On 17 October 2003 OAO Gazprom issued its unaudited consolidated interim condensed financial information prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting” (IAS 34) for the three months ended 31 March 2003.  It is the first time that the Company has prepared and issued consolidated interim condensed financial information for the first quarter. 

The table below presents the unaudited IFRS consolidated interim condensed statement of operations for the three months ended 31 March 2003 and 31 March 2002.  Amounts for the three months ended 31 March 2002 are expressed in terms of the equivalent purchasing power of the Russian Rouble as of 31 December 2002.  As the characteristics of the economic environment of the Russian Federation indicated that hyperinflation had ceased, effective from 1 January 2003 we no longer apply the provisions of International Accounting Standard 29 “Financial Reporting in Hyperinflationary Economies” (IAS 29).  Accordingly, no adjustments for the effects of changes in general purchasing power have been made for the three months ended 31 March 2003.  All amounts are presented in million Russian Roubles, unless otherwise stated.

For the three months ended 31 March 2003 sales (net of excise tax, value added tax and customs duties) increased by RR 59,386 million to RR 232,250 million, or 34% compared to the three months ended 31 March 2002.  More detailed information on our sales in the three months ended 31 March 2003 and 2002 is presented in the table below.

Sales of gas increased 32% to RR 195,030 million in the three months ended 31 March 2003 compared to the three months ended 31 March 2002.  This increase was primarily due to higher prices and volumes for sales in Europe and Russia. 

The 13% increase in the average price of gas exported to Europe followed the increase in U.S. dollar oil prices in 2002 which more than offset the impact of the RR devaluation against the dollar continuing to lag behind inflation.  The 11% increase in export sales volumes relates to sales under existing long-term contracts.  The 46% increase in the average constant RR price for domestic gas sales followed the increase in domestic gas tariffs set by the Federal Energy Commission.  

Sales of gas condensate and oil and gas products increased by RR 7,189 million, or 60%, primarily due to higher oil products prices and the fact that OAO AK Sibur (“Sibur”) increased its level of operations.

Our operating expenses increased by 26% to RR 157,472 million for the three months ended 31 March 2003 as compared to the three months ended 31 March 2002.  This increase was primarily due to higher depreciation (RR 3,870 million), transit costs (RR 6,134 million), staff costs (RR 6,363 million) and costs of refined product processing (RR 3,520 million).  The increase in transit costs was primarily due to the increased volumes of gas sales to Europe, new transit contracts for gas from Central Asia and higher transportation tariffs in Poland.   

Our profit tax expense decreased by RR 36,740 million to RR19,895 million in the three months ended 31 March 2003 compared to the three months ended 31 March 2002.  The decrease primarily resulted as from 1 January 2003 we no longer need to apply the provisions of IAS 29, which in prior periods increased the book value of our fixed assets compared to their tax basis and resulted in a deferred tax expense.

Net profit for the three months ended 31 March 2003 amounted to RR 55,972 million, changing from the net loss in the three months ended 31 March 2002 and already higher than the net profit for the year ended 31 December 2002. 

Our net debt balance (defined as the sum of short-term borrowings and current portion of long-term borrowings, short-term promissory notes payable, long-term borrowings and long-term promissory notes payable as well as restructured tax liabilities net of cash and cash equivalents and balances of cash and cash equivalents restricted as to withdrawal under the terms of certain borrowings and other contractual obligations) decreased by RR 21,768 million or 5%, from RR401,673 million as of 31 December 2002 to RR 379,905 million as of 31 March 2003.  This was primarily due to the increase in cash and cash equivalents more than offsetting the increase in borrowings. 

More detailed information on the IRFS consolidated interim condensed financial information for the three months ended 31 March 2003 can be found on Gazprom’s web site(www.Gazprom.ru).

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