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. Last Updated: 07/27/2016

Market Greets News of Surgutneftegaz Issue

Russia's second largest oil producer by market capitalization, OAO Surgutneftegaz, plans to issue 12 billion ordinary shares to buy parent NK Surgutneftegaz and consolidate the firm, NK Surgutneftegaz said in a statement Wednesday.

Shares of the production company bucked the broader market trend and had risen 6.71 percent by midday to 30.2 cents, after two days of heavy losses on profit-taking linked to fears ahead of the deal.

The statement, made after a meeting with investors, said a share exchange rate, the price of the acquisition, would be based on assets and market prices. The issue would raise producer OAO Surgutneftegaz's share capital by 38 percent.

The production company now has 23.73 billion ordinary shares and 7.7 billion preference shares, while the holding has 10.5 million shares.

The deal will make shares of producer OAO Surgutneftegaz the only traded equity in the firm. The producer will become the new holding company, taking control of all key assets, especially the Kirishi oil refinery, which are owned by NK Surgut, the current holding.

Producer OAO Surgutneftegaz will effectively buy back a controlling stake, held by NK Surgutneftegaz, which has led some analysts to say the deal is good for the producer's shareholders.