Zubkov said. He did not specify whether the party would be to celebrate the New Year or the company’s 16th anniversary in February.

Gazprom said in September that it was going to spend 4 million rubles ($135,500) to hold a New Year’s party at its Moscow headquarters. The company announced in December that a company called Event Production Pro won a tender to carry out several corporate events, including the party, according to Gazprom’s web site. The firm could not be located for comment Friday.

A Gazprom spokeswoman declined to elaborate on Zubkov’s comments, saying only that the company hosted a concert the previous day and then hanging up.

Gazprom celebrated its anniversary last year in style. Attended by then-President Vladimir Putin and then-presidential frontrunner Dmitry ?­Medvedev, the party featured performances by Tina Turner and Deep Purple, one of Medvedev’s favorite bands. Medvedev, then a first deputy prime minister, also served as Gazprom chairman. The company did not disclose the costs for arranging that party, but prices for Western stars, including Rihanna and George Michael, to sing at New Year’s parties in Moscow in recent years have reportedly ranged from $500,000 to $3 million.

Earlier this year, prosecutors warned state-owned leasing company Rosagroleasing, where Zubkov is also chairman, to rein in frivolous spending, including tens of millions of rubles on donations, parties and sports events for its employees and workers of partner companies.

At the news conference Friday, Zubkov said issues uncovered in the prosecutors’ check were being resolved.

He also gave another signal that the Gazprom-led development of the giant Shtokman gas field might be delayed.  

“It may or may not be postponed a little bit,” he said.

The company first announced that the project, where the partners are France’s Total and Norway’s StatoilHydro, could be pushed back in a prospectus for its eurobond issue in summer.

Gazprom chief executive Alexei Miller said earlier this month, while chatting with reporters after taking part in Putin’s meeting with a Vietnamese delegation, that there had never been a firm deadline for production at the field to begin. He said in June that the field would come on line in 2013.

Total is more confident that Shtokman will start operating in the rough Arctic waters later than planned. Vice president Arnaud Breuillac said earlier this month that high costs and financing problems were behind the delay.

At the news conference, Zubkov shed some light on how he spends some of his leisure time, saying he had been practicing walking for the last 20 years as a way to keep fit. Zubkov covers six kilometers on weekdays and double or even triple that on weekends, he said.

“Walking is a good way to concentrate on your thoughts and analyze things,” he said. “Jogging is really hard to combine with thinking.”

n Gazprom announced Thursday that it was handing over production rights for two major oil and gas fields to its oil arm, Gazprom Neft, weeks after sources told Reuters that the oil company was considering a share placement next year.

Gazprom Neft will receive the licenses for the Novoportovskoye field, estimated to hold 238 million tons of oil, and the eastern part of the Orenburgskoye field, Gazprom said. The eastern part contains 96 million tons and is in operation while Novoportovskoye has a “high degree of readiness” to begin operating, Gazprom said.

Gazprom did not say whether it would require payment for the licenses and how big it would be.

The gas producer also said it made the decision to hand over the licenses because it increased its holding in Gazprom Neft to 95.68 percent after buying 20 percent of the company from Italy’s Eni in the spring. The handover is a start of consolidation of Gazprom’s oil assets under the auspices of Gazprom Neft in a bid to raise efficiency of their development, Gazprom said.

Staff writer Anatoly Medetsky contributed to this report.

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