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. Last Updated: 07/27/2016

Gazprom Neft Moves to Take Over Sibir Energy

Gazprom Neft moved on Thursday to take operational control of mid sized oil firm Sibir Energy, installing its legal expert as Sibir's new head in the latest government push to dominate the energy sector.

With firms across the economy weakened by the financial crisis, the state has acted to consolidate its influence over strategic sectors, raising the prospect of an effective nationalization of much of Russia's industrial landscape.

The change in Sibir Energy's management followed news on Wednesday that Gazprom Neft, Gazprom's oil arm, had raised its stake in the company to 33.5 percent from 28.5 percent.

It has now become the largest stakeholder by almost fully buying out Sibir's minority shareholders, with two seats on the board of directors and its top legal councilor, Igor Tsibelman, stepping in to replace Stuard Detmer as chief executive.

Gazprom is widely believed to be aiming for control of Sibir, which has Royal Dutch Shell as a partner in the development of the Salym field in Siberia.

Sibir ran into trouble last year after its main shareholder, Shalva Chigirinsky, was forced to put up his stake as collateral with state bank Sberbank to meet obligations on Western loans.

Analysts said the move would boost Gazprom Neft's oil output and help its financial results recover from a rut brought on by lower oil prices and slackening demand.

Also on Thursday, Gazprom Neft reported net profits for the first quarter of $335 million, down 76 percent from a year earlier but beating consensus forecasts of $300 million.

"Gazprom Neft is seeking to strengthen its position in Sibir Energy not only for financial reasons. It also wants it to help raise its oil output," said Denis Borisov, an analyst at Solid Brokerage.

Though Gazprom Neft's sales were also down sharply, falling 48 percent to $4.2 billion, its performance showed a dramatic improvement from the previous quarter.

The bottom line recovered from a net loss of $543 million in the last three months of 2008, and EBITDA more than tripled quarter on quarter to $942 million.

Chigirinsky and his partner Igor Kesayev jointly control about 47 percent of Sibir, a stake now collateralized with Sberbank, while the central government owns 18 percent. Market sources have said Gazprom wants to buy Kesayev and Chigirinsky's joint stake in the firm.

The fate of the latter is complicated by the fact that another Russian businessman, Ruslan Baisarov, claims ownership of the stake, while Chigirinsky has won a British court order prohibiting Gazprom and Gazprom Neft from buying those shares until their ownership becomes clear.

Tsibelman, 41, headed Gazprom Neft's international legal affairs department. Prior to joining the firm he worked as an attorney for White & Case and Arent Fox in New York.