Russneft’s future in the air

After a Russian arbitration court today upheld the government’s claims of $145 million in back taxes owed by the 300,000 bpd oil firm Russneft, the company’s head, Mikhail Gutseriyev, is said to be in talks to sell to a Kremlin-friendly entity. Gutseriyev denies that he is planning to sell, however, suggesting his company is worth $8-9 billion, more than the $6.5 rumored to be offered by Oleg Deripaska’s investment firm Basic Element. Rosneft has also been suggested as a potential buyer, based on oil major’s recent acquisitions.

Gutseriyev, the former head of Slavneft, went on to create Russneft from a collection of small acquisitions around 5 years ago, made with the help of financing from the Swiss commodities firm Glencore. This winter, Russneft came under pressure from the Kremlin over back taxes owed by the company, culminating in a raid of its Moscow office in May followed by the tax charges.

Some say the accusations stem from Russneft’s association with the foreign firm Glencore. Others suggest that it has more to do with the manner in which Gutseriyev was able to so cheaply acquire the assets, particularly from Slavneft and the embattled Yukos. Indeed, it would seem that the Kremlin’s displeasure would derive more from the spirit of the deals, rather than their actual content, as Russneft remains a relatively small player in the Russian oil scene, accounting for about 3% of the country’s total production. However, Rosneft and Kremlin-controlled firms are inching their way towards 50% control of Russia’s oil sector, so any additions would add to that cause.

A press release by Russneft says that it “did not enter in any negotiations as to the sale of the holding’s shares and does not have any intention to. OAO NK “RussNeft” is not sold.”   It goes on to call the rumors of the impending sale as “a provocative act.”

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Rosneft’s deal with Prana ties up a few loose ends

Prana, the mysterious company which won a May 2007 auction for the last remaining assets of Yukos, sold those assets to Rosneft earlier this month, closing out a few loose ends stemming from the unexpected ending of the Yukos saga. Rosneft apparently paid $3.4 billion for the assets, which included Yukos’ former Moscow office building, as well as a series of shell companies rumored to contain billions of dollars in their accounts (whether in debts or liquidity is unknown). This value was unknown to nearly everyone going into the May auction, but the high sale price (about $4 billion, nearly 5 times larger than originally expected) immediately caused interest and closer observation, which I wrote about earlier.

According to the Moscow Times article, Rosneft got the money by selling a 50% stake in its newly-acquired Tomskneft production unit–also bought at auction from Yukos this spring. Rosneft sold the stake to the state-owned Vneshekonombank for $3.4 billion, the exact same amount given to Prana for the last of the Yukos assets.

While this ties up parts of the Yukos saga–particularly symbolically, as Rosneft now literally owns the disintegrated company’s former headquarters–questions remain. Namely, who owns Prana? And why are they willing to part with the assets they bought two months ago for $500 million less than they paid? It still seems like something fishy is going on, and we’ll have to see who exactly is benefiting the most.

The mystery surrounding the end of Yukos

Now that Yukos has “expired,” we are left to ponder exactly what went on during the last auction lot, which was expected to raise only a few hundred million dollars from the sale (likely to Rosneft) of Yukos’ 22-story Moscow office building, but in actuality generated nearly $4 billion from an intense bidding war. From the FT:

…an obscure company bought an auctioned lot, including Yukos’s headquarters building, for almost $4bn (£2bn), in what looked at first glance to be the most expensive property deal in recent history.

The company, Prana, bid nearly five times the starting price of Rbs22bn (£430m) to head off state-controlled Rosneft in 707 rounds of bidding.

Observers were baffled by the price paid for the lot, which, at first glance, included only the office building…and acouple of shell companies.

Prana is, according to wikipedia, a sanscript word for “breath” or some such, used mainly in yoga practices–though some how I doubt that the office will be turned into a new-age workout studio.

It turns out that those “shell companies,” which apparently include trading and sales units, still held active (or recently active) accounts possibly worth a couple billion dollars themselves. The sale had been headlined by the office building (and its associated property–certainly a valuable commodity in Moscow, even if it isn’t right in the center of the city), which was valued at around $300 million. It is not exactly clear if the auctioneers realized the extra worth within the associated companies, or whether they were ignorant along with most every one else–except, apparently Rosneft and the mysterious Parna.

It could very well have been one last attempt at a “F-You” to Yukos by Rosneft, making off with the last of the fallen company’s sales for bargain-basement prices, behind the backs of critical outside observers. Instead, it raised about another $4 billion, pushing the total amount raised from Yukos’ auctions to over $30 billion. Yukos’ stock, long-thought worthless, also rose to 57 cents on news of the surprise sale, before closing at 52 cents (it’s now at 49 cents).

Here is the NYTimes article, Moscow Time’s coverage, and the Google news roundup of the story.

I’ll comment more after I read some of the Russian coverage, but it looks to be that one of the shell companies, “YUKOS-M,” was the main firm’s “purse,” acting as a lending and surplus vehicle. Just how much was left within the “purse,” is still unclear, however.

Update: According to Kommersant, it looks like Prana may have some obscure connections to Gazprom.  Russia’s anti-monopoly agency is threatening to vitiate the auction if the true backers behind Prana aren’t revealed, and this could be a legitimate threat given the precedence, but we’ll see.