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. Last Updated: 07/27/2016

France's Elf to Aquire A 5% Stake In Yuksi




Russian oil giant Yuksi will sell 5 percent of its shares to France's Elf Aquitaine in a $528 million deal analysts said could boost Yuksi's odds of acquiring a 75 percent stake in state-owned Rosneft to be auctioned this month.


In addition to the shares, the deal gives the French oil firm the right to participate with Yuksi in several oil production and distribution projects.


Yuksi, created through a merger between the Yukos and Sibneft oil groups, is Russia's largest oil company by reserves and production.


With the acquisition, Elf will be allotted one seat on Yuksi's board of directors. It also will have first rights to acquire an additional 5 percent of Yuksi should the Russian firm place shares on international markets.


"This transaction is another major step in creating an international oil company. ... Elf can assist Yuksi as it transforms itself into one of the worlds top international oil companies," Yuksi president Mikhail Khodorkovsky said in a statement released Monday.


Yuksi and Elf officials did not say when the deal will be signed. Currently, Yuksi is waiting for documents to be cleared before it can list its shares on the electronic Russian Trading System.


In addition to the Elf deal, Yuksi officials hope to sell another 5 percent of the company to another foreign investor, Yuksi spokeswoman Natalya Mandrova said.


Officially, Elf and Yuksi have not announced plans to bid together for the stake in Rosneft, the last large state-owned oil company, Mandrova said. Yuksi still is talking to four major French and U.S. oil companies, including Elf and U.S. company Amoco, she said.


"These are important moves," said one oil analyst, who asked not to be named. "It will force Yuksi to be transparent and cooperative on the international market."


Aside from the share sale to Elf, the agreement sets parameters for development and distribution projects. One involves a 50-50 venture to spend about $1.5 billion developing the vast Sugmut field in western Siberia, estimated to hold more than 700 million barrels of oil.


Both companies plan to study development of the Prirazlom oil field, also in western Siberia, with reserves estimated at one billion barrels, and the Yurubcheno-Tokhomo gas field, one of the biggest fields in eastern Siberia.


Analysts were surprised at the price Elf is paying for the Yuksi stake, which is about 45 percent higher than would appear justified by the combined $7.7 billion market capitalization of Yukos and Sibneft.


"The price they paid suggests Yuksi is worth over $10 billion, which is too much," said oil analyst Alexander Blokhin of United Financial Group-Paribas. "They most likely paid a higher price to participate in the tender for Rosneft, and for the extra projects."


An Elf spokesman said Yuksi's 16 billion barrels in oil reserves alone justifies the price. He would not say how Elf will finance the purchase and development.


Elf already operates in Russia in the Timan-Pechora region.


Yukos shares rose 8 percent Monday to close at $2, while Sibneft shares remained unchanged at $0.675. In New York, Elf was trading at 65 3/4 at around 11 a.m. Monday, up 4.18 percent.


In another move that would signal further steps to join the international market, Yuksi confirmed Monday it will sign a memorandum outlining a partnership with U.S.-based Schlumberger Ltd.


Neither company would say what the deal entails, but Schlumberger is a provider of technological services for increasing the output of old oil fields.