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. Last Updated: 07/27/2016

Investors Reconsider Buying Yukos Stocks

The stock market performance of Yukos, the nation's No. 2 oil producer, is sending signals to investors to revise their pessimistic attitude to the company.

A steep rise in the price of Yukos' shares followed a posting of the company's results for 1999, after an annual shareholders' meeting in early June. Yukos shares trading on the RTS exchange have more than doubled in value since July 3, when they were trading at 67.5 cents, to $1.38 Wednesday.

Yukos posted a net 1999 profit of $1.15 billion in accordance with the U.S. GAAP accounting standard, and forecasts predict a further increase to $2.3 billion in net profit for this year.

It has also announced its first dividend and will pay 3 billion rubles ($108 million).

The company reported a 7.5 percent increase in oil production for the first half of 2000, coming third after LUKoil with 9.9 percent growth and Surgutneftegaz with 8.6 percent.

Analysts Wednesday said the 1999 results and the company's revised policy on minority shareholder treatment has earned Yukos more confidence in the eyes of influential Western investors.

At the end of last year, Yukos agreed to buy off international tycoon Kenneth Dart - who owned stakes in three of the oil company's production subsidiaries - for a reported $120 million.

Dart had led a campaign by minority investors that protested against alleged violations of shareholders rights by Yukos company management and majority shareholders.

The oil major countered by saying Dart was a vulture investor wanting only to obstruct Yukos' plan to streamline an unwieldy corporate structure.

Since its resolution with Dart, Yukos has had conflicts with minority investors over the management of cash flows in the company's subsidiaries - Yuganskneftegaz and Samaraneftegaz - and their ultimate consolidation into a holding company. Yukos says these feuds have now been solved peacefully.

Yukos has also approved a new charter under which new share issuances will require approval by a majority vote of 75 percent plus one share.

Commenting on Yukos' soaring fortunes, Stephen Buscher, head of corporate finance at United Financial Group, spoke of high-caliber investors in the West supporting the company.

"There are now more people out there promoting the upside value in the Yukos story, whereas before they were in the mood to dig trenches and fight," he said.

Buscher did not name which investors he believed were involved.

Gennady Krasovsky, an analyst with NIKoil, said Yukos CEO Mikhail Khodorkovsky realizes that with world oil prices up and local expenditures down after the 1998 ruble devaluation, it is a good time to raise funds abroad.

And the decision of the company to drop share issuances, he said, is not just a goodwill gesture or charity, but the cool-minded calculation of a company in need of a multibillion investment and the intention to enter the American Depositary Receipt market.

"If they decided to go otherwise, the company would not have survived for longer than five to 10 years," he said.

Steve Allen, an oil analyst at Renaissance Capital, sees the 1999 results as the most important factor behind the rise in Yukos shares prices.

"The company can hire Western PR people and investor relations people, but at the end of the day not one of these kinds of measures really matters; what does matter is the kind of profit you show," Allen said.

Stephen O'Sullivan, head of research at UFG, raised doubts about the ascent of Yukos' shares, saying it may be attributable to small trading volumes.