Rosneft to Aquire Remaining 49% Stake in Itera

By Lada Ponomareva, May 29, 2013

WEB EXCLUSIVE, Moscow. Rosneft will buy out the remaining 49% stake in Itera from its founder Igor Makarov and his partners. It is expected that the deal will be valued at $3 billion. According to the Russian news daily Kommersant, sources familiar with the deal said that the relevant documents should be signed within the next one to two months.

The state company already owns 51% of Itera, a stake it purchased in February 2012 when the two companies agreed to set up a joint venture. Under the agreement, Rosneft received a controlling stake in return for 100% of the Kynsko-Chaselkoy licensed block and an additional payment of $173.4 million. The Kynsko-Chaselkoy licensed block includes six fields: Kynskoye, Verkhneye-Chaselskoye, Novo-Chaselskoye, Ust-Chaselskoye, Fakhirovskoye and Naumovskoye which together have total reserves of about 284.2 billion cubic meters of gas and 40.2 million tons of crude.

Itera's assets in the JV were 40% of Purgaz, 49% of Sibneftegaz and 76% of Uralsevergaz-NGK. The deal to set up the joint venture was completed in August of last year, and according to experts, was worth $4-5 billion.

Kommersant reported that Igor Makarov had earlier tried to come to an agreement with TNK-BP to sell 50% in Itera, but at that time, the sides were unable to agree on a price, as TNK-BP valued Itera under $3 billion (the total value of the company) Makarov then began negotiations with Rosneft at the end of 2011.

VTB Capital analysts value the Rosneft-Itera deal as a possible negative factor in terms of market influence. "Rosneft has ambitious plans to produce 100 billion cubic meters of gas in 2020. Strengthening its portfolio of gas projects fully meets its stated objectives. However, we believe that the domestic Russian market is determined more by large supply contracts than by the level of reserves. The forecast price of the deal reflects a price of approximately $78 per barrel of oil equivalent, and that seems a big expensive to us. If the deal is carried out on the terms stated, we expect a negative reaction from the market".

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