Brokers Divided On Surgut Outcome

Federal Securities Commission officials failed to make an announcement as expected Monday on their inquiry into a controversial Surgutneftegaz share dilution and analysts were divided about the probe's likely outcome.

Surgutneftegaz president Vladimir Bogdanov was in Moscow and expected to meet with commission chairman Dmitry Vasiliyev.

But commission officials could not confirm whether the two met, and issued no statement about the inquiry.

The securities watchdog previously said the decision on the Surgut share issuance would be made public by Dec. 1, but it has put off a statement several times.

At issue is a supplemental share issue in Surgutneftegaz that took management's stake in the main holding company to 43.5 percent from 38 percent, effectively ensuring their control. Critics have said the move was a violation of shareholders' rights.

A Moscow broker said Monday that a group of legal advisers to Surgutneftegaz was able to convince the commission that the share acquisition did not violate Russian laws.

"It's not the prettiest thing, and it's not the clearest thing, but it's legal," said the broker, who asked not to be identified.

However, James Bunch, an oil analyst at Renaissance Capital, said Bogdanov's visit to Moscow was a sign that the commission was preparing a stern response.

"It's unlikely that the FSC would want to talk to the company if they were just to come out and say: 'Surgutneftgaz is a model company and we really like them,'" he said.

A company spokeswoman at headquarters in Surgut, eastern Siberia, said that Bogdanov travels to Moscow frequently of late because of the budget and tax discussions now being debated in the State Duma.

Last month the FSC asked the Finance Ministry to suspend registration of new Surgut shares as it conducted its inquiry.

But Andrei Vorontsov, head of the shares registration department at the Finance Ministry, said registration of Surgut shares had been completed long before the start of investigation and could only be cancelled under direct order from the FSC.

Renaissance Capital predicts a 10 percent rise in Surgut's share price if the commission recommends that the Finance Ministry cancels the issue, a jump that would reflect the removal of additional shares.

Surgut shares closed on Monday night at $0.405 from $0.390 last Friday