Yukos-Sibneft Is Expected
To Get Bids by 2 U.S. Firms
ChevronTexaco, Exxon Likely to Make
Offers for 25% Stake in Russian Oil Firm
By ANITA RAGHAVAN, JEANNE WHALEN and GREGORY L. WHITE
Staff Reporters of THE WALL STREET JOURNAL
U.S. oil companies ChevronTexaco Corp. and Exxon Mobil Corp. are expected to submit rival preliminary proposals as early as this week for a plan to buy a 25% stake, valued at more than $11 billion (€9.74 billion), in Russian oil titan, Yukos-Sibneft, according to people familiar with the situation.
But no offer is on the table and any deal is far from certain and hinges on the willingness of Yukos-Sibneft -- the company to be created later this year by the merger of OAO Yukos and OAO Sibneft -- to address corporate-governance concerns held by both U.S. oil companies, these people cautioned.
The submission of informal proposals is important, though, because it is the first sign that the U.S. oil companies are seriously considering acquiring a sizable interest in Russia, one of the few places in the world left where large oil reserves are up for sale.
If completed, a deal would be by far the largest foreign investment in a Russian company, eclipsing the $7.7 billion BP PLC invested in a joint venture with TNK International, a deal that was completed last week. A 25% stake in Yukos-Sibneft, whose shares have risen more than 50% this year, would be valued at about $11 billion, based on current market prices.
Both ChevronTexaco and Exxon are expected to proceed cautiously and any proposal they submit would be very preliminary and detail conditions under which the companies would be prepared to acquire a stake in Yukos, people familiar with the situation said.
Yukos, which will solidify its position as Russia's largest oil producer when it completes the merger with Sibneft later this year, has been particularly active in looking for foreign talent to help improve its operations, hiring dozens of veteran oil executives from overseas in recent years.
Mikhail Khodorkovsky, Yukos's chief executive officer and largest shareholder, has been under intense pressure since July 2, when a close associate who is also a major Yukos shareholder was arrested on fraud charges related to a 1994 privatization. Mr. Khodorkovsky and the associate have denied the charges and insist the case is politically motivated. Many in Russia have speculated Mr. Khodorkovsky has run afoul of the Kremlin because of his growing political activity.
One person familiar with the talks said Mr. Khodorkovsky and his associates, who together control 61% of Yukos stock, began looking for a foreign partner in the spring. At that time, Mr. Khodorkovsky has said, he became aware that he was running into political trouble.
Steeped in the U.S. tradition of corporate governance, ChevronTexaco and Exxon Mobil are separately seeking to explore ways that they may acquire a stake in Yukos-Sibneft while gaining greater control over corporate-governance matters at the oil concern.
While Yukos has one of the best corporate-governance systems for a Russian company, many foreign investors have been reluctant to take minority stakes in Russian companies fearing their rights might not be adequately protected.
Both companies would seek to acquire a 25% stake plus one share in Yukos-Sibneft, which, under Russian law, would give them the right to block certain major decisions at the company. But ChevronTexaco and Exxon are also looking for greater corporate-governance provisions so that they could sell such a deal to their boards, which are skittish about any far-flung overseas investment, particularly against a backdrop of an aggressive regulatory climate in the U.S.
One way either company could gain greater control is if their acquisition of a 25% stake is a first step in a path leading to eventual control of the company, said one person familiar with the situation. Another way would be for Yukos-Sibneft to make certain corporate-governance commitments as part of any agreement, this person said.
For ChevronTexaco, a purchase of a stake in Yukos-Sibneft would be a big bite and would likely be accomplished through a stock swap, said a person familiar with the situation.
A spokesman for Yukos declined to comment Sunday evening. Sibneft couldn't be reached for comment. Spokesmen for ChevronTexaco and Exxon also couldn't be reached for comment.
For the U.S. oil companies, an investment in Russia is compelling. Like their major global competitors, U.S. oil companies are scrambling to bulk up their reserves as world oil consumption rises but fewer big new fields are discovered. Russia, with its young oil giants created after the collapse of communism in 1991, has some of the world's largest reserves, all the more attractive because their owners are primarily private companies, instead of governments as is the case in many other oil-rich nations.
Exxon already controls a $12 billion offshore oil and natural-gas project off the coast of Russia's Sakhalin Island, from which it plans to send oil and gas to Asian buyers. Elsewhere in Russia, Exxon's attempts to pump oil have been thwarted. In the mid-1990s it hoped to start developing reserves in northern Russia, but a local governor unexpectedly revoked Exxon's license to the field.
ChevronTexaco's only upstream oil asset in Russia is a 33% stake in another project off the coast of Sakhalin that hasn't yet gotten under way.
Write to Anita Raghavan at anita.raghavan@wsj.com, Jeanne Whalen at jeanne.whalen@wsj.com and Gregory L. White at greg.white@wsj.com
Updated September 15, 2003 |
