WEST UNIVERSITY OF TIMISOARA

THE FACULTY OF ECONOMICS AND BUSINESS ADMINISTRATION

Financial analysis
Gazprom

Professor:

Conf. Dr. Violeta Săcui

Student:

Odagiu Doina

Timisoara 2015
Faculty of Economics and Business Administration 2

Table of Contents

1. The general presentation of the company .............................................................................. 3

2. The history of the company. The mergers and acquisitions of the company ........................ 5

3. The book value of the company ............................................................................................. 8

3.1. The book value of assets ................................................................................................. 8

3.2. The book value of liabilities ........................................................................................... 9
3.3. The book value of equity .............................................................................................. 10
3.4. The book value of shares .............................................................................................. 10

4. The Investment policy of the company................................................................................ 10

5. The evolution of revenues, expenditures, net income, dividends (the last years) ............... 12

6. Financial Ratios of the company (last years) ....................................................................... 12

7. The evolution of Market Value of share (the last years) ..................................................... 16

8. Bibliography ........................................................................................................................ 17
Faculty of Economics and Business Administration 3

1. The general presentation of the company

Open Joint Stock Company Gazprom (Russian: Открытое Акционерное Общество

«Газпром», abbreviated OAO Gazprom, Russian: ОАО «Газпром», IPA: [ɡɐsˈprom]) is the
largest extractor of natural gas in the world and one of the world's largest companies. Its name
is a contraction of the Russian words Gazovaya Promyshlennost (Russian: газовая
промышленность - gas industry). Its headquarters are in Moscow.

Gazprom was created in 1989 when the Soviet Ministry of Gas Industry converted to a
corporation, retaining all its assets. The company was later partly privatized, although the
Russian government currently holds a majority stake. In 2011, the company produced about
513.2 billion cubic meters (18.12 trillion cubic feet) of natural gas, amounting to more than
17% of worldwide gas production. In addition, Gazprom produced about 32.3 million tons of
crude oil and nearly 12.1 million tons of gas condensate. Gazprom's activities accounted for 8%
of Russia's gross domestic product in 2011.

Gazprom's major production fields are located around the Gulf of Ob in Western Siberia, and
the Yamal Peninsula is expected to become the company's main gas producing region in the
future. Gazprom possesses the largest gas transport system in the world, with approximately
158,200 kilometers of gas trunk lines. Major new pipeline projects include Nord Stream and
South Stream. The company has a number of subsidiaries in various industrial sectors, including
finance, media and aviation, as well as majority stakes in various companies.

Native name ОАО «Газпром» Products Petroleum, natural gas, and

other petrochemicals
Type Public (OAO) Services Gas pipeline transport
Traded as  MCX: GAZP  Revenue  / PP 5.59 trillion (US$
 LSE: OGZD 106.3 billion) (2014)
 FWB: GAZ
 OTC Pink: OGZPY
Industry Oil and gas Net income PP 159 billion (US$
3.1 billion) (2014)
Founded 1989 Owner Russian Government (50.23%)
Headquarters Moscow, Russia Number of 393,000
employees
Key people Viktor Website www.gazprom.com
Zubkov (Chairman)
Alexei Miller (CEO)
Faculty of Economics and Business Administration 4

Production

In 2011, the Gazprom group produced 513.17 billion cubic metres (18.122 trillion cubic feet)
of natural gas. This amounted to 17% of the worldwide and 83% of Russian production. Of this
amount, the Yamburg subsidiary produced 41%, Urengoy 23.6%, Nadym 10.9%, Noyabrsk
9.3% and others 15.2%. In addition, the company produced 32.28 million tons of oil and 12.07
million tons of gas condensate.

Major part of Gazprom's current production fields are located in the Nadym-Pur-Taz region
(near the Gulf of Ob) in Yamalo-Nenets Autonomous Okrug in Western Siberia. The three
largest ones — Medvezhe, Urengoy and Yamburg— have been sustaining Russian gas
production for 20 years. They are now in a declining state of production, with levels falling by
20–25 bcm per year. Gazprom's fourth large field, Zaporliarnoe was able to increase production
until 2004, which offset the decline in the three largest fields.nFrom 2004, the company has
been able to sustain its overall production levels by launching production from new smaller
fields and by purchasing production assets from other companies.

Crude oil production comes mostly through the subsidiary Gazprom Neft, which was previously
called Sibneft. Gazprom bought 75% of the company's shares in 2005 for $13.1 billion.

Imports from Central Asia

Imports from Central Asia have become very important to Gazprom's supply balance. In 2007,
Gazprom imported a total of 60.7 billion cubic metres (2.14 trillion cubic feet) from Central
Asia: 42.6 billion cubic metres (1.50 trillion cubic feet) from Turkmenistan, 8.5 billion cubic
metres (300 billion cubic feet) from Kazakhstan and 9.6 billion cubic metres (340 billion cubic
feet) from Uzbekistan. In particular, 75% of all Turkmen gas exports go to Gazprom, which in
turn exports the gas to Ukraine. The price of the Central Asian gas received by Gazprom ranged
from $130/mcm to $180/mcm in 2008. Gazprom has agreed that prices will rise to European
levels in the near future.

Sales

In 2006, Gazprom sold 316 billion cubic metres (11.2 trillion cubic feet) of gas to domestic
customers in Russia; 162 billion cubic metres (5.7 trillion cubic feet) to rest of Europe and 101
billion cubic metres (3.6 trillion cubic feet) to CIS countries and the Baltic states. There is a
considerable difference in gas prices for these three customer groups. Inside Russia, according
to Russian government policy, Gazprom is forced to sell gas at a considerable discount. This is
a result of the socialist legacy, according to which energy is a "basic human right."
Consequently, Gazprom receives about 60% of its revenues from its sales to European
customers.

The low domestic price has caused problems for the Russian economy, such as overdependency
on gas as an energy source and lack of investment in new production fields.[citation needed]
Until 2004, Gazprom could only sell gas inside Russia, with a loss. It has also been realized
that development of the new high-cost gas fields will not be possible without prices increasing.
In 2006, the Russian government decided that domestic gas prices for industrial customers will
rise to European netback levels (with tariffs and transmission costs reduced) by 2011. In 2008,
average gas price paid by Russian industrial customers was $71/mcm, while households paid
$54/mcm. Both prices are expected to rise about 25% in 2009, 25% in 2010, and 40% in 2011.
Faculty of Economics and Business Administration 5

Gazprom's attempts to bring CIS export prices to European levels have led to several disputes,
most seriously with the Ukraine in 2006 and 2009.

Gazprom sales of gas 2006-2008

2006 2007 2008
Volume Price Volume Price Volume Price
Russia 316 bcm $43/mcm 307 bcm $42/mcm 287 bcm $67/mcm
CIS+Baltic 101 bcm $76.37/mcm 100 bcm $91.6/mcm 96.5 bcm $118/mcm
Europe 162 bcm $192.59/mcm 168.5 bcm $185/mcm 184.4 bcm $313/mcm

Natural gas prices have shown strong fluctuation since the year 2000. Furthermore Gazprom's
sales prices varied largely among their customers. By the end of 2007, the price at the New
York NYMEX was 7,53 $ per MMBtu, at 26,4 m³ per MMBTU this means a price of $285 per
1000 Cubic metre. At the same time, based on their respective contracts with Gazprom,
customers paid these prices: Germany $250, Poland $290, Ukraine $130 and Russia $49.

2. The history of the company. The mergers and acquisitions of the company

1989–1992: Inception

The Soviet Union created a separate gas industry in 1943 during World War II. In 1965, it
centralized gas exploration, development, and distribution within the Ministry of Gas Industry.
Large natural gas reserves discovered in Siberia and the Ural and Volga regions in the 1970s
and 1980s were the basis for the Soviet Union's becoming a major gas producer in the world.

In August 1989, under the leadership of the Minister Viktor Chernomyrdin, the Ministry of Gas
Industry was reconfigured as State Gas Concern Gazprom, which became the country's first
state-corporate enterprise. The company was still controlled by the state, but it exercised control
through shares of stock, 100% of which were owned by the state.

When the Soviet Union dissolved in late 1991, assets of the former Soviet state in the gas sector
were transferred to newly establish national companies, such as Ukrgazpromand
Turkmengazprom. Gazprom kept assets located in the territory of Russia, and was able to secure
a monopoly in the gas sector. Assets in the oil industry, on the other hand, were divided among
several companies.

1993–1997: Privatization

Gazprom's political influence increased significantly after the new Russian President Boris
Yeltsin appointed the company's chairman Chernomyrdin as his Prime Minister in December
1992. Rem Viakhirev took Chernomyrdin's place as Chairman both of the Board of Directors
and of the Managing Committee.

The new government was eager to introduce economic reforms and began to privatize Gazprom.
Following the Decree of the President of the Russian Federation of 5 November 1992 and the
Faculty of Economics and Business Administration 6

Resolution of the Government of Russia of 17 February 1993, the organization became a joint-
stock company and started to distribute shares under the voucher method: every Russian citizen
received vouchers to purchase shares of formerly state-owned companies. By 1994, 33% of the
Gazprom's shares had been bought by 747,000 members of the public, mostly in exchange for
the vouchers. 15% of the stock was also purchased and allocated to Gazprom employees. The
state retained 40% of the shares, but the amount was gradually lowered to 38%.Trading of
Gazprom's shares was heavily regulated, and the by-laws of the company prohibited foreigners
from owning more than 9% of the shares.

Gazprom slowly established credibility in the western capital markets with an offering of one
percent of its equity to foreigners in October 1996 in the form of Global Depository Receipts
and a successful large bond issue of US$2.5 billion in 1997.

1998–2000: Tax evasion and asset-stripping

As the Prime Minister of Russia, Chernomyrdin ensured that the state did not closely regulate
Gazprom. The company evaded taxes on a large scale, and the state received little money in the
form of dividends. The management and board members launched a massive asset-stripping,
and Gazprom's property was parceled out to them and their relatives. Some of the largest
stripped assets were transferred to the controversial gas-trading company Itera. Chernomyrdin
and Gazprom's CEO Rem Viakhirev were leading figures in the process.

In March 1998, for reasons unrelated to Gazprom, Yeltsin fired Chernomyrdin from his position
as Prime Minister.[8] On 30 June 1998 Chernomyrdin returned to the company as the chairman
of the board of directors.

2000–2003: The Putin reforms

Gazprom's situation changed abruptly in June 2000, when Vladimir Putin became the President
of Russia. Putin launched a campaign to rein in the oligarchs. Per his policy of the so-called
national champions, he strengthened state control in strategic companies.He launched an attack
against what he saw as mismanagement and personal pilfering of state assets. After coming to
power, Putin immediately fired Chernomyrdin from his position as the chairman of the
company's board and used the stock owned by the state to vote out Vyakhirev. The two men
were replaced by Dmitry Medvedev and Alexei Miller, who had previously worked with Putin
in Saint Petersburg.[9] Putin's actions were aided by shareholder activism of Hermitage CEO
William Browder and former Russian finance minister Boris Fyodorov. Miller and Medvedev
were assigned the task to stop the asset-stripping, and also to regain lost possessions. By
denying Itera access to Gazprom's pipelines, Miller almost forced Itera to declare bankruptcy.
As a result, Itera's management agreed to sell the stolen assets back to Gazprom.

2005–2006: Establishment of government control

In June 2005, Gazprombank, Gazpromivest Holding, Gazfond and Gazprom Finance B. V.,
subsidiaries of Gazprom, agreed to sell a 10.7399% share to the state-owned company
Faculty of Economics and Business Administration 7

Rosneftegaz for $7 billion, at what some western analysts viewed as an undervalued price. The
sale was to be completed by 25 December 2005, which, combined with the 38% share of the
State Property Committee, gave the Russian government control over the company.

As the Russian state had acquired a controlling share, it removed the 20% restriction on foreign
investment in Gazprom, and the company became fully open to foreign investors.

On 20 July 2006, the Federal Law "On Gas Export," granting Gazprom exclusive right to export
natural gas was published. It was approved nearly unanimously by the State Duma on 5 July,
by the upper house, the Federation Council on 7 July and signed into law by President Vladimir
Putin on 18 July.

2007 and later

At the ceremony marking the opening of a LNG production plant built as part of the Sakhalin-
II project.

On 4 September 2012, the European Commission said it had launched an anti-trust case against
Gazprom. The Brussels-based competition watchdog said it opened the formal legal probe
based on "concerns that Gazprom may be abusing its dominant market position in upstream gas
supply markets."

On 21 May 2014, A 30 year deal between Gazprom and China's China National Petroleum
Corporation (CNPC) which was 10 years in the making is estimated worth $400 billion, The
agreement which was signed at a summit in Shanghai is expected to deliver some 38 billion
cubic meters of natural gas a year eastward to China's burgeoning economy, which will start
around 2018. Construction has already begun, with pipes for the Power of Siberia pipeline
delivered to Lensk, Yakutia in August 2014.

Notable acquisitions

In April 2001 Gazprom took over NTV, Russia's only nationwide state-independent television
station held by the oligarch Vladimir Gusinsky's Media-Most holding. In 2002 the Gazprom
subsidiary Gazprom Media acquired all of Gusinsky's shares in the companies held by Media-
Most.

In September 2005, Gazprom bought 72.633% of the oil company Sibneft (now Gazprom Neft)
for $13.01 billion, aided by a $12 billion loan, which consolidated Gazprom's position as a
global energy giant and Russia's biggest company. On the day of the deal the company was
worth £69.7 billion/US$123.2 billion.

In December 2006, Gazprom signed an agreement with Royal Dutch Shell, Mitsui and
Mitsubishi, taking over a half plus one share in Sakhalin Energy.
Faculty of Economics and Business Administration 8

In June 2007, TNK-BP, a subsidiary of BP plc, agreed to sell its stake in Kovykta field in Siberia
to Gazprom after the Russian authorities questioned BP's right to export the gas to markets
outside Russia. On 23 June 2007, the governments of Russia and Italy signed a memorandum
of understanding to cooperate on a joint venture between Gazprom and Eni SpA to construct a
558-mile (900 km) long gas pipeline to carry 1.05 trillion cubic feet (30 km3) of gas per year
from Russia to Europe.

At the end of November 2013, Gazprom expanded its media interests with the acquisition of
Profmedia from Russian metals tycoon Vladimir Potanin. In June 2014, Gazprom was in
negotiations with a 24.9 percent stake in the Austrian oil and gas firm OMV, held by Abu
Dhabi's International Petroleum Investment Co (IPIC).

3. The book value of the company

3.1. The book value of assets

The book value of assets

Balance Sheet
Restated Restated
Balance Sheet as of: Dec-31- Dec-31-
2009 dec-31-2010 dec-31-2011 2012 dec-31-2013 sep-30-2014
Currency EUR EUR EUR EUR EUR EUR
ASSETS
Cash And Equivalents 3.970,3 7.007,0 7.969,6 6.767,5 10.954,8 11.982,3
Short Term Investments 925,6 - 277,8 14,5 - 38,2
Trading Asset Securities 348,8 42,7 64,4 238,8 355,4 118,3
Total Cash & ST Investments 5.244,7 7.049,7 8.311,8 7.020,7 11.310,1 12.138,8

Accounts Receivable 6.255,6 6.362,6 8.541,6 10.400,5 11.941,8 9.878,8

Other Receivables 4.554,7 4.733,0 6.659,3 8.584,2 8.208,7 7.240,8
Notes Receivable 232,2 75,4 39,2 16,4 34,1 28,5
Total Receivables 11.042,5 11.171,1 15.240,0 19.001,1 20.184,6 17.148,1

Inventory 4.557,8 5.178,1 6.478,3 7.356,1 9.056,6 10.750,4

Prepaid Exp. - - - - - 1.717,7
Restricted Cash 77,4 58,3 61,6 87,9 6,4 25,6
Other Current Assets 5.894,6 6.204,0 5.521,1 5.016,6 4.948,8 5.213,4
Total Current Assets 26.817,0 29.661,2 35.612,9 38.482,4 45.506,5 46.994,1

Gross Property, Plant & Equipment 111.365,0 126.175,1 149.783,6 174.927,9 196.505,4 217.736,7
Accumulated Depreciation (39.178,9) (42.831,5) (46.948,0) (53.090,3) (59.254,5) (67.914,3)
Net Property, Plant & Equipment 72.186,1 83.343,6 102.835,6 121.837,6 137.250,9 149.822,3

Long-term Investments 15.329,5 15.079,0 14.260,8 11.172,3 11.423,1 12.775,3

Goodwill - 928,6 1.634,2 2.330,2 2.403,4 2.402,7
Other Intangibles 5.694,5 3.871,6 3.966,4 4.526,6 4.865,4 -
Accounts Receivable Long-Term 86,5 74,1 98,6 74,3 129,3 -
Loans Receivable Long-Term 1.224,0 1.181,6 1.077,3 1.090,2 1.062,0 9,6
Other Long-Term Assets 11.692,9 12.680,5 13.797,4 10.558,5 10.948,9 11.376,0
Total Assets 133.030,5 146.820,2 173.283,2 190.072,1 213.589,5 223.379,9
Faculty of Economics and Business Administration 9

The proportion of tangible assets and intangible assets in total value of assets:
Balance Sheet
Restated Restated
Balance Sheet as of: Dec-31- Dec-31-
2009 dec-31-2010 dec-31-2011 2012 dec-31-2013 sep-30-2014
Currency EUR EUR EUR EUR EUR EUR
Total Assets 133.030,5 146.820,2 173.283,2 190.072,1 213.589,5 223.379,9
Tangible assets 99.003,1 113.004,8 138.448,4 160.320,0 182.757,4 196.816,4
Intangible assets 5.694,5 4800,19399 5600,58399 6856,79094 7268,79705 2.402,7
The proportion of tangible
assets in total value of 74,4 77,0 79,9 84,3 85,6 88,1
assets
The proportion of intangible
assets in total value of 4,3 3,3 3,2 3,6 3,4 1,1
assets;
The proportion of tangible
and intangible assets in 78,7 80,2 83,1 88,0 89,0 89,2
value total of assets

3.2.The book value of liabilities

The book value of liabilities

Balance Sheet
Restated Restated
Balance Sheet as of: Dec-31- Dec-31-
2009 dec-31-2010 dec-31-2011 2012 dec-31-2013 sep-30-2014
Currency EUR EUR EUR EUR EUR EUR
LIABILITIES
Accounts Payable 3.427,0 3.589,4 4.375,5 4.340,7 4.487,4 13.312,6
Accrued Exp. 1.164,2 1.162,1 1.510,6 1.979,7 2.358,9 2.295,6
Short-term Borrowings 3.226,0 1.009,1 1.032,1 1.045,4 629,3 626,4
Curr. Port. of LT Debt 3.714,7 2.027,9 4.799,8 4.083,3 4.647,2 4.634,8
Curr. Income Taxes Payable 592,4 725,7 700,0 127,0 282,2 99,7
Other Current Liabilities 4.533,5 7.561,3 8.394,5 12.142,5 9.714,6 -
Total Current Liabilities 16.657,8 16.075,5 20.812,6 23.718,7 22.119,5 20.969,1

Long-Term Debt 18.901,7 17.874,0 18.651,3 18.725,5 23.367,9 26.832,2

Pension & Other Post-Retire. Benefits 582,6 1.336,3 1.520,9 3.151,6 3.150,7 3.075,9
Def. Tax Liability, Non-Curr. 5.111,1 5.295,8 6.402,0 7.054,9 8.884,1 9.653,8
Other Non-Current Liabilities 1.972,6 2.333,1 2.523,6 2.619,8 2.914,5 3.019,6
Total Liabilities 43.225,9 42.914,8 49.910,4 55.270,5 60.436,7 63.550,6

Common Stock 5.169,5 5.169,5 5.169,5 5.169,5 5.169,5 5.169,5

Additional Paid In Capital - - - - - -
Retained Earnings 80.348,7 95.184,9 114.206,6 122.501,1 143.233,1 151.401,2
Treasury Stock (1.656,5) (1.653,0) (1.662,9) (1.654,7) (1.652,0) (1.652,0)
Comprehensive Inc. and Other 811,4 648,0 931,7 3.870,5 1.398,4 -
Total Common Equity 84.673,1 99.349,3 118.644,8 129.886,3 148.149,1 154.918,7

Minority Interest 5.131,5 4.556,1 4.727,9 4.915,4 5.003,7 4.910,6

Total Equity 89.804,6 103.905,4 123.372,8 134.801,7 153.152,7 159.829,3

Total Liabilities And Equity 133.030,5 146.820,2 173.283,2 190.072,1 213.589,5 223.379,9
Faculty of Economics and Business Administration 10

3.3. The book value of equity

The book value of equity

Balance Sheet
Restated Restated
Balance Sheet as of: Dec-31- Dec-31-
2009 dec-31-2010 dec-31-2011 2012 dec-31-2013 sep-30-2014
Currency EUR EUR EUR EUR EUR EUR
Common Stock 5.169,5 5.169,5 5.169,5 5.169,5 5.169,5 5.169,5
Additional Paid In Capital - - - - - -
Retained Earnings 80.348,7 95.184,9 114.206,6 122.501,1 143.233,1 151.401,2
Treasury Stock (1.656,5) (1.653,0) (1.662,9) (1.654,7) (1.652,0) (1.652,0)
Comprehensive Inc. and Other 811,4 648,0 931,7 3.870,5 1.398,4 -
Total Common Equity 84.673,1 99.349,3 118.644,8 129.886,3 148.149,1 154.918,7

Minority Interest 5.131,5 4.556,1 4.727,9 4.915,4 5.003,7 4.910,6

Total Equity 89.804,6 103.905,4 123.372,8 134.801,7 153.152,7 159.829,3

3.4.The book value of shares

The book value of shares

Balance Sheet
Restated Restated
Balance Sheet as of: Dec-31- Dec-31-
2009 dec-31-2010 dec-31-2011 2012 dec-31-2013 sep-30-2014
Currency EUR EUR EUR EUR EUR EUR
Total Shares Out. on Filing Date 22.976,0 23.000,0 22.900,0 22.900,0 23.000,0 23.000,0
Total Shares Out. on Balance Sheet Date22.976,0 23.000,0 22.900,0 22.900,0 23.000,0 23.000,0
Book Value/Share 3,69 4,32 5,18 5,67 6,44 6,74
Tangible Book Value 78.978,5 94.549,1 113.044,3 123.029,5 140.880,3 152.516,1
Tangible Book Value/Share 3,44 4,11 4,94 5,37 6,13 6,63

4. The Investment policy of the company

The Gazprom Board of Directors approved the Company's current investment policy.

The Board of Directors noted that Gazprom was among the world's largest players in the energy
market and the absolute leader among Russian oil and gas companies in terms of investments.
In 2012 Gazprom Group's capital investments reached RUB 1.221 trillion according to the
International Financial Reporting Standards, while a number of leading domestic oil and gas
companies had at most RUB 0.5 trillion.

Significant investments are explained by the specifics of Gazprom's activities as compared to

other Russian oil and gas companies.

Gazprom is responsible for securing gas supplies to Russian consumers and meeting
international gas supply obligations. For this purpose the Company ensures reliable operation
and full-scale development of its production and gas transmission capacities, including the
Unified Gas Supply System of Russia – the world's largest gas transmission system.
Faculty of Economics and Business Administration 11

Gas is extracted under the conditions of declining production from the basic fields. The
Company annually increases capital investments in order to maintain the current level of
production.

Consistent efforts are made to develop the producing fields. In January 2013 the Company
brought the Zapolyarnoye field to its nominal capacity of 130 billion cubic meters of gas per
year, thus making it the most productive field in Russia.

In order to harmonize production growth with projected gas demand, Gazprom allocates
considerable funds into exploration and development of new fields. These activities shift
progressively towards Russia's hard-to-access regions that are remote from the main production
areas and devoid of the necessary infrastructure. Gazprom has built a greenfield production
facility at the Bovanenkovskoye field in Yamal. At present, the Company is engaged in
production from the Kshukskoye and Nizhne-Kvakchikskoye fields in Kamchatka and is about
to commission the Kirinskoye field in the Sea of Okhotsk offshore Sakhalin in 2013.

Gazprom invests substantial funds into gas transmission and storage projects, with over 50 per
cent of the Company's overall capital investments annually channeled for these purposes.
Gazprom lays gas transmission routes from new production regions, reconstructs operating gas
pipelines, improves their technical reliability and increases the capacity of underground gas
storage facilities. In 2012 Gazprom's major gas transmission projects were as follows:
Bovanenkovo – Ukhta, Ukhta – Torzhok, Gryazovets – Vyborg and Southern Corridor. Such
large-scale activities make it possible to ensure reliable gas transmission to consumers in Russia
and abroad.

In addition, Gazprom invests considerable funds into the upgrading and reconstruction of
existing gas and oil processing facilities, gasification of the Russian regions and construction
of socially–oriented facilities. For instance, the Company is the investor of the key sports and
infrastructure facility construction in Sochi as part of the preparations for the 2014 Winter
Olympic Games.

Gazprom's investment activities have significant influence on the national industry. The
Company is one of Russia's largest consumers of domestically produced goods – from basic
metallurgical products to high-tech equipment. For instance, new transmission routes contribute
to the development of the pipe sector, as 95 per cent of pipe products purchased by the Company
are manufactured by Russian companies.

Gazprom's Investment Program covers the activities of hundreds of companies, including those
operating in related sectors, and this permits to create new jobs. Besides, for many years
Gazprom has increased tax payments to the budgets of all levels. According to the 2012 results,
Gazprom became Russia's largest taxpayer with over RUB 1.9 trillion of payments.

In the coming decade the Company will face a wide range of crucial challenges. Those will be
related to the development of new fields in Yamal, Russia's eastern regions and northern seas,
upgrading and expansion of the Unified Gas Supply System, its development in Eastern Russia,
construction of new routes for mineral resource transportation, diversification of sales markets
and commercial products as well as build-up of advanced gas processing.

The Management Committee was tasked to continue large-scale investment projects with the
Company's participation.
Faculty of Economics and Business Administration 12

5. The evolution of revenues, expenditures, net income, dividends (the last years)

The evolution of revenues, expenditures, net income, dividends (the last years)
Income Statement
Reclassifie Reclassifie Reclassifie Reclassifie
d d d Restated d LTM
12 months 12 months 12 months 12 months 12 months 12 months
For the Fiscal Period Ending Dec-31- Dec-31- Dec-31- Dec-31- Dec-31- Sep-30-
2009 2010 2011 2012 2013 2014
Currency EUR EUR EUR EUR EUR EUR

Revenue 47.546,5 57.180,7 72.191,5 74.200,4 81.793,9 85.527,3

Other Revenue - - - - - -
Total Revenue 47.546,5 57.180,7 72.191,5 74.200,4 81.793,9 85.527,3

Selling General & Admin Exp. 4.973,1 6.629,7 425,8 383,5 431,9 1.239,0
Provision for Bad Debts - - 673,2 750,9 1.024,5 1.024,5
R & D Exp. 453,4 386,3 - - - 104,4
Depreciation & Amort. 3.516,3 3.969,3 - - - 543,2
Other Operating Expense/(Income) 7.023,8 7.963,1 6.602,5 1.039,5 1.325,2 2.860,5

Other Operating Exp., Total 15.966,7 18.948,3 7.701,6 2.173,9 2.781,6 5.771,8

Earnings of Discontinued Ops. - - - - - -

Extraord. Item & Account. Change - - - - - -
Net Income to Company 12.618,5 15.864,6 21.340,2 19.909,0 18.530,7 13.703,2

Minority Int. in Earnings (225,9) (467,9) (563,1) (444,2) (420,4) (402,0)

Net Income 12.392,7 15.396,7 20.777,0 19.464,9 18.110,3 13.301,3

Dividends per Share 0,04 0,06 0,14 0,1 0,11 0,11

Payout Ratio % 2,1% 5,7% 7,2% 16,1% 12,0% 21,1%

6. Financial Ratios of the company (last years)

Earnings per share

Earnings per share, also called net income per share, is a market prospect ratio that measures
the amount of net income earned per share of stock outstanding. In other words, this is the
amount of money each share of stock would receive if all of the profits were distributed to the
outstanding shares at the end of the year.

Earnings per share is also a calculation that shows how profitable a company is on a shareholder
basis. So a larger company's profits per share can be compared to smaller company's profits per
share. Obviously, this calculation is heavily influenced on how many shares are outstanding.
Thus, a larger company will have to split its earning amongst many more shares of stock
compared to a smaller company.

Earnings per share is the same as any profitability or market prospect ratio. Higher earnings per
share is always better than a lower ratio because this means the company is more profitable and
the company has more profits to distribute to its shareholders.

Although many investors don't pay much attention to the EPS, a higher earnings per share ratio
often makes the stock price of a company rise. Since so many things can manipulate this ratio,
investors tend to look at it but don't let it influence their decisions drastically.
Faculty of Economics and Business Administration 13

𝑁𝑒𝑡 𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠
EPS =𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐶𝑜𝑚𝑚𝑜𝑛 𝑆𝑡𝑜𝑐𝑘𝑠

Earning per
share

2009 2010 2011 2012 2013 2014

Net Earning 12.392,7 15.396,7 20.777,0 19.464,9 18.110,3 13.301,3
Common Stock 5.169,5 5.169,5 5.169,5 5.169,5 5.169,5 5.169,5
Earnings per share 1,90 1,05 1,94 0,62 0,92 0,52

Dividend per share

The dividend yield is a financial ratio that measures the amount of cash dividends distributed
to common shareholders relative to the market value per share. The dividend yield is used by
investors to show how their investment in stock is generating either cash flows in the form of
dividends or increases in asset value by stock appreciation.

Investors use the dividend yield formula to compute the cash flow they are getting from their
investment in stocks. In other words, investors want to know how much dividends they are
getting for every dollar that the stock is worth.

A company with a high dividend yield pays its investors a large dividend compared to the fair
market value of the stock. This means the investors are getting highly compensated for their
investments compared with lower dividend yielding stocks.

A high or low dividend yield is relative to the industry of the company. As I mentioned above,
tech companies rarely give dividends at all. So even a small dividend might produce a high
dividend yield ratio for the tech industry. Generally, investors want to see a yield as high as
possible.

𝐴𝑛𝑛𝑢𝑎𝑙 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑𝑠 (𝑓𝑜𝑟 𝑐𝑜𝑚𝑚𝑜𝑛 𝑠𝑡𝑜𝑐𝑘𝑠)

DPS= 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐶𝑜𝑚𝑚𝑜𝑛 𝑆𝑡𝑜𝑐𝑘𝑠

Dividend per share

2009 2010 2011 2012 2013 2014

Total Dividends 196,4 316,4 737,1 492,2 591,7 591,7
Common Stock 5.169,5 5.169,5 5.169,5 5.169,5 5.169,5 5.169,5
Dividends per
Share 0,04 0,06 0,14 0,1 0,11 0,11

Dividend payout ratio

The dividend payout ratio measures the percentage of net income that is distributed to
shareholders in the form of dividends during the year. In other words, this ratio shows the
portion of profits the company decides to keep to fund operations and the portion of profits that
is given to its shareholders.

Since investors want to see a steady stream of sustainable dividends from a company, the
dividend payout ratio analysis is important. A consistent trend in this ratio is usually more
important than a high or low ratio.
Faculty of Economics and Business Administration 14

Since it is for companies to declare dividends and increase their ratio for one year, a single high
ratio does not mean that much. Investors are mainly concerned with sustainable trends. For
instance, investors can assume that a company that has a payout ratio of 20 percent for the last
ten years will continue giving 20 percent of its profit to the shareholders.

Conversely, a company that has a downward trend of payouts is alarming to investors. For
example, if a company's ratio has fallen a percentage each year for the last five years might
indicate that the company can no longer afford to pay such high dividends. This could be an
indication of poor operating performance.

Generally, more mature and stable companies tend to have a higher ratio than newer startup
companies.

Annual Dividends per Share

𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑎𝑦𝑜𝑢𝑡 𝑟𝑎𝑡𝑖𝑜 = Annual Earnings per Share ∗100

Dividend payout ratio

2009 2010 2011 2012 2013 2014
Dividends per Share 0,04 0,06 0,14 0,1 0,11 0,11
Earnings per share 1,90 1,05 1,94 0,62 0,92 0,52
Dividend payout ratio 2,10% 5,70% 7,20% 16,10% 12,00% 21,10%

Earning Retention Ratio

The retention rate, sometimes called the plowback ratio, is a financial ratio that measures the
amount of earnings or profits that are added to retained earnings at the end of the year. In other
words, the retention rate is the percentage of profits that are withheld by the company and not
distributed as dividends at the end of the year.

This is an important measurement because it shows how much a company is reinvesting in its
operations. Without a steady reinvestment rate, company growth would be completely
dependent on financing from investors and creditors.

Since companies need to retain some portion of their profits in order to continue to operate and
grow, investors value this ratio to help predict where companies will be in the future.

Higher retention rates are not always considered good for investors because this usually means
the company doesn't give as much dividends. It might mean that the stock is continually
appreciating because of company growth however. This ratio helps illustrate the difference
between a growth stock and an earnings stock.

Annual Retained Earnings

𝐸𝑎𝑟𝑛𝑖𝑛𝑔 𝑅𝑒𝑡𝑒𝑛𝑡𝑖𝑜𝑛 𝑅𝑎𝑡𝑖𝑜 = ∗100
Annual Net Earnings

Earning Retention Ratio

2009 2010 2011 2012 2013 2014

Retained Earnings
80.348,7 95.184,9 114.206,6 122.501,1 143.233,1 151.401,2
Net Income
12.392,7 15.396,7 20.777,0 19.464,9 18.110,3 13.301,3
Earning Retention Ratio 97,90% 94,30% 92,80% 83,90% 88,00% 78,90%
Faculty of Economics and Business Administration 15

Return on Equity

The return on equity ratio or ROE is a profitability ratio that measures the ability of a firm to
generate profits from its shareholders investments in the company. In other words, the return
on equity ratio shows how much profit each dollar of common stockholders' equity generates.

So a return on 1 means that every dollar of common stockholders' equity generates 1 dollar of
net income. This is an important measurement for potential investors because they want to see
how efficiently a company will use their money to generate net income.

That being said, investors want to see a high return on equity ratio because this indicates that
the company is using its investors' funds effectively. Higher ratios are almost always better than
lower ratios, but have to be compared to other companies' ratios in the industry. Since every
industry has different levels of investors and income, ROE can't be used to compare companies
outside of their industries very effectively.

Many investors also choose to calculate the return on equity at the beginning of a period and
the end of a period to see the change in return. This helps track a company's progress and ability
to maintain a positive earnings trend.

𝑁𝑒𝑡 𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠
𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝑒𝑞𝑢𝑖𝑡𝑦 = 𝑇ℎ𝑒 𝐵𝑜𝑜𝑘 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝐸𝑞𝑢𝑖𝑡𝑦 ∗100

Return on Equity %

2009 2010 2011 2012 2013 2014

Total Equity
89.804,6 103.905,4 123.372,8 134.801,7 153.152,7 159.829,3
Net Income
12.392,7 15.396,7 20.777,0 19.464,9 18.110,3 13.301,3
Return on Equity % 15,03% 16,38% 18,78% 15,42% 12,87% 8,89%

Return on Assets

The return on assets ratio, often called the return on total assets, is a profitability ratio that
measures the net income produced by total assets during a period by comparing net income to
the average total assets. In other words, the return on assets ratio or ROA measures how
efficiently a company can manage its assets to produce profits during a period.

It only makes sense that a higher ratio is more favorable to investors because it shows that the
company is more effectively managing its assets to produce greater amounts of net income. A
positive ROA ratio usually indicates an upward profit trend as well. ROA is most useful for
comparing companies in the same industry as different industries use assets differently. For
instance, construction companies use large, expensive equipment while software companies use
computers and servers.

𝑁𝑒𝑡 𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠
𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝑒𝑞𝑢𝑖𝑡𝑦 = ∗ 100
𝑇ℎ𝑒 𝐵𝑜𝑜𝑘 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝐴𝑠𝑠𝑒𝑡𝑠
Faculty of Economics and Business Administration 16

Return on Assets
%
2009 2010 2011 2012 2013 2014
Total Assets 133.030, 146.820, 173.283, 190.072, 213.589, 223.379,
5 2 2 1 5 9
Net Income 12.392,7 15.396,7 20.777,0 19.464,9 18.110,3 13.301,3
Return on Assets % 6,54% 8,00% 10,27% 7,11% 7,83% 6,72%

7. The evolution of Market Value of share (the last years)

Market Capitalization

Market capitalization (or market cap) is the total dollar market value of the shares outstanding
of a publicly traded company; it is equal to the share price times the number of shares
outstanding. As outstanding stock is bought and sold in public markets, capitalization could be
used as a proxy for the public opinion of a company's net worth and is a determining factor in
some forms of stock valuation. The investment community uses this figure to determine a
company's size, as opposed to sales or total asset figures.

Market Capitalization = Share price * Number of shares outstanding

Market Capitalization

2009 2010 2011 2012 2013 2014

Share Price 2,3 2,3 2,0 2,2 2,2 2,4
Total Shares Out. 22.976,0 23.000,0 22.900,0 22.900,0 23.000,0 23.000,0
on Balance Sheet
Date
Market 53.181,2 53.155,6 46.808,1 49.854,5 49.434,9 54.111,8
Capitalization

Market to Book Value Ratio

Book-To-Market Ratio is a ratio used to find the value of a company by comparing the book
value of a firm to its market value. Book value is calculated by looking at the firm's historical
cost, or accounting value. Market value is determined in the stock market through its market
capitalization.

The book-to-market ratio attempts to identify undervalued or overvalued securities by taking

the book value and dividing it by market value.

In basic terms, if the ratio is above 1 then the stock is undervalued; if it is less than 1, the stock
is overvalued.

𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝𝑖𝑡𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛
M/B ratio = 𝐵𝑜𝑜𝑘 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝐸𝑞𝑢𝑖𝑡𝑦

Market to Book Value

Ratio

2009 2010 2011 2012 2013 2014

Market Capitalization 53.181,2 53.155,6 46.808,1 49.854,5 49.434,9 54.111,8
Total Equity 89.804,6 103.905,4 123.372,8 134.801,7 153.152,7 159.829,3
Faculty of Economics and Business Administration 17

Market to Book 0,6 0,5 0,4 0,4 0,3 0,3

Value Ratio

PER

The price earnings ratio, often called the P/E ratio or price to earnings ratio, is a market prospect
ratio that calculates the market value of a stock relative to its earnings by comparing the market
price per share by the earnings per share. In other words, the price earnings ratio shows what
the market is willing to pay for a stock based on its current earnings.

The price to earnings ratio indicates the expected price of a share based on its earnings. As a
company's earnings per share being to rise, so does their market value per share. A company
with a high P/E ratio usually indicated positive future performance and investors are willing to
pay more for this company's shares.

A company with a lower ratio, on the other hand, is usually an indication of poor current and
future performance. This could prove to be a poor investment.

In general a higher ratio means that investors anticipate higher performance and growth in the
future. It also means that companies with losses have poor PE ratios.

An important thing to remember is that this ratio is only useful in comparing like companies in
the same industry. Since this ratio is based on the earnings per share calculation, management
can easily manipulate it with specific accounting techniques.

PER=Market Value per Share / Earnings per Share (EPS)

PER

2009 2010 2011 2012 2013 2014

Share Price 2,3 2,3 2 2,2 2,2 2,4
Earnings per share 2,4 3 4 3,8 3,5 2,6
PER 1,0 0,8 0,5 0,6 0,6 0,9

8. Bibliography
1. http://www.gazprom.com/
2. http://ro.wikipedia.org/wiki/Gazprom
3. https://www.capitaliq.com/CIQDotNet/Login.aspx
4. http://www.investopedia.com/terms/p/payoutratio.asp