Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Sidanko President, Top Managers Quit

The president of the oil company Sidanko announced Monday that he and other top managers have resigned after successfully turning around the company's operations in the past two years.

Sidanko President Zia Bazhaev and Vladimir Potanin, head of Sidanko's controlling shareholder, Uneximbank, announced the resignations at a news conference, declining to specify how many people were leaving the company.

One former Sidanko executive said up to 50 people have resigned on the belief that their posts would soon be eliminated. The resigning employees believe that Sidanko in the coming months could merge with Rosneft or even with LUKoil, squeezing out current company management, the source said.

Uneximbank and strategic partner British Petroleum, which owns a 10 percent stake in the company, have confirmed their interest in bidding for state-held Rosneft.

But Sidanko and LUKoil in recent weeks have denied rumors that they are considering a merger. Sidanko employees, however, believe the possibility still exists, said the former Sidanko executive.

"This was a pre-emptive move," he said. "There is no future for them and it is foolish for them to wait to be fired."

Potanin at the news conference would say only that the current team, appointed in 1996, had successfully completed the tasks set before it and was leaving to pursue other opportunities. Sidanko first vice president Boris Volkov has been appointed acting president for an undisclosed period of time.

"The shareholders of Sidanko ... give the highest evaluation of this team's work," Potanin said, noting that the company's market value had grown 900 percent in 1997 to $6 billion as Sidanko increased control over its subsidiaries and attracted BP as a strategic partner.

British Petroleum in November agreed to pay $571 million for a 10 percent stake in Sidanko. The British oil major's main goal was to obtain a piece of a Siberian gas development project controlled by Sidanko, although the company last month sent several top managers to help run Sidanko's daily operations.

Potanin noted that British Petroleum executives will begin to play a greater role in Sidanko's operations in the coming year, working as mentors to Sidanko employees to train them in international business practices.

"We will try to attract the maximum number of managers from British Petroleum, with the view of replacing them in the period of 1 1/2 to two years with Russian counterparts whom they will train in the meantime," Potanin said.

The resignation of Bazhaev's team did not appear to be connected to the recent uproar surrounding a planned Sidanko convertible bond issue. Russia's Federal Securities Commission annulled the bond issue after determining it would have unfairly diluted minority shareholders' stakes in the holding company.

Potanin on Monday said Sidanko had come to terms with minority shareholders, which own 4 percent of the company. Uneximbank and MFK-Renaissance own 86 percent, while BP owns 10 percent.

"We have reached a decision agreed upon by the FSC that a similar kind of deal will be restructured so that shareholders' rights are not violated," Potanin said. It could be that there "will be no convertible bond issue at all."

Bazhaev said Sidanko's plans for 1998 include increasing control over subsidiaries from the current 70 percent to 90 percent, cutting production costs in the face of plummeting world oil prices and increasing the company's sales of oil products on the domestic market.

Sidanko will also attempt to increase energy development ties with China, Kazakhstan, Azerbaijan and Iraq, he said.

Sidanko's 1997 pre-tax profits rose 21 percent in dollar terms to 1.5 billion rubles ($259 million) from 1.1 billion rubles in 1996. The company produced 20.25 million metric tons of oil, down from 20.81 million metric tons in 1996.