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. Last Updated: 07/27/2016

Chernogorneft Drops TNK Lawsuit

In a move that apparently ends a long-running feud between oil majors Sidanko and Tyumen Oil Co., Chernogorneft has dropped a lawsuit to have those assets returned and the sale annulled, Tyumen Oil, or TNK, said in a statement Friday.

"Now, basically, there are no serious differences to be settled, especially with Sidanko’s foreign shareholders," said Mikhail Fridman, chairman of the supervisory board of directors of Alfa Group, which effectively controls TNK in alliance with the Access/Renova group.

The struggle for Sidanko-owned Chernogorneft, which was left a shell company after a bankruptcy auction of its oil-producing assets to TNK, made international headlines when British Petroleum hotly challenged the sale. BP owns a 10 percent stake in Sidanko.

Under a December 1999 settlement, TNK agreed to hand back the contested production unit to Sidanko without any debt attached. In exchange, TNK would receive a blocking stake of 25 percent plus one share.

Over the past year Sidanko has seen its oil production plummet 47 percent, atking it from being the nation’s No. 5 oil major to No. 10. The sharp fall is mostly attributed to the loss of Chernogorneft and Kondpetroleum, another production subsidiary picked up by TNK in the Sidanko bankruptcy.

The reconciliation process between Sidanko and TNK after December 1999 has been plagued with disputes over the way the shares could be issued.

The Interros holding, which owns a 44 percent stake in Sidanko, was for a while unable to provide TNK with outstanding shares that would complete the swap because of defaulted debt that its subsidiary Uneximbank owed creditors. This point of contention was resolved when Interros bought out the credits issued to Uneximbank against a pledge of a 37.36 percent stake in Sidanko last week.

TNK and Sidanko have been wrestling for control of Chernogorneft since early 1999, when it was sued for bankruptcy and placed under the control of an external manager.

In November 1999, Chernogorneft was sold to TNK-Nizhnevartovsk, a TNK affiliate, for $176 million in an auction that was widely criticized as rigged.

"There are some technical issues left to be sorted out, and we hope to solve them in the near future, hopefully in the next month or so," Fridman said.

In saying "technical issues," Fridman is probably alluding to the mechanics of the share issue, said Stephen O’Sullivan, head of research at United Financial Group.

Neither TNK nor Sidanko were immediately available for comment.