January 19, 2017 / 11:40 AM / 2 years ago

UPDATE 3-Gazprom shares hit by dividend prospects despite swing to profit

* Gazprom shares down more than 1.7 pct

* Q3 net income at 102.2 bln roubles, above forecasts

* Gazprom sees its gas prices in Europe rising in 2017 (Adds company comment, update share prices)

By Vladimir Soldatkin and Oksana Kobzeva

MOSCOW, Jan 19 (Reuters) - Russian energy giant Gazprom’s forecast-beating quarterly profit on Thursday failed to prevent a drop in its share price as a shift in government policy raised the possibility of lower than expected dividends at the state-controlled company.

Gazprom shares were down more than 1.7 percent in late Moscow trading, dragging the broader stock market index lower, after reports that the government has backtracked on plans to oblige state-controlled companies to increase dividend payouts to 50 percent of net profit.

The government won’t force companies to pay more than 25 percent of their profit in dividends, two government sources told Reuters, confirming a Bloomberg report.

“I saw headlines about the 25 percent dividends today. Certainly that is pushing the prices down,” said German Nikonenko, the head of UralSib Capital trading.

The government’s previous proposal had been aimed at boosting the state’s dividend take to bolster public finances battered by lower oil prices. However, Moscow has faced strong lobbying against the measure from companies including Russia’s largest oil producer Rosneft, headed by Igor Sechin, a long-standing ally of President Vladimir Putin.

Gazprom had earlier reported profit of 102.2 billion roubles ($1.7 billion) in the three months to Sept. 30, against a loss of 2 billion roubles a year earlier and a consensus profit forecast of 100.2 billion roubles in a Reuters poll of analysts.

The company cited the beneficial effect of a stronger rouble, which reduces the valuation of foreign currency loans.

Third-quarter sales fell to 1.26 trillion roubles from 1.29 trillion a year earlier as gas sales to Europe, Gazprom’s key market, slipped to 570 billion roubles because of lower rouble-denominated prices.

Gazprom supplies more than a third of Europe’s gas. Its gas exports to Europe and Turkey jumped by 12.5 percent last year to a record high of 179.3 billion cubic metres as buyers capitalised on lower gas prices, which are pegged to oil prices with a lag of six to nine months.

A Gazprom official told a conference call that the company expects its average gas price in Europe this year to be higher than 2016’s $167-$171 per 1,000 cubic metres.

The official attributed the estimate to forecasts for a cold winter, declining production in the Netherlands and an expected influx of liquefied natural gas (LNG) from the United States and Australia.

Last week Gazprom’s Deputy Chief Executive Valery Golubev acknowledged for the first time that the company’s dominant position in the European gas market could be threatened by compettion from American LNG because of potential changes to U.S. energy policy under Donald Trump’s administration. ($1 = 59.2800 roubles) (Additional reporting by Zlata Garasyuta; Editing by Jason Neely and David Goodman)

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