[lbo-talk] YUKOS plus Sibneft - a possible oil supermajor

ChrisD(RJ) chrisd at russiajournal.com
Sun Apr 20 08:42:31 PDT 2003


YUKOS plus Sibneft - a possible oil supermajor By Dmitry Zhdannikov

MOSCOW, April 20 (Reuters) - A merger between Russia's second and fifth largest oil firms, YUKOS and Sibneft, were it to take place, would create an industry colossus to rival the biggest global players.

The combined company would produce more than 2.2 million barrels per day (bpd) of crude oil, on a par with OPEC member Kuwait, and close to the world's fourth and fifth largest oil firms, ChevronTexaco and TotalFinaElf.

And analysts said such a formidable global competitor could soon climb to the world top three position given YUKOS's and Sibneft's strategy to maintain double-digit production growth at least until 2005.

ExxonMobil, Royal Dutch/Shell and BP are now the top three oil firms in the world.

"The merger seems to be logical and, if it happens, international giants such as ExxonMobil or BP will have something to worry about," said Steven Dashevsky from Aton brokerage.

Industry and banking sources said on Friday that YUKOS and Sibneft could announce a merger as soon as next week, a move which would dislodge LUKOIL as Russia's largest oil producer.

YUKOS's main shareholders, including CEO Mikhail Khodorkovsky, would get a controlling stake in a firm with a market capitalisation of around $35 billion.

Sibneft's shareholders, including the powerful governor of the remote eastern region of Chukotka, Roman Abramovich, would get a blocking stake and a cash payment of up to $1.4 billion.

Both YUKOS and Sibneft said they would not comment on "market speculation."

YUKOS and Sibneft are the fastest growing oil firms in Russia and currently produce 1.6 million bpd and 600,000 bpd respectively.

They control or operate a total of 10 refineries in Russia, Belarus and Lithuania with refining capacity of above 2.0 million bpd and a network of 2,000 petrol stations.

YUKOS controls reserves of 12.5 billion barrels of oil under international standards while Sibneft has some 8.2 billion barrels of crude oil reserves, excluding substantial reserves of the freshly acquired oil firm Slavneft.

The two companies are already among the world leaders in terms of production costs. It cost YUKOS $1.67 to produce one barrel of crude in 2002 and Sibneft $1.75, half the level of ExxonMobil and Shell.

"If the merger happens I can't see many synergies on the production side as there is not much fat to cut. Some synergies could be found in refining and lay-offs," said Kaha Kiknavelidze from Troika Dialog.

He added that the move was probably also aimed at preventing another acquisition of Russian oil assets by an international giant after BP in February bought a 50-percent stake in Russia's third-largest oil firm, TNK, for $6.75 billion.

Sibneft's shares have rallied over the past weeks on rumours that Total, Shell or Exxon were seeking to acquire a stake in it.

"It could be a defensive play. By merging with Sibneft today YUKOS guarantees that in the long-term the combined firm would reign in the Russian market alongside with LUKOIL and BP," said Kiknavelidze.



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