Daily analyst comments

The first auction to sell off Yukos assets is scheduled for today. For the record, a 9.44% stake in Rosneft and Yuganskneftegaz promissory notes for a total of Rub 195.5 bln ($7.49 bln) is to be sold. The Russian Federal Property Fund registered bids of Rosneft’s affiliate RN-Razvitie and TNK-BP’s subsidiary Samotlorneftegaz (for details, see our daily dated March 26, 2007). Rosneft said Monday in the event that this stake is acquired, the company plans to use the bulk of it for swapping for core assets in Russia and abroad. In addition, the company does not rule out that some shares could be sold on the stock market in order to increase its free float in the event that the market fairly (i.e. considerably higher than the current valuations) prices Rosneft shares.

Meanwhile, Vedomosti reported Monday that independent gas producer Novatek, in which Gazprom owns slightly less than 20%, could bid in the auction to sell 20% in Gazprom Neft and Yukos gas assets slated for April 4. Vedomosti quoted one of investment bankers dealing with the gas company as saying that Novatek could bid on behalf of Gazprom’s interests, since the gas giant hesitates to bid directly due to possible claims from Yukos’ minority shareholders in the West. Previously, Energogaz (controlled by Grigory Berezkin associated with Gazprom) in which Italian energy majors Eni and Enel own 49% petitioned the Federal Antimonopoly Service to bid for assets which are to be sold off at the auction. At that time, the media reported that in the future, these assets will be assigned to Gazprom and a middleman will be required in order to avoid claims from Yukos minority shareholders.

Thus, serious rivals will be bidding at the first Yukos auctions the results for which market participants projected long ago and viewed state-run companies (Rosneft and Gazprom) as the winners. The largest oil and gas companies have publicly displayed their interest in asset acquisition. However, we do not view the scenario of participation in interests of state-run companies as unjustified either. Moreover, the day before, a spokesperson of Group Menatep Ltd. (GML) said Yukos shareholders would like to monitor the auction to sell off 9.44% in Rosneft on March 27 and ensure the participation of their agents at the auction. However, even if as a result of the auction, a 9.44% stake in Rosneft and 20% in Gazprom Neft go to the most anticipated owners, some less important assets could go to other bidders.

Yukos’ interim receiver Eduard Regbun said Monday that the oil company’s production units and refineries are to be auctioned off by the end of April 2007 and possibly as a single lot. Previously, Rosneft was viewed as the only contender and possibly Gazprom. However, recent events increase the likelihood of new “surprises” at the auctions.