Daily analyst comments

The media reported Friday that Rosneft has a serious rival at the upcoming initial auction to sell off Yukos assets slated for March 27. We have already noted that the lot includes a 9.44% stake in Rosneft and Yuganskneftegaz' promissory notes for a total of Rub 195.5 bln ($7.5 bln). Previously, Rosneft (or to be more precise, its affiliate RN-Razvitie which is raising a $9 bln loan to bid at the auction) was the sole contender. However, unexpectedly, it turned out that TNK-BP's 100% subsidiary Samotlorneftegaz also filed an application to bid at the auction.

According to TNK-BP's press secretary Alexander Shadrin, "a bid at the auction and acquisition of a stake will help develop strategic relations with Rosneft, make it possible to speed up implementation of the existing large-scale projects and create new opportunities for cooperation throughout the production chain". When asked how TNK-BP would finance the possible acquisition, he replied, "using investments from majority shareholders, as well as internal financing and loans". BP already acquired Rosneft shares in an IPO (1.4%). Therefore, the acquisition of another 9.44% could enable the buyer to participate in Rosneft's BoD. However, a source close to TNK-BP's management told Vedomosti business daily that TNK-BP has no strategic targets in relation to Rosneft shares so far and an acquisition is viewed as a profitable portfolio investment.

On Friday, BP CEO John Brown and Rosneft CEO Sergey Bogdanchikov discussed issues of shareholder interaction of their companies and bilateral cooperation in the sphere of joint projects. However, the media reported that Rosneft did not unveil any other details of the meeting. BP's management was to meet Russian President Vladimir Putin the same day. According to contradictory media remarks by BP's management, TNK-BP currently faces serious problems, since Gazprom is looking to acquire control over the company, while neither British nor Russian shareholders are interested in selling their stakes. Meanwhile, the company could see its license to tap the Kovykta gas condensate field revoked before long, as reiterated by the Federal Subsoil Use Agency (Rosnedra).

At least two bids are necessary to hold an auction. On Friday, the Russian Federal Property Fund completed accepting bids for the March 27 auction. Rosneft's affiliate RN-Razvitie and TNK-BP's subsidiary Samotlorneftegaz filed their bids. No other contenders have yet been reported. The question right now is to what extent TNK-BP's bid is independent (we do not rule out that the company is intended to bolster the legality of the auction, while both Rosneft and TNK-BP deny this allegation). This gives a certain intrigue to the auction. However, we do not believe it could produce any tangible impact on the results of the auction, since, at the end of the day Rosneft will most likely take control over the stake. However, after a strong rival emerged, Rosneft could have to pay a much higher price for the shares than previously expected. We do not rule out that TNK-BP will attempt to use "the development of strategic relations" with Rosneft to leverage its positions in negotiations with Gazprom.