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. Last Updated: 07/27/2016

First Russian Oil Major To Make NYSE Debut




Regional oil company Tatneft will be the first Russian oil company to list on the New York Stock Exchange this month when it begins offering its ordinary shares in the form of Level-2 American Depositary Receipts.


The company will join two telecom enterprises -- Vimpelcom and Rostelekom -- as the third Russian company to be traded on the NYSE. The listing is awarded only to companies meeting stringent standards of transparency.


The NYSE listing amounts to an upgrade of Tatneft's existing Rule 144A ADR and Level-1 ADRs into securities that can be traded on the New York and London exchanges. Current ADR holders will be allowed to exchange their shares for the new ADRs, the company said.


Analysts said the listing will raise Tatneft's visibility with foreign investors and could cause a short-term rally in the shares. News of the NYSE listing sent Tatneft's shares climbing 9 percent to $127.50 at Wednesday's close from $117 on Tuesday.


A recent announcement that Tatneft is discussing a strategic partnership with LUKoil has also boosted Tatneft's stock price and should increase interest in the company's NYSE listing, analysts said.


"We are pleased that our planned listing on the New York Stock Exchange will be the first such listing for a Russian oil company," Tatneft general director Rinat Galeyev said in a press release. "A New York listing will commit us to meet the highest standards of information disclosure in the world, and should help further to distinguish us from our peers."


To list on the NYSE, a company must provide three years of financial accounts audited to the standards of Generally Accepted Accounting Principles.


Tatneft, Russia's fourth largest oil company by production, will beat LUKoil to the big board with its listing. LUKoil has not yet published GAAP accounts and trades on over-the-counter exchanges as a Level-1 ADR.


"I think it's fairly positive and means that Tatneft is ahead of LUKoil in terms of providing all the information necessary for listing," said MFK-Renaissance analyst Alexei Kokin.The NYSE listing will open up Tatneft stock to new U.S. investors, thus raising the stock's liquidity, Kokin said. Pension funds and insurance companies in the United States are forbidden to buy Level-1 ADRs, which are seen as high-risk securities.


Tatneft receives abundant support from the regional government, which owns 30 percent of the company. Employees hold 41.5 percent, while Russian investors own 12.7 percent and foreign investors, 15.4 percent, according to a report by MC Securities.


The company made before-tax profit of $316 million in 1996 on sales of $2.3 billion, according to the GAAP audit.


Tatneft enjoys favorable tax breaks from the Tatarstan government but will be particularly vulnerable to falling world crude oil prices, said one analyst who asked not to be identified.


"The majority of Tatneft's sales come from crude oil and not refined oil products, and Tatneft has a very high proportion of barter for domestic sales," he said. "When its cash flow from exports weakens it will face liquid problems."