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Sibir Energy, which, through Moscow Oil & Gas Company (MOGC) holds a majority stake in the Moscow Refinery (MR), is looking to sign an agreement with Gazprom, whereby the gas concern could gain control over the refinery by the end of year. Generally speaking, there are several scenarios of how events will unfold, but they have one thing in common: in the long run the refiner will end up under the control of Gazprom which, in our view, should have a positive impact on MR’s prospects.
On July 5, 2007 The Financial Times quoted in its article a director from one of Sibir Energy’s departments as saying that this autumn the company intends to sign a partnership agreement with Gazprom, calling for the establishment of an "enlarged company" on the basis of separate assets held by the parties to the agreement. Thereby, Sibir Energy expects to recover a working interest in a West Siberian oil-and-gas field, the rights to which it has been challenging for several years already. Earlier, this field was owned by Sibneft and is now under the control of Gazprom Neft. Speaking about the potential benefit for Gazprom, Sibir Energy representatives say that the company will not prevent the gas holding from grabbing MR, should such an agreement be penned.
Sibir Energy owns around a 45% stake in the charter capital of MOGC, a majority shareholder of the Moscow Refinery. MOGC’s controlling interest is in the hands of City Hall. However, taking into account that Sibir Energy’s primary owner Shalva Chigirinky is on speaking terms with the capital’s authorities and there are reasons to believe that the steps with regard to MR Sibir Energy will be worked out with its MOGC partner beforehand. Under this scenario, it looks quite likely that Gazprom will gain control over MR, all the more since in 2006 the companies were already ready to team up on similar terms, but Gazprom Neft experienced a management shakeup, which disrupted the negotiations.
It’s noteworthy that there are several scenarios about MR’s future, but they all mean approximately one and the same thing: MOGC will most likely assign control over MR. Taking into account the latest news, Gazprom appears to be the most likely contender. We reiterate that the settlement of the ownership conflict at MR as soon as possible is a top-priority target towards streamlining production at the company.
Our approximate target price for the Moscow Refinery (RTS: mnpz) shares, found using the comparative method, is $253, which implies a Buy recommendation.
Timur Khabitsov
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Gazprom
Capitalization: $92 800 170 568,00
Common shares:
Price: $3,92
Delta week: -9,0%
Delta month: -24,3%
Delta year: -72,2%
Gazprom Neft
Capitalization: $9 150 708 303,27
Common shares:
Price: $1,93
Delta week: -7,3%
Delta month: -21,4%
Delta year: -65,3%
Moscow refinery
Capitalization: $827 847 141,50
Common shares:
Price: $130,00
Delta week: 8,3%
Delta month: -7,1%
Delta year: 4,0%
Preferred shares:
Price: $30,05
Delta week: 0,00%
Delta month: -14,3%
Delta year: -52,7%
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0.553
1.6
