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Russian oil firm to float 15% stake

Paul Rodgers
Saturday 20 January 1996 19:02 EST
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LUKOIL, Russia's largest oil company, is considering whether to place up to 15 per cent of its shares, worth about $600m (pounds 398m), on the London Stock Exchange or its New York rival.

Company officials in Moscow said at the weekend that it was in talks with both exchanges and expects to make a decision within the next few months. The listing would take place around the end of the year.

"We are researching the situation and will chose New York, London or a combination of both," said Lukoil spokesman Peter Neyev.

Lukoil sees itself as the little brother of the West's Seven Sisters: Amoco, BP, Chevron, Exxon, Mobil, Shell and Texaco. Its move follows a recent successful placing of American depository receipts (ADRs), which allow investors to trade in US-denominated instruments backed by foreign shares held in a New York bank vault.

Full financial details have yet to be revealed, and the company's existing ownership is still not clear. It is believed that the Russian government's stake is 5 per cent and that the company's pension fund has another 29 per cent, while managers and workers hold 31 per cent. The remaining 20 per cent is owned by western interests, including the US oil firm Arco.

Of the Russian oil companies set up after the collapse of Communism, Lukoil is the biggest and arguably has the best assets, including 15 billion barrels of reserves. Its 1994 production was 416 million barrels, not far behind Texaco, the smallest of the Sisters. Its revenue of $6bn that year is expected to climb as non-paying customers, such as collective farms, are cut off.

The London exchange refused to say whether it was fighting for the listing, but it usually takes an aggressive stance towards winning international business.

London argues that while the NYSE is larger, most of its rival's companies are domestic and most of its investors are individuals. London has the largest list of international companies, backed primarily by institutional investors.

Because institutions are more sophisticated, London's regulations tend to be less strict than New York's, which could be an important factor in Lukoil's decision. It is only now preparing its first balance sheet, with the help of accountants KPMG. "There are certain difficulties in Russia in preparing all the necessary documents," said Mr Neyev.

If the company does seek a listing here, either directly or through global depository receipts - London's equivalent to ADRs - it will be the first big opportunity for British investors to get directly involved in the Russian oil patch.

While US and Canadian oil companies piled into western Siberia after the fall of the Soviet Union, most small and medium-sized British firms concentrated on other former Soviet republics.

BP and Shell both have a presence, but their involvement is heavily diluted by their exposure elsewhere. Several Irish companies are working in Russia, including Bula Resources and Dana, a partner of Lukoil now seeking a London listing.

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