New world No. 4 oil firm in the making in Russia

  • Business
  • Wednesday, 23 Apr 2003

MOSCOW: Russia’s second and fifth largest oil companies, YUKOS and Sibneft, announced yesterday they would merge to create the world’s fourth largest oil producing company. 

A joint statement said the new company, to be called YukosSibneft, would have YUKOS head Mikhail Khodorkovsky as its chief executive officer and Sibneft head Eugene Shvidler as chairman. 

“The combined group...would have total reserves of around 19.4 billion barrels of oil and gas equivalent,” the statement said. The two companies plan to complete the merger by the end of the year. 

The new company will produce 2.3 million barrels per day of crude oil, putting it on par with Organisation of Petroleum Exporting Countries member Kuwait and giving it 29% of Russia’s crude oil production. It will control reserves greater than the entire North Sea or Alaska’s Prudhoe Bay. 

In a complex deal, Sibneft shareholders will sell 20% of YUKOS for US$3bil cash, with the rest of the company’s shares to be swapped at a ratio of 0.36125% of the new combined firm for every 1% of Sibneft stock. 

The two companies had made an earlier attempt to merge in early 1998 but abandoned their efforts after several months of fruitless wrangling. 

Yesterday's statement also said YUKOS was considering making dividend payments to shareholders and buying back shares, a move which would increase indebtedness. 

“Prior to completing the transaction, YUKOS intends to increase its leverage and is considering, among other things, cash distributions to its shareholders in the form of dividends and share buybacks,” the statement said. 

The combined company would have a “moderate level” of debt, the statement added. 

The merger will give the combined company 2,500 filling stations and 10 refineries in Russia, Lithuania and Belarus. – Reuters  

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