Yukos Plummets on Shock Tax Bill

Shock new government tax claims of $10 billion knocked ailing oil giant Yukos' dollar shares down 17 percent Tuesday as prospects for the company's survival appeared to dim.

Analysts said the market was now braced for further deadly blows from the government to be leveled against Yukos subsidiaries other than its main production unit, Yuganskneftegaz, which would destroy any residual value left in the company.

"The big picture emerges more clearly than ever: Yukos looks worthless unless and until [its main shareholder] Menatep leaves," the brokerage United Financial Group said.

"A zero-value scenario for Yukos is very much on the cards now," added Steven Dashevsky, oil analyst at Aton brokerage.

Yukos spokesman Alexander Shadrin said the company was presented with fresh tax demands of $6.7 billion in back taxes for 2002.

That is in addition to around $7.5 billion for 2000 and 2001, of which Yukos says it has paid $3.5 billion.

Shadrin also confirmed its main unit, Yugansk, which produces 1 million barrels per day or 62 percent of total output, had been handed demands for $3.4 billion in a move that will further reduce the unit's worth if sold to pay the tax debt.

Officials delivered a new tax claim to Yugansk for 2001 for 67.5 billion rubles ($2.4 billion) for 2001 and increased a demand for 2002 to 29.6 billion rubles ($1 billion).

"The amount is certainly impressive," Shadrin said.

"However, we are rather puzzled that the claim is actually higher than the company's revenues for that year."

The news sent Yukos' dollar-denominated shares, widely held by foreign investors, tumbling 17 percent to $3.32 on the RTS stock exchange and ruble shares down 9.49 percent to below the psychological barrier of 100 rubles ($3.48) at 95.94 on MICEX.

Yukos' market value stood at $11.3 billion before the new claims.

"This massive tax bill means that sales of other Yukos subsidiaries are now looking increasingly likely. If there are further tax bills, we will see charges leveled directly against other Yukos subsidiaries," Dashevsky said.

He said he anticipates asset sales at Yukos units Tomskneft and Samaraneftegaz.

Analysts said fresh tax claims on Yugansk appeared geared for a planned government auction of its assets, for which a date has yet to be announced officially.

The market now expects the government to get its latest claims to be judged due and payable by courts before any sale.

"This will ensure that even after Yugansk is sold ... there will still be unpaid claims on the basis of which the assets and bank accounts of Yukos will remain frozen," UFG said in a research note.

Interfax said the Moscow Arbitration Court set a Nov. 16 date for the main hearings of Yukos' claim to overturn the tax authorities' demands for 50.76 billion rubles in arrears and 28.5 billion rubles in penalties for 2001.

Analysts expect Yukos' objections to be brushed aside.

(From The Moscow Times, 3.11.2004)