On 3 October 2006 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 2006.

A material factor impacting certain indicators in the consolidated financial information of Gazprom Group for the three months ended 31 March 2006 was the acquisition in October 2005 of OAO Sibneft (from June 2006 – OAO Gazprom neft).

The table below presents the unaudited consolidated interim condensed statement of operations for the three months ended 31 March 2006 and 2005. All amounts are presented in million Russian Roubles, unless otherwise stated.

	Three months ended
	31 March
	2006	2005
Sales (net of excise tax, VAT and customs duties)	585,777	339,181
Operating expenses	(355,267)	(220,414)
Operating profit	230,510	118,767
Finance income	36,569	14,969
Finance expenses	(18,552)	(14,252)
Share of net income of associated undertakings and jointly controlled companies	5,988	4,214
Gain on disposal of available-for-sale financial assets	1,215	815
Profit before profit tax	255,730	124,513
Current profit tax expense	(62,788)	(28,568)
Deferred profit tax	(2,043)	(3,548)
Profits tax	(64,831)	(32,116)
Profit for the period	190,899	92,397
Profit for the period attributable to:
Equity holders of OAO Gazprom	185,157	91,628
Minority interest	5,742	769
	190,899	92,397

Sales (net of excise, VAT and customs duties) increased by RR 246,596 million, or 73%, to RR585,777 million in the three months ended 31 March 2006 compared to the three months ended 31 March 2005. More detailed information on our sales for the three months ended 31 March 2006 and 2005 is presented in the table below.

in million RR (unless otherwise stated)	Three months ended 31 March
Sale of gas	2006	2005
Europe
Net sales (net of excise tax and customs duties)	228,340	152,572
Volumes in bcm	45.6	43.9
Average price, RR/mcm (including excise tax and customs duties)	6,906.8	4,739.6
FSU
Net sales (net of excise tax, VAT and customs duties)	61,236	24,182
Volumes in bcm	28.8	19.2
Average price, RR/mcm (including excise tax, customs duties and net of VAT)	2,528.1	1,520.2
Russia
Net sales (net of excise tax and VAT)	124,064	105,396
Volumes in bcm	111.5	106.2
Average price, RR/mcm (including excise tax and net of VAT)	1,120.7	1,003.1
Total sales of gas
Net sales (net of excise tax, VAT and customs duties)	413,640	282,150
Volumes in bcm	185.9	169.3
Net sales of oil and gas products (net of excise tax, VAT and customs duties)	98,623	33,825
Net sales of crude oil and gas condensate (net of excise tax, VAT and customs duties)	45,121	2,207
Gas transportation sales (net of VAT)	8,905	6,601
Other sales (net of VAT)	19,488	14,398
Total sales (net of excise tax, VAT and customs duties)	585,777	339,181

Net sales of natural gas increased by RR 131,490 million, or 47%, to RR 413,640 million in the three months ended 31 March 2006 compared to the three months ended 31 March 2005. This increase was primarily due to higher European and FSU prices for gas as well as higher volumes of sold gas.

Net sales of natural gas to Europe increased by RR 75,768 million, or 50%, to RR 228,340 million in the three months ended 31 March 2006 compared to the three months ended 31 March 2005. This was primarily due to higher average prices for gas to European customers and the 4% increase in the volume of sold gas.

Net sales of natural gas to FSU countries increased by RR 37,054 million, or 153%, to RR 61,236 million in the three months ended 31 March 2006 compared to the three months ended 31 March 2005. The increase of sales in this segment is explained higher average realized prices and higher sale volumes.

Net sales of natural gas in the domestic market increased by RR 18,668 million, or 18%, to RR 124,064 million in the three months ended 31 March 2006 compared to the three months ended 31 March 2005. This is explained primarily by increased average domestic price for gas set up by the Federal Tariff Service, and increased volumes.

In the three months ended 31 March 2006 sales of oil and gas products increased by RR 64,798 million, or 192%, primarily due to increased market prices for oil and gas products in the three months ended 31 March 2006 compared to the three months ended 31 March 2005, as well as the inclusion of Gazprom neft Group in the consolidated financial information.

In the three months ended 31 March 2006 net sales of crude oil and gas condensate increased by RR 42,914 million. The increase of sales in this segment is explained by the inclusion of Gazprom neft Group in the consolidated financial information of Gazprom Group for the three months ended 31 March 2006.

Operating expenses increased by RR 134,853 million, or 61%, to RR 355,267 million in the three months ended 31 March 2006 compared to the three months ended 31 March 2005.

This increase in operating expenses was primarily due to higher expenses on purchased oil and gas (RR 40,104 million, including Gazprom neft RR 15,482 million), higher taxes other than on income (RR 26,194 million, including Gazprom neft RR 20,834 million), higher expenses on transit of gas, oil and refined products (RR 14,330 million, including Gazprom neft – RR 9,593 million.), higher depreciation (RR 11,299 million, including Gazprom neft – RR 7,364 million), higher expenses on goods for resale, including refined products (RR 11,296 million, including Gazprom neft – RR 11,149 million), higher staff costs (RR 10,682 million). The increase in the cost of purchased oil and gas was primarily related to higher purchases of gas in Central Asia and appearance of a new type of expenses - “purchased oil” - due to consolidation of Gazprom neft Group. The increase in taxes other than on income was primarily due to consolidation of Gazprom neft Group and changes in tax legislation related to natural resources production tax and enacted from 1 January 2006. The increase in expenses on transit of gas, oil and refined products was primarily due to consolidation of Gazprom neft Group as well as general increase in gas volumes sold to Far Abroad and the growth of transit tariffs. The increase in depreciation relates to consolidation of Gazprom neft Group. The increase in expenses on the purchase of goods for resale, including refined products is explained by consolidation of Gazprom neft Group. The increase in the staff costs resulted from the increase in average base salaries and other payments and the increase in average number of employees.

The profit tax increased by RR 32,715 million, or 102%, to RR 64,831 million in the three months ended 31 March 2006 compared to RR 32,116 million for the three months ended 31 March 2005. Our effective current profit tax rate for the three months ended 31 March 2006 was 25.4% compared to 25.8% for the three months ended 31 March 2005.

In the three months ended 31 March 2006 our profit for the period attributable to equity holders of OAO Gazprom totaled RR 185,157 million which is RR 93,529 million, or 102%, higher compared to the three months ended 31 March 2005.

Our net debt balance (defined as the sum of short-term borrowings, current portion of long-term borrowings, short-term promissory notes payable, long-term borrowings, long-term promissory notes payable and 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 130,069 million, or 16%, from RR 797,465 million as of 31 December 2005 to RR 667,396 million as of 31 March 2006. This can be explained primarily by decreased sum of long-term borrowings and increased sum of cash resulting from increased cash inflow from operating activities.

More detailed information on the IFRS consolidated interim condensed financial information for the three months ended 31 March 2006 can be found here.