Gazprom on track for record profits, buying up its own bonds: Barclays

  • High natural gas prices have put Gazprom on track for record profits this year.
  • The Russian energy giant is exploring strategies to buy back its own bonds, Barclays said.
  • This would reduce debt and help shield Gazprom from Western sanctions against Russia.

High natural gas prices have put Gazprom on track for sky-high profits this year – and the state-run energy giant could use the extra cash to better protect itself from Western sanctions, according to Barclays.

Natural gas prices have soared this year as Moscow chokes off supplies to Europe via key gas pipelines, including Nord Stream 1. Dutch TTF natural gas futures have broken a series of records , peaking at 346 euros ($346) per megawatt-hour in August. .

Gazprom reported profits of 2.5 trillion rubles ($42 billion) in the first six months of this year, meaning it has already topped last year’s $29 billion. Even conservative estimates suggest it has already made more than $70 billion from gas sales this year, according to Barclays.

“High gas prices have provided Gazprom with financial flexibility,” a team led by energy analyst Amarpreet Singh said in a recent research note.

“According to conservative estimates, Gazprom has already generated more revenue from gas sales in 2022 than in the whole of 2021, which was already the most profitable for the group in recent years.”

Barclays said all signs point to the energy giant reinvesting profits to reduce its external debts, which could make it more resilient to Western sanctions.

On Aug. 11, Gazprom’s financial arm requested changes to the contracts of its dollar-denominated bonds, which the bank sees as a precursor to the company buying up its non-ruble debt.

“Gazprom is exploring a strategy to redeem its eurobond curve,” Singh’s team said. “He is seeking consent on a number of his bonds, which would allow him to redeem directly, avoiding the problems caused by Russian capital controls and European sanctions.”

The West has rushed to cut Moscow off from financial and energy markets since Vladimir Putin invaded Ukraine in February.

But by buying its debt from non-Russian bondholders, Gazprom would reduce its vulnerability to further US or European sanctions against Russia, according to Barclays.

“If successful, Gazprom will therefore appear relatively immune to the loss of revenue that would result from a complete reduction in EU gas exports,” the analysts said.

“With fewer external liabilities, the company would then clearly be better able to withstand the risk of default if the EU or US retaliates with sanctions.”

Read more: Russian bonds are back on the market for a week as sanctions are temporarily lifted – and investors have already bid for more than $1 billion in debt


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