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3 Apr, 2013 12:17

Gazprom market value below $100 billion for first time since 2009

Gazprom market value below $100 billion for first time since 2009

The value of Russia’s largest natural gas producer Gazprom has slipped below $100 billion for the first time in four years due to growing costs and sliding profit. 

The last time the company was valued so cheaply was in July 2009, after the 2008 credit crunch. 

By the end of the trading sessions in Moscow and London on April 2 Gazprom shares lost 1.5% and 2.7% respectively, which both put the market value at about $99 billion. On the Russian market share price slipped to 130.81 roubles – the lowest price in four years. 

American depositary receipts of Gazprom lost 2.9% to $8.25 in New York yesterday, pushing the market value of Russia’s gas export monopoly to $97.7 billion, Bloomberg reports. 

Gazprom remains Russia’s biggest and most valued company, but has failed to meet goals announced by its head Aleksey Miller five years ago. In June 2008 when Gazprom was valued at $360 billion, Miller said that in the upcoming 7-8 years Gazprom would become the world's largest company with a market capitalization of $1 trillion. 

Gazprom has lost about a third of its market value over the past year due to rising costs and sliding profit. The decline of the expected dividend yield is essential to foreign investors who look at this indicator and react to it influencing the price significantly, Oleg Popov of Allianz Investment told Vedomosti. 

Since the beginning of 2013 Gazprom shares have dropped 0.2%. Over last year Gazprom also has been facing significant decline. 

At the beginning of 2012 the company was hit by increased tax on natural resources production, suggested by the then PM Vladimir Putin. Private-owned gas producers avoided the tax increase, while Gazprom saw the tax double. 

Later in the year Gazprom was forced by its largest European customer - Germany's E.ON – and a number of other foreign buyers to reduce prices leading to a decline in revenue. 

The decision to expand to the East to enter the Chinese market also became a major hit on the company’s market value. Despite the pricey eastern project Gazprom also investged in another huge project – the South Stream pipeline - part of Gazprom’s plan to diversify the Russian natural gas supply routes.

Also Gazprom is currently expanding the Nord Stream pipeline. It has agreed to cooperate with Dutch natural gas firm Gasunie. The Dutch said on Wednesday it would sign up to extend Gazprom’s supply network to western Europe and build a third branch of the Nord Stream pipeline, Reuters reports.

As a result according to the company’s financial statement for 2012 under the Russian Accounting Standard, Gazprom’s profit fell 37%, weighing on its dividend outlook. Net income totaled 556 billion roubles ($17.9 billion).