The Board of Directors took notice of the information on Gazprom's debt management strategy, debt structure, costs and mechanisms of financial resources attraction and approved of the ongoing activities aimed at the Company's debt portfolio management.

The meeting noted that the Company continued its efficient work on the debt portfolio management. The key debt ratios are at the same level with the world's leading oil and gas companies and are comfortable for Gazprom.

For instance, the total debt-to-EBITDA (earnings before interest, taxes, depreciation and amortization) ratio remains low: after 6 months of 2012 it equaled 0.9. It is expected that by the end of 2012 it will stay at the current level.

The EBITDA-to-interest ratio is steadily high: according to the results of the first half of 2012, EBITDA was 56 times higher than the interest expenses. In its turn, the debt-to-equity ratio remains steadily low and in the said period it equaled 21 per cent.

Over the recent years, against the background of the unstable global economy and financial markets, Gazprom has been flexibly diversifying its borrowing policy according to the market behavior. The Company refinances its liabilities, lowering their servicing costs, maintains the appropriate level of the debt load, controls the borrowing policies of strategically important companies in Gazprom Group. Moreover, the Company manages the liquidity in a flexible way, that is, repays borrowings as soon as practical and deposits the available temporary surplus funds. During a steady surplus period, the Company favors a balanced approach to external borrowings.

All of the above mentioned measures help Gazprom retain credit ratings at the investment level, form a debt portfolio structure close to optimal as well as optimize the targeted use and periods of the borrowings raised.

In the future, Gazprom is planning to expand the use of internal borrowings and the cash pooling mechanism (a system of centralized cash flow management in the Group) prior to external borrowings. Moreover, the Company is going to gradually centralize external borrowings to minimize the fundraising costs. The Management Committee will submit Long-Term Borrowing Principles of Gazprom to 2020 to the Board of Directors for approval.

Background

According to Gazprom's consolidated IFRS statement for 6 months of 2012, the total debt of Gazprom Group, as compared with the beginning of the year, decreased by 0.9 per cent or RUB 13 billion – to RUB 1.527 trillion as of June 30, 2012.

Gazprom's current credit rating as well as the rating forecast from the three primary international rating agencies – Fitch Ratings, Moody's and Standard&Poors – corresponds to the sovereign one. Over the last six years, the credit rating has been at the investment level that enables the Company to maintain a low debt cost and expand its pool of investors. From the point of view of primary rating agencies, of all Russian oil and gas companies Gazprom has the highest credit quality.

The strategic principles of debt financing in Gazprom include, inter alia, diversification of sources, application of a wide spectrum of borrowing tools, reduction of the debt cost and smothering the repayment profile, minimization of the secured borrowings share, balancing the currency composition of the debt and profit amounts, expansion of the pool of banks and investors. In addition, these principles include the use of hedging tools for the debt portfolio optimization, currency and interest rate risks mitigation.