By Thomas Grove and Andrey Ostroukh 

MOSCOW--Russian gas giant OAO Gazprom on Wednesday said net profit plunged by 86%, or nearly $20 billion, in 2014 due to the weakness of the ruble and one-off charges, but analysts said underlying profitability looked strong.

Largely shrugging off Western sanctions on Russia over the crisis in Ukraine, Gazprom, which sells its gas in dollars and reports its profit in rubles, was able to generate record cash flow of $17.2 billion, helped by the ruble's nearly 50% fall against the dollar last year.

"If you clean up the numbers from one-offs, impairments charges in the fourth quarter and the foreign exchange loss, there is a positive net income," said Ildar Davletshin at Renaissance Capital. "Underlying profitability looks strong."

The company reported full year net profit at 159 billion rubles ($3.1 billion).

Gazprom, which is facing European Union sanctions on drilling and has been restricted in U.S. financial markets, said its operations were largely unaffected by the Western measures.

The gas giant said it had secured loans from Russian and European lenders, including a EUR350 million loan from Intesa Sanpaolo SpA due in 2016 and a $500 million loan due in 2018 from a consortium of banks, among whom J.P. Morgan Europe Ltd. was the appointed bank agent.

"The Group continues to assess and monitor the impact of the ongoing sanctions but currently does not believe they have a significant impact on the financial position and results of operations," Gazprom said in its results.

One of the largest contributors to Russian gross domestic product, Gazprom saw a fall in sales volumes across its markets, including at home as Russian economic activity slows.

Gazprom shares closed 0.29% at 152.50 rubles.

It also reported a slowdown in volumes sold to Europe, highlighting chronic problems the company faces in its biggest market.

The company exported 159.4 billion cubic meters to Europe in 2014, compared with 174.3 billion a year earlier, although a higher-than-expected price of $353 per thousand cubic meters offset the fall, Mr. Davletshin said.

Gazprom's uphill battle in Europe, its biggest market, depends largely on the fate of EU charges filed against the energy behemoth for allegedly abusing its dominant market position and charging unfair prices in central and Eastern Europe.

Interconnecting pipelines between EU countries and a rise in the continent's use of liquefied natural gas has also eased the stranglehold Russia has held on Europe for decades, forcing Gazprom to change its longtime rigid business model.

Gazprom said gas prices for Europe would be $289 per 1,000 cubic meters in the first quarter of this year and likely be $242 for the same volume during the full year at an estimated Brent price of $55 per barrel.

Deputy Chairman Alexander Medvedev said European gas exports were expected at 152 bcm-153 bcm. While Mr. Medvedev said shipments this year are so far running above last year's rate, his full year estimate would represent a decline from Gazprom's reported exports.

Deputy Chief Accountant Mikhail Rosseev said the company would invest 1.6 trillion rubles in 2015, slightly higher than the 1.4 trillion it spent last year.

Gazprom said ruble currency weakness pushed its net debt 48% higher to 1.65 trillion rubles.

Russia's ruble plummeted last year, losing around half of its value against the dollar, due to lower oil prices and a crisis of confidence in the currency following Western sanctions on Russia over the crisis in Ukraine.

The company said it suffered a 40 billion ruble write off for debts from Ukraine and Moldova and faced a 124 billion ruble impairment provision on its domestic assets.

Gazprom has been arguing with Naftogaz over energy prices to the former Soviet republic following the ouster of pro-Russian President Viktor Yanukovych.

Write to Andrey Ostroukh at andrey.ostroukh@wsj.com

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