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. Last Updated: 07/27/2016

TNK, Sibneft Split Up Slavneft Assets

Oil majors TNK and Sibneft agreed Wednesday to split the assets of a third oil producer they acquired, which could lead Britain's BP to enlarge its agreed $6.75 billion deal to buy half of TNK.

The deal between Russia's third and fifth largest oil firms, the Tyumen Oil Co., or TNK, and Sibneft, ended two months of uncertainty after they bought Slavneft from the government in December for $1.86 billion.

In addition Sibneft agreed to sell its minority stakes in TNK's affiliates back to TNK, which could also result in an enlargement of TNK's deal with BP, already a record transaction in Russian history.

"It is positive news for both Sibneft and TNK which also clearly shows that the two firms decided to exist as separate units," said Stephen O'Sullivan from United Financial Group.

TNK and Sibneft said in a statement that they would equally divide Slavneft's 300,000 barrels per day output and its 550 filling stations. The two firms would jointly manage Slavneft's two Russian and one Belarussian refineries.

In addition, Sibneft would sell its stakes in TNK affiliates back to TNK, including 38 percent in the 245,000 bpd Orenburgneft producing unit. TNK has agreed to purchase Sibneft's 1 percent interest in Onako.

The two companies declined to disclose price details.

"I can't see why TNK's new assets could not be included in its venture with BP, but a lot will depend on the price. It will be an interesting test case which will show how this new partnership works," O'Sullivan said.

BP said no decision had yet been made.

"It is not impossible that TNK's new assets could be included in our joint venture. But so far they are not part of our agreement," said BP's spokesman in Moscow, Peter Henshaw.

TNK and Sibneft had said they planned to decide before March whether to merge Slavneft with Sibneft or TNK in exchange for equity, or split assets between the two firms.

After BP agreed to buy half of TNK in February, however, a decision was postponed.

"Under the circumstances of our new partnership with BP, we believe that the agreement we announced today is optimal for everyone involved and will help both Sibneft and TNK secure long-term growth and profitability," Sibneft and TNK said.

After TNK and BP agreed to combine their assets in February, TNK became Russia's third-largest oil firm with output of 1.21 million bpd, reserves of 5.2 billion barrels, five refineries and 2,100 filling stations throughout the country.

Sibneft produces 590,000 bpd, fully controls a 300,000 bpd Siberian refinery, has a 37 percent stake in a 200,000 bpd Moscow refinery and around 1,180 filling stations.

Analysts said it was difficult to predict how Sibneft and TNK could equally split Slavneft's oil production, which is concentrated mainly on the giant west Siberian Megion field.

"It is also unclear how the two firms will jointly manage Slavneft's three refineries. Maybe they feel that there could be some synergies in jointly operating refineries of the three firms," O'Sullivan said.

Bulat Karimov from Aton brokerage said one of the most clear and positive outcomes of the deal is Sibneft's ability to reduce its $2.1 billion debt because the firm was likely to receive a generous premium for its minority stake in TNK's subsidiary.

O'Sullivan said he believed Sibneft sold its 38 percent stake in Orenburgneft to TNK at a substantial premium to the initial acquisition price of $430 million.

Sibneft shares closed Wednesday up 0.9 percent at $2.17 in Moscow.