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. Last Updated: 07/27/2016

Yukos Assets Go To Eni And Enel

APJournalists watching a broadcast of proceedings at an auction for Yukos assets at Yukos' headquarters Wednesday.
Italy's Eni and Enel became the first foreign companies to scoop up the remains of Yukos on Wednesday, casting the winning bid at a bankruptcy auction before promptly announcing plans to pass on the bulk of the assets to Gazprom.

EniNeftegaz, an Eni-Enel consortium, beat out a Rosneft subsidiary and an unknown company with a bid of 151.54 billion rubles ($5.83 billion) for the lot, which includes Yukos' 20 percent stake in Gazprom Neft and two gas production units.

The Gazprom Neft stake will be entirely transferred to Eni, Italy's top oil major, which has given Gazprom a call option to buy the stake for $3.7 billion within two years, Eni said in a statement.

State-controlled Gazprom previously said it had no interest in the auction, but analysts believed it would use a proxy firm to scoop up the assets amid fears of legal action.

Gazprom will also likely take control of the two gas producers, ArcticGaz and Urengoil, as EniNeftegaz has given it the option of buying a 51 percent stake in them within two years.

"We will receive at least 51 percent of the assets," Gazprom deputy head Alexander Medvedev said after the auction, RIA-Novosti reported.

EniNeftegaz faced little competition at the auction, casting a winning bid just 6.77 billion rubles ($261 million) above the starting price of 144.77 billion rubles ($5.57 billion).

The unknown company, Unitex, rumored to be fronting for Gazprom and close to its partner Novatek, dropped out after just two bids, leaving EniNeftegaz and Rosneft subsidiary NeftTradeGroup to battle it out quietly.

Rosneft, through subsidiary RN-Razvitiye, won the first round of Yukos auctions on March 27, buying back a block of its own shares in the face of little resistance from counterbidder TNK-BP. This time it was Rosneft's turn to cede, holding out for 26 bids before laying down the paddle. "We congratulate the victors," Rosneft spokesman Nikolai Manvelov said by telephone after the auction.

A spokesman for Yukos' bankruptcy receiver praised the auction for "running in an organized way." "The bidding price was expected," said the spokesman, Nikolai Lashkevich.

Eni holds a 60 percent stake in EniNeftegaz, and Enel has the remaining 40 percent. Eni spokeswoman Erika Mandraffino said the subsidiary was set up in July. Enel said in a statement that it contributed $852 million to the bid -- 40 percent of the lot minus the stake in Gazprom Neft, since it will be entirely transferred to Eni. The Italian utility will not be involved in running ArcticGaz or Urengoil, which are due to be operated through a joint venture between Gazprom and Eni, the Eni statement said.

Yet both Italian companies praised the auction as a significant step toward expanding their business in Russia. The leaders of both countries appeared to bless the move, with Italian Prime Minister Romano Prodi phoning President Vladimir Putin on the eve of the sale late Tuesday.

"The transaction, which is in the context of a fruitful ongoing relationship between Italy and Russia, underlines the value of our strategic partnership with Gazprom," Eni CEO Paolo Scaroni said in a statement.

Market players also praised the sale. "The fact that Italian companies were able to come in and buy into a couple of gas assets is a positive thing," said Roland Nash, head of research at Renaissance Capital.

"It makes it very clear that foreign companies can take part in Russian hydrocarbons, but they have to do it according to the rules of the Russian government and its related entities," he said.

The jailing of former Yukos chief Mikhail Khodorkovsky and the oil company's subsequent forced bankruptcy have been widely seen as a first step in a Kremlin plan to bring oil and gas resources more under state control.

State-run Rosneft is soon expected to become the country's largest oil producer -- a position once held by privately owned Yukos.

The series of auctions, initiated last week and due to end in May, aims to pay off Yukos' more than $27 billion in debt to creditors, the largest of which are the Federal Tax Service and Rosneft.

Yukos was initially crippled by the forced sale of its main oil production unit, Yuganskneftegaz, in December 2004. Rosneft won that auction through a proxy firm, after Gazprom dropped out following an injunction from a U.S. court.

Tim Osborne, head of Yukos majority shareholder GML, formerly known as Group Menatep, warned that Eni and Enel could be open to lawsuits from shareholders. "They are making a profit from stolen property," he said.

Seven companies were originally expected to take part in the auction, but only four made down payments, Lashkevich, the receiver's spokesman, said. A place was set -- complete with papers and water bottles -- in the auction room for the fourth contender, gas trader Trans Nafta, but the company failed to show up.

Analysts called the EniNeftegaz victory "expected" and "predictable."

"Today Eni made another step toward further cooperation with Gazprom," said Valery Nesterov, an analyst at Troika Dialog.

Eni and Gazprom signaled their closer cooperation in November, signing a wide-ranging agreement allowing Gazprom to sell gas directly to Italy and extending supply contracts to 2035.

Gazprom said the call option agreements for the 20 percent Gazprom Neft stake and 51 percent stakes in ArcticGaz and Urengoil were concluded as part of that agreement.

The 20 percent stake is a holdover from Yukos' share in Sibneft, as Gazprom Neft was called when Gazprom bought it from Roman Abramovich in 2005.

"The call option can be exercised as soon as tomorrow, but we don't have details yet," a Gazprom spokesman said.