Rosneft's CEO Sergei Bogdanchikov set out a number of the company's strategic goals in his statement on Wednesday. According to Bogdanchikov, Rosneft's capitalization could surge over 20% in 2007 and the bulk of this growth will be achieved through organic growth, not M&A deals. Rosneft plans to bid for extraction licenses in Eastern Siberia and will run for an unlicensed Sakhalin-3 block in the event that the Russian government puts it up for sale. Rosneft still has to decide whether to vie for Yukos assets or not, but could eye production units elsewhere and “at a price which envisages margins of over 20%”. Rosneft's spokesman N. Manvelov said later that day that the company is prepared to examine the possibility of taking part in an auction to sell a 9.44% stake in Rosneft in March 2007, one of the first Yukos assets to go under the hammer, and has never denied its interest in this stake.
For the record, Rosneft (together with the Russian government which holds a controlling stake in the company) is the largest creditor of bankrupt Yukos and is widely viewed as one of the key beneficiaries in an upcoming auction to sell Yukos's assets. The media reported some time ago that Rosneft inked an agreement with a number of major Western investment banks to take out a $24.5 bln syndicated loan to pick up Yukos assets. There is speculation that the starting price of the 9.44% stake in Rosneft will be Rub 182.3 bln ($6.95 bln) which would be about a 20% discount to current stock valuations. It is very likely that Rosneft will be allowed to buy other Yukos assets, e.g. refineries, at a considerable discount, as well. The oil giant unveiled its plans some time ago to lift refining capacities to match 50% of output by acquiring (some 30% of the company's existing refining facilities have been obtained as a result of M&A deals) and erecting new refineries. Therefore, it is very likely that Rosneft could set its sights on Bashkortostan-based refineries before long.
A MICEX listing could be viewed as another positive for Rosneft shares which now include the stocks of 12 subsidiaries which were merged with the oil company and switched to a single share last fall. Therefore, Rosneft's free float and the liquidity of its stock are picking up. In our opinion, Rosneft's aggressive strategy aimed at taking over new production and refining facilities is currently the main upside driver for the company's value.
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