Daily analyst comments

The first auction to divest Yukos assets was held on March 27. Rosneft's subsidiary (RN-Razvitie) and TNK-BP's subsidiary Samotlorneftegaz placed bids. The starting price of the lot which included a 9.44% stake in Rosneft and Yuganskneftegaz's Rub 3.55 bln ($136.79 mln) promissory notes was set at Rub 195.5 bln ($7.5 bln) and bids could be raised by Rub 260 mln ($9.99 mln).

Trading did not last long and bids were raised seven times at the auction. Rosneft (RN-Razvitie) received the lot for Rub 197.84 bln ($7.60 bln). Therefore, the auction did not bring any unexpected outcome, since Rosneft was viewed by market participants as the top contender, although theoretically another bid by a serious rival in the last days could have changed the results or at least significantly impacted the selling price compared to the starting level. This was not the case and TNK-BP left the scene fast. Rosneft picked up the lot at a price only 1.2% higher than the starting price and at a considerable discount to the market.

Thus, the share buyback turned out to be very profitable for Rosneft. Formally, the shares will be listed on RN-Razvitie's balance sheet, i.e. Rosneft will not be bound by any legal limitations related to treasury shares. By law, if Rosneft itself had bought its shares, the oil company would have been forced to sell them in free float or redeem them within a year. TNK-BP subsidiary's bid at the auction reduces the likelihood of further claims being made by Yukos minority shareholders, although Yukos Chairman Victor Gerashchenko believes there is a reason for claims, since the starting price was below the market.

According to Rosneft's spokespersons, the company views the acquired shares "as a very profitable investment instrument" and plans to swap them for core assets in Russia and abroad. Some shares could be sold on the stock market as free float in order to increase the number of shareholders. However, previously, the oil company's spokespersons said Rosneft does not plan to sell its shares in the near future, since their fair price considerably exceeds the current valuations.

Meanwhile, the next round of Yukos auctions is on the way and Rosneft's BoD recently approved raising $22 bln in loans for asset acquisition there. Yukos interim receiver's press secretary Nikolay Lashkevich said Tuesday that the creditor bankruptcy committee could address the sale of Samaraneftegaz and Tomskneft as early as on Friday. Yukos interim receiver Eduard Rebgun said Monday that Yukos production units and refineries could be auctioned off by the end of April 2007 and possibly as a single lot. However, Vedomosti reported Tuesday that Rebgun proposes establishing lots for Yukos production, refining and sales assets on a geographical basis. The same article said that Tomskneft could be merged with the Achinsk and Strezhevoy refineries and Tomsknefteprodukt; Samaranefteproduct with a group of Samara-based refineries (Kuibyshev, Novokuibyshev and Syzran) and Samaranefteprodukt and East Siberian Oil Company (ESOC) with Angarskaya Petrochemical Company and Irkutsknefteprodukt. We view Rosneft as the main contender for Samaraneftegaz, a group of Samara-based refineries and Yukos assets located in East Siberia.