November 21, 2008 at 11:32 am #3304
Lukoil May Purchase 30% Holding in Spain’s Repsol (Update2)
By Stephen Bierman and Gianluca Baratti
Nov. 21, 2008 (Bloomberg) — OAO Lukoil, Russia’s biggest non- state oil company, may buy a 30 percent stake in Repsol YPF SA to expand its refining in the Mediterranean.
Repsol, the largest Spanish oil company, rose as much as 11 percent in Madrid trading to 15.14 euros after Criteria Caixacorp SA said it and Sacyr Vallehermoso SA may sell a holding of up to 30 percent. Based on yesterday’s share price, the stake is valued at 5 billion euros ($6.3 billion). Lukoil declined to comment.
El Economista reported today that Lukoil offered 28 euros a share to Criteria and other shareholders for a stake of just under 30 percent. Chief Executive Officer Vagit Alekperov agreed in June to pay 1.35 billion euros to buy into a refining venture in Italy with ERG SpA, adding to refinery holdings in Bulgaria and Romania. Analysts at JPMorgan Chase & Co. and ING Groep NV said that Lukoil may not afford another purchase.
“The current conditions and the value of the stake make any deal highly unlikely in our view,” JPMorgan analyst Alex Kantarovich said in a note to clients today.
Lukoil fell 4.2 percent to 782 rubles on the Micex stock exchange. Repsol rose 1.6 percent to 13.82 euros. The company has $1.9 billion in debt and loans maturing this year. Obligations will drop to $609 million in 2009 and $525 million in 2010. Lukoil had $1.66 billion in cash at the end of June.
Last week, OAO Gazprom, Russia’s natural-gas exporter, said it’s not interested in Repsol, while the Spanish government said it was opposed to an approach by a nationally owned company.
Repsol, which also has gas assets, would have been a “much better match” for Gazprom, said Igor Kurinnyy, an ING analyst in London.
Spain wants Repsol to “remain a company managed by Spaniards with a plan that is positive with regard to security of supply,” Deputy Prime Minster Maria Teresa de la Vega said today. Prime Minister Jose Luis Rodriguez Zapatero said yesterday that while he would prefer for Repsol to be under a “Spanish flag,” any sale was for “private companies.”
Repsol, which relies on South America for about 95 percent of its oil reserves is looking to diversify its supply. It has boosted its stake in West Siberian Resources Ltd., a Stockholm- traded Russian oil producer, to 10 percent and has said it’s interested in taking part in Russia’s offshore Pacific Sakhalin- 3 development.
The refineries in Romania, Ukraine and Italy aren’t enough for Lukoil to be considered a “global company,” said Alexei Kokin, an analyst at Metropol in Moscow. Buying part of Repsol would boost its refining presence in Europe and “catapult Lukoil into South America as well.”
Repsol is aware of talks between one of its “significant” shareholders and third parties and isn’t involved in any discussions, the company said in a statement. A Sacyr spokeswoman, who didn’t want to be identified citing company policy, said it’s open to talks about selling its holdings.
Repsol operates five refineries in Spain, three in Argentina and one in Peru. It has holdings in another refinery in Argentina and two in Brazil, giving the company a total refining capacity of 1.23 million barrels a day, according to the Madrid-based company’s Web site.
“Lukoil would have trouble financing the deal,” said Evgenia Dyshlyuk, an analyst at Renaissance Capital. “They don’t have much cash because they need to spend it on capital spending.”
Sacyr, which has a market value of 2.6 billion euros, ended September with debt of 16.5 billion euros. The construction company spent 6.5 billion euros buying the Repsol holding in 2006, paying an average of 26.71 euros a share.
Criteria has a 9.1 percent direct stake in Repsol and owns an interest through Repinves, taking its stake to 12.7 percent, according to the company’s third-quarter earnings report.
To contact the reporter on this story: Gianluca Baratti in Madrid firstname.lastname@example.org. Last Updated: November 21, 2008 10:04 EST
November 21, 2008 at 11:34 am #6443
Right instincts by Lukoil but probably wrong time market for them to pull it off, since Russia’s crude revenue has been ~cut in half & they are already strained to keep going on strategic refinery capital projects.
Market & company value on refining industry will be ripe for another round of mergers globally….. especially after some asset / reserves re-evaluation at end of year 2008.
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