LONDON (AP) - OAO Lukoil became the first Russian company to list its shares on the London Stock Exchange, but its debut Thursday was undercut by the Russian government's abrupt decision not to sell a 5.9 percent stake in the business.
Russia is the world's second-largest source of crude after the United States, and Lukoil is Russia's single biggest producer.
Lukoil called its share listing a milestone in its efforts to improve financial transparency and strengthen corporate governance. Although American Depositary Receipts for its shares had already been listed in London, the company needed to satisfy stricter rules about the disclosure of financial information before the actual trading of shares could begin, Lukoil executives told a news conference.
Nonetheless, the share listing lost much of its significance after the Russian government announced late Wednesday that it was putting its privatization plans for Lukoil on hold. The effect was to leave Lukoil with no shares to offer on its maiden day of trading.
Russian government officials at the London news conference said the privatization of Lukoil shares would proceed in time, though they offered no details.
"We will sell off the shares. There is no doubt about that," said Vladimir Malin, chairman of the Russian Federal Property Fund.
The Russian government pulled out of the planned sale because it was unhappy with the price investors had indicated they would pay. Russian Deputy Property Minister Alexander Braverman said the market price was slightly below what the government was seeking for its 50 million Lukoil shares.
Malin suggested that potential investors hadn't taken into account the company's full potential.
"Unfortunately, the investors valued the company looking at the past," he said. "For our part, we would like investors to regard the company looking toward today."
Braverman insisted that the reversal on Lukoil shares did not represent a setback to the government's overall plan to privatize many of its remaining state-owned businesses.
"The government's policy toward privatization has not changed. It stays the same," he told reporters.
Lukoil President Vagit Alekperov said the company underwent intense scrutiny before it could list its shares on the London exchange. Pressure on Lukoil's competitors to improve their transparency and corporate governance would likely increase as a result, he said.
Malin said the London Stock Exchange has especially strict requirements for the listing of shares, stricter even than major U.S. stock markets.
"This is why we came to London," he said.
The Russian government has given no sign, Alekperov said, that it wants Lukoil and other Russian oil companies to moderate their output in support of OPEC's effort to keep prices firm by restricting production.
Russia agreed to trim its exports by 150,000 barrels a day during the first three months of the year, at the request of the Organization of Petroleum Exporting Countries. It ended this cooperation after March, and Russian exports have resumed their upward trend.
Lukoil accounts for more than 20 percent of Russia's oil exports.