Lukoil bought ConocoPhillips out of Naryanmarneftegaz JV for $600 mln - report
MOSCOW. Aug 31. (Interfax) - Lukoil bought ConocoPhillips out of the Naryanmarneftegaz joint venture for around $600 million, the Russian oil major said in an earnings report to US GAAP.
"On August 22, 2012, the Group acquired ConocoPhillips' investments in OOO Naryanmarneftegas (NMNG) and certain related assets for approximately $0.6 billion. ConocoPhillips group owned 30% in NMNG. The acquisition brings the Group's total ownership interest in NMNG to 100%," the report said.
Lukoil and ConocoPhillips had a joint venture, NMNG, which develops oil reserves in the Timan-Pechora region. Lukoil and ConocoPhillips had equal voting rights over the joint venture's activity and effective ownership interests of 70% and 30%, respectively.
Lukoil Group companies have a number of loan agreements denominated in Russian rubles with ConocoPhillips, with an outstanding amount of $1.464 billion as of June 30, 2012. This amount includes $1.309 billion loaned by ConocoPhillips to Naryanmarneftegaz. Borrowings under these agreements bear interest at fixed rates ranging from 6.8% to 8.0% per annum and have maturity dates up to 2038. Financing under these agreements is used to develop oil production and distribution infrastructure in the Timan-Pechora region.
ConocoPhillips has said it expected to receive $400 million after tax from the sale.
Lukoil and ConocoPhillips announced a major strategic alliance in 2004 when the American company bought 7.6% of Lukoil. It increased its stake to 20% in 2006 and acquired 30% of Naryanmarneftegaz, with Lukoil owning the other 70%.
But according to the SPARK database, Lukoil's wholly owned subsidiary LLC Lukoil-Komi owns 50% of Naryanmarneftegaz and NMN Holding B.V. owns the other half.
ConocoPhillips sold 18% of Lukoil in 2010, partly on the market and partly to Lukoil itself, and rounded the process off in 2011. The company said as it was selling the shares that it would not be pulling out of its Russian projects.
Lukoil said in 2011 that due to an error by geologists, some of them American who worked at Naryanmarneftegaz's Yuzhno-Khylchuyuskoye field, production at the field had started to nosedive, from 7 million tonnes in 2009-2010 to just 3.3 million tonnes in 2011, due to "unforeseen geological reasons."
As of December 31, 2011, the field's proven reserves had decreased considerably and totaled approximately 142 million barrels. In 2011, following an assessment, the company recognized an impairment of $1.261 billion related to Naryanmarneftegaz.
Lukoil says in reporting that the stake in Naryanmarneftegaz was sold for $529 million. The companies had said the price would include more than $370 million for the 30% rights to the joint venture's oil and gas reserves and further payments for 30% of the joint venture's working capital and 30% of capex made by Lukoil in the field since January 1, 2004.
LLC Naryanmarneftegaz holds seven licenses to develop fields in the Nenets Autonomous District: Yuzhno-Khylchuyuskoye, Yareiyuskoye, Varandeiskoye, Tovareiskoye, Zapadno-Lekeiyaginskoye, Severno-Sarmeboiskoye and the Varandei-Adyzinvskoye zone, which includes the Perevoznoye, Mezhdurechenskoye and Sedyaginskoye fields. Oil is carried by pipeline to the Varendei seaport on the coast of the Barents Sea.
