Gazprom – Joint Stock Company

  • Total number of Gazprom Group personnel — 459.6 thousand people
  • State-controlled stake — over 50% of the shares
  • Dividends for 2014 (as recommended) — RUB 7.2 per share

What is Gazprom?

Open Joint Stock Company (OAO) Gazprom is a global energy company focused on natural gas, gas condensate and oil exploration, production, transportation, storage, processing and marketing (including gas marketing as a vehicle fuel) as well as thermal and electric power generation and sales.

OAO Gazprom is the successor of the proprietary rights and obligations of State Gas Concern Gazprom, including its rights to use land, subsurface reserves, natural resources as well as rights and commitments under the agreements concluded by the Concern.

Gazprom holds the world’s richest natural gas reserves. Its share in the global and Russian gas reserves totals 17% and 72% respectively. Gazprom owns the world’s largest network of gas trunklines (170.7 thousand km long), most of which are tied together into the Unified Gas Supply System (UGSS) of Russia.

In accordance with the Russian Federation President’s Decree of November 5, 1992 the Company is vested with the obligations as follows:

  • providing reliable gas supply to consumers in the Russian Federation;
  • exporting gas under interstate and intergovernmental agreements;
  • pursuing an integrated sci-tech and investment policy with regard to the UGSS upgrade and development;
  • building and financing high pressure gas branches in order to gasify rural areas;
  • exercising control over the UGSS;
  • providing other producers with access to the national gas transmission system.
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When was OAO Gazprom founded?

On February 17, 1993 State Gas Concern Gazprom was transformed into Russian Joint Stock Company (RAO) Gazprom pursuant to the Russian Federation Government’s Directive in compliance with the Russian Federation President’s Decree of November 5, 1992. RAO Gazprom was reincorporated into an open joint stock company in 1998.

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What companies is Gazprom Group comprised of?

As a vertically integrated energy business, Gazprom Group is comprised of the parent company – OAO Gazprom – and its specialized subsidiaries engaged in gas, oil and other hydrocarbons production, transportation, processing and marketing, underground gas storage, thermal and electric power generation and sales as well as other activities including pipeline system monitoring, equipment supply and repairs, R&D and information processing.

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How many people are employed by Gazprom Group?

Personnel structure of Gazprom Group in 2014 by categories
Personnel structure of Gazprom Group in 2014 by categories

As of late December 2014 the total number of Gazprom Group’s personnel amounted to 459.6 thousand people.

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How was OAO Gazprom privatized?

RAO Gazprom (since 1998 – OAO Gazprom) was privatized fully in line with the Russian privatization laws as well as the Decrees and Directives of the Russian President, and the Resolutions of the Council of Ministers – the Government of Russia.

At the time RAO Gazprom was founded, 100% of the Company’s shares were held by the Russian Federation. As a result of the stock sale between 1993 and 1995, 41% of the shares remained under the state ownership, 10% were acquired by Gazprom in exchange for privatization vouchers, 15% were acquired by the Company’s current and former employees in exchange for vouchers (at least 50% payment) as well as for cash, 32.9% were acquired by residents of 60 Russian regions in exchange for vouchers and 1.1% were handed over to OAO Rosgazifikatsiya. A total of 8.3 million privatization vouchers and around RUB 17 billion were paid for Gazprom’s shares. 1 million 30 thousand Russian citizens became the Company’s shareholders.

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What are the rights of Gazprom’s shareholders?

Just like shareholders of other joint stock companies, Gazprom’s shareholders are basically entitled to:

  • participate in the General Shareholders Meeting with a voting right on all issues within the General Shareholders Meeting competence;
  • receive dividends.

A 2% ownership stake enables the shareholder or a group of the Company’s shareholders to nominate candidates for the Gazprom Board of Directors and Audit Commission as well as to propose items to be included in a shareholders meeting agenda. The shareholder or the group of shareholders possessing a 10% ownership stake may call for an extraordinary shareholders meeting of Gazprom to be summoned.

In order to efficiently protect the rights and interests of its shareholders, Gazprom was one of the first Russian companies to adopt the Code of Corporate Governance (Conduct) in 2002. The document sets out the basic principles and mechanisms enabling the shareholders to exercise their rights as well as creating conditions for the Board of Directors to efficiently control the activities of Gazprom’s executive bodies, i.e. the Management Committee and the Management Committee Chairman. In addition to the Code requirement for corporate data disclosure to the shareholders, the Board of Directors adopted OAO Gazprom Provision on Information Disclosure.

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Does the Company provide financial support to its shareholders?

The Company participates in and arranges numerous charitable and sponsorship events aimed at developing culture, sports, science and education, it also assists socially disadvantaged citizens.

The Company does not provide any direct financial support to its shareholders.

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How is OAO Gazprom Management Committee formed?

The Chairman and the Members of the Company’s Management Committee are elected for a 5 year term by the Board of Directors entitled to early termination of their powers.

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How is the size of dividends payable on OAO Gazprom shares determined?

The dividend size depends on OAO Gazprom’s net profit calculated under the Russian accounting standards in compliance with the Russian laws and regulations. The net profit is determined by the Company’s operating and financial results.

The Company’s Dividend Policy was approved by the Board of Directors on October 27, 2010.

The Dividend Policy sets out the following procedure for the net profit distribution in a reporting period.

Under the Company’s Articles of Association a part of the net profit is used to form the reserve fund until the latter reaches the size specified in the Articles (7.3% of the authorized capital).

A 10% share of the net profit is reserved for dividend payouts.

40% to 75% of the net profit is reserved for the Company’s investment purposes.

The remaining share of the net profit is divided into equal parts for paying out dividends and forming a reserve for investment purposes.

The net profit intended for dividend payouts may be adjusted for the amount of Gazprom’s financial investments revaluation. This enables the Company to allocate the profit secured by the real cash flow for dividend payouts and investment purposes.

The Dividend Policy contains a provision on the dividend payouts (from 17.5% to 35% of the net profit provided that the reserve fund is formed).

The decision on the payout of annual dividends, including the dividend size and payout method, is adopted by the Shareholders Meeting on the Board of Directors’ recommendation. The size of annual dividends should not exceed the amount recommended by the Board of Directors.

In May 2015 the Board of Directors recommended that the annual General Shareholders Meeting approve the proposal to pay out RUB 7.2 per share in annual dividends based on Gazprom’s operating results for 2014.

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Are there any preferred shares issued by Gazprom?

The share emission prospectus did not originally provide for any preferred shares issue. All the shares of Gazprom are ordinary ones.

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Who performs independent audit of Gazprom?

An independent auditor of OAO Gazprom is appointed through an annual competitive procedure. The procedure results are considered by the Board of Directors of Gazprom, and the auditor’s candidacy is approved at the annual General Shareholders Meeting.

In May 2015 the Gazprom Board of Directors recommended that the annual General Shareholders Meeting approve FBK as the Company’s auditor for 2015.

FBK is one of Russia’s leading national audit and consulting groups, which provides services in six key areas: audits according to RAS and IFRS; tax and law; valuation; finance, accounting, management and IT-consulting; outsourcing; business education. FBK has partnered Gazprom since 1996 and currently renders services to nearly 80% of its subsidiaries.

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Who owns Gazprom shares?

The number of Gazprom’s shareholders in Russia and abroad totals several hundred thousand. The Russian Federation Government controls over 50% of the Company’s shares.

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OAO Gazprom share capital structure as of December 31, 2014, %
  Share
The Russian Federation represented by the Federal Agency for State Property Management 38,37
OAO Rosneftegaz 10,97
OAO Rosgazifikatsiya 0,89
ADR holders 28,05
Other registered persons and entities 21,72
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Where can one buy (sell) OAO Gazprom shares?

Gazprom shares can be bought from their legal holder. Shares can be acquired under a sales and purchase agreement drawn up as per the applicable legislation with subsequent re-registration of proprietary rights in a register keeper’s office (depository) at the legal holder’s banking account location. The Company’s shares can also be bought or sold at Gazprombank offices.

Additionally, one can buy or sell Gazprom shares through a professional stock exchange broker. As a rule, such services are offered by investment companies and commercial banks.

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What does ADR stand for?

ADR is an American Depositary Receipt publicly traded mostly in foreign stock markets and issued against shares of a non-US company deposited with a US bank. ADR is an instrument of international stock trade. ADRs for Gazprom’s shares are issued to ensure the circulation of the Company’s shares by means of the foreign stock markets infrastructure. Before April 18, 2006 one ADR represented 10 shares of Gazprom. Subsequently, the number of the Company’s ordinary shares per an ADR was reduced from ten to four. Since April 18, 2006 it has been possible to convert OAO Gazprom ordinary shares into ADRs and vice versa.

Starting from April 21, 2011 the number of Gazprom ordinary shares per an ADR was reduced from four to two. Previously outstanding shares were automatically converted according to the new ratio. This step allowed to open up access to Gazprom’s ADRs for a wider range of investors and to increase the liquidity of receipts.

At present, Gazprom’s depositary receipts are traded in the London Stock Exchange, the US over-the-counter stock market, the Moscow Exchange, the Berlin and Frankfurt Stock Exchanges as well as the Singapore over-the-counter stock market. As of late 2014, 28.05% of Gazprom’s shares were floating in the form of ADRs.

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How can Gazprom shareholder convert his/her ordinary shares into ADRs?

Gazprom ADR Program provides any shareholder with the opportunity to convert the Company’s shares into Gazprom’s ADRs. For this purpose the shares are to be deposited with a local custodian bank (currently Gazprombank), and then the Bank of New York Mellon (ADR Program depository bank) issues a relevant amount of ADRs to the shareholder’s account opened with a foreign bank. Since this depositing procedure requires a thorough understanding of the entire process (including respective paperwork, fees and timing), it is more expedient to vest the conversion operation in a securities market professional – a brokerage company or a bank that will take all necessary actions at the shareholder’s request.

At the same time, it is noteworthy that upon receipt of an ADR the shareholder becomes the owner of a foreign security and is liable to the Russian Federation currency laws.

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Can a shareholder of Gazprom sell shares in a foreign market?

Gazprom’s shares are traded as ADRs in foreign markets. Therefore, in order to be sold in a foreign market, shares are to be converted into ADRs first. It is reasonable to vest the conversion operation in a professional equity market player – a brokerage company or a bank that, at the shareholder’s request, will take all necessary actions.

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