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. Last Updated: 07/27/2016

TNK Posts 25% Fall in Profits

Tyumen Oil Co. on Wednesday announced that consolidated net profits plunged 25 percent in 2001 according to preliminary results, reflecting the industry-wide reality of higher taxes and lower oil prices.

Furthermore, profits for 2002 will probably be down from last year, said Iosif Bakaleinik, the company's chief financial officer. "We started to pay more taxes," he said.

According to the results, Tyumen Oil, or TNK, posted a net profit of 9.7 billion to 9.8 billion rubles ($317 million to $320 million) on revenues of 116 billion to 117 billion rubles.

These unaudited results were compiled to Russian accounting standards and reflect the performance of TNK's newly consolidated upstream operations. TNK's retail and refining businesses are not included. Their inclusion, however, will not drastically change the results, Bakaleinik said.

TNK compiled financial results for 2000 according to U.S. generally accepted accounting principles, but it does not plan to release them to the general public.

The oil company, Russia's fourth-largest, has completed the long-awaited consolidation of its exploration and production assets into a single share. TNK now owns 100 percent of subsidiaries Samotlorneftegaz, Tyumenneftegaz and the Nizhnevartovsk Oil and Gas Extraction Co.

Through a series of holdings, including Novy Investments and Novy Petroleum Finance, TNK-International holds 97 percent of TNK's shares, and the other 3 percent is divided among 13,000 minority shareholders. TNK-International is jointly owned by Alfa Group and Renova.

TNK spent about $500 million to buy out minority shareholders who agreed to cash instead of a TNK stake. Bakaleinik said the actual outlays amount to $132 million because many of the minority shareholders were themselves companies affiliated with TNK.

The consolidation of ONAKO -- an oil major that was privatized for a whopping $1.08 billion -- has not turned out quite as successfully.

TNK shareholders bought an 85 percent stake from the government in late 2000 and acquired an additional 12.8 percent on the open market.

Before the auction, No. 6 oil major Sibneft acquired 42 percent of Orenburgneft, ONAKO's main production subsidiary.

While industry analysts were waiting for one company to buy out the other, TNK and Sibneft surprised the market by agreeing to merge ONAKO's subsidiaries into a single share.

Under the agreement, Sibneft was supposed to end up with 33.3 percent in the consolidated company, but it did not participate in an additional share issue that ended in December.

"We agree with the spirit of the consolidation but have a few problems with the fine print," said Sibneft spokesman Nick Halliwell. He declined to elaborate on the fine print.

TNK, meanwhile, is ready to try again.

"We intend to repeat the process with ONAKO, and hopefully, it will work out this time," Bakaleinik said.