Mazeikiu refinery watches Yukos sale with trepidation

  • 2004-11-25
  • By TBT staff
VILNIUS - News that Russian authorities intended to sell Yukos' main production subsidiary has reverberated throughout Lithuania and given rise to fears that Russia's oil major may be forced to part with its controlling stake in Mazeikiu Nafta.

Last week the Federal Property Fund of Russia announced that it would sell 77 percent of Yuganskneftegaz for $8.6 billion, which is considerably less than the company's fair market value - approximately $15 billion (after liabilities) according to a recent appraisal by Dresdner Kleinwort Wasserstein, an investment bank.

The auction will be the single-largest in Russia's history.

The sale price is also far less than the $24 billion in tax bills the Russian government has hit Yukos with in recent months (the latest being a $5 billion claim made last week), which has led many to believe the government will sell other Yukos assets - including the 53.7 percent stake in Mazeikiu Nafta - in an attempt to squeeze as much money out of the moribund company as possible.

Lithuanian officials, however, were quick to dismiss the possibility.

Nerijus Eidukevicius, deputy minister of economy, told the Lietuvos Rytas daily that Russia could not sell the stake in Mazeikiu Nafta since it was owned by Yukos Finance, a Dutch-registered subsidiary of the Russian oil company.

But he did say that Russian authorities might try to sell Yukos Finance, which would see the stake in Mazeikiu Nafta effectively moving into the hands of new owners of the Dutch company.

Rye, Man & Gor Securities, a Russian financial services firm, has also put the majority stake in Mazeikiu Nafta on the list of Yukos' assets that might be sold, the Baltic News Service reported.

Yukos had earlier declared its wish to purchase an additional 9.7 percent in the Lithuanian refinery and port complex. Experts now, however, doubt the company will be able to pursue this goal.

In the meantime, the refinery continues to handle record amounts of crude and has resumed business as usual. This week it was announced that Paul Nelson English, CEO of Mazeikiu Nafta, would remain in his post for another three years. His contract with the refinery was to expire in December.

Meanwhile, the company reported production data for the 10 months of 2004, showing dramatic increases year-on-year. Mazeikiu Nafta refined 7.05 million tons of crude and other feedstock during the period, up by 23.5 percent from last year.

"We continue to work at record levels," Giedrius Karsokas, the oil company's communication service head, told the Baltic News Service.

At the same time, the Butinge crude terminal, also owned by Mazeikiu Nafta, recorded a 28.8 percent decline in throughput. The terminal loaded some 6.5 million tons of crude onto tankers during the 10-month period, down from 9.1 million tons in the same period a year ago.

Mazeikiu Nafta posted consolidated net earnings of 448.2 million litas (129.9 million euros) for the first nine months of 2004, up from 117.9 million litas in the same period last year, according to its U.S. GAAP financial results.