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Russian oil creates new giant
MOSCOW, Russia (CNN) -- YUKOS, Russia's second-biggest oil company, agreed on Tuesday to buy rival Sibneft, creating the world's fourth-largest oil producer. YUKOS plans to buy 20 percent of Sibneft, the country's fifth-largest oil company, for $3 billion in cash and acquire the rest in a share swap -- at a ratio of 0.36125 percent of the new company for every one percent of Sibneft stock -- by the end of the year, the companies said in a joint statement. The new company to be called YUKOSSIBNEFT would control oil reserves of 19.4 billion barrels, more than the entire North Sea and Alaska's Prudhoe Bay. It will also pump 2.3 million barrels a day -- on a par with the daily output of Kuwait, but just short of the world's fourth and fifth-largest oil companies ChevronTexaco of the U.S. and France's TotalFinaElf. "The merger means that the new company will be the third largest among oil companies in the world in terms of oil reserves," Konstantin Reznikov, an oil and gas analyst at Alfa Bank, told Reuters. "The payment of $3 billion means that YUKOS is offering a premium on the current valuation of Sibneft and we could expect its share price to rise." Shares in YUKOS rose 1.7 percent, or 19 cents, to $11.24, while Sibneft rose 3.8 percent, or 9 cents, to $2.46 in midday Moscow trading on Tuesday. The merger, which is expected to be completed by the end of 2003, would value the combined group at about $35 billion, accounting for 30 percent of the Russian stock market's capitalization. Sibneft's stocks have risen more than 10 percent over the past two weeks on speculation YUKOS or an overseas rival may buy the oil company. Western oil companies have been looking for some time to Russia to diversify their supplies. In February, Europe's second-largest oil company BP agreed to pay $6.75 billion for a joint venture with the Russian owners of oil group TNK. The new company would be headed by Mikhail Khodorkovsky, now CEO of Yukos. Sibneft's Eugene Shvidler is to be nominated as chairman of the board of directors. Sibneft "By combining with Sibneft, we'll maximize our competitive advantages," Khodorkovsky said.
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