Yukos asks JP Morgan to revalue its assets

MOSCOW: Russian oil major Yukos has asked JP Morgan for an alternative valuation of its key unit Yuganskneftegaz, ahead of a state auction of its assets, Vedomosti reported on Tuesday.

A Yukos spokesman had no comment, but the business daily said Yukos hoped JP Morgan would give Yugansk a higher valuation than the conservative estimate of $10.4bn included in a government-commissioned study by Dresdner Kleinwort Wasserstein.

Analysts say the Yukos saga has entered its final stage, with Russia’s privatisation agency announcing plans on Monday to auction Yugansk on November 22 to raise cash to meet Yukos’ crippling tax bills. The fund has to give one month notice of the sale, which will effectively split up the oil giant, by Friday.

Oleg Vyugin, head, Russian Federal Financial Markets Service, said selling Yukos assets at an unfair price would hurt investor confidence, already shattered by the government’s year-long legal assault on the company.

“The market and investors are currently waiting for an end to be put to the so-called Yukos affair, and a final bill will be presented after assets are sold,” Interfax news agency quoted Mr Vyugin as saying late on Monday.

“If they are sold at an unfair price, for next to nothing, this will mean that the property owned by Yukos’ minority shareholders has been expropriated by state bodies for its new owner,” he said.

“This event may not restrict itself to investors’ losses alone, but may also serve to provide an assessment to the investment climate, the improvement of which is our objective.”

Yukos, which produces 20% of Russia’s oil output and accounts for 2% of global production, has lost more than two-thirds of its value since April. The share was trading 1% down at 123.78 roubles ($4.25) in early Tuesday trade.

The tightening legal noose around Yukos has raised market fears of supply disruptions and contributed to the surge in world oil prices. Yugansk pumps out 1m barrels of crude per day.

The market’s fears of a fire sale of Yugansk assets, which would dilute the value of minority shareholdings, were reinforced when Interfax news agency said on Monday that the opening bid for the closed auction could be the equivalent of Yukos’ immediately due tax debt, which it put at $3.7bn.

“The news seemingly further confirms our worst-case scenario, which implies that Yukos may find itself on the verge of collapse after the auction,” analysts at Troika Dialogue brokerage wrote in a note on Tuesday.

“Clearly, the latest moves by the government give no reason for optimism.”

Many analysts believe Yugansk will end up in the Kremlin-friendly hands of gas monopoly Gazprom or oil firm Surgutneftegaz.

Vedomosti said last week that bailiffs collecting Yukos’ overall tax debt, which runs to $8bn, had issued a sale document that raised the possibility of a price significantly below the Dresdner valuation, which ranged from a low end of $10.4bn to a high of $17.3bn.

Yukos’ tax woes are part of a broader campaign that many in business circles see as the Kremlin’s punishment of its main shareholder, Mikhail Khodorkovsky, for his political activities. Mr Khodorkovsky is now on trial for fraud and tax evasion.

Alfa Bank analyst Chris Weafer said the Yukos affair was now coming down to the wire.

“If the government is now going to let this case end in a shambles,” he wrote in a research note on Tuesday, “then that raises the prospect of the complete destruction of any residual value in Yukos.”

(From : The Economic Times 19.10.2004)