RUSSNEFT IS GOING PUBLIC

RussNeft may float up to 10% of its shares on the Moscow Exchange and gain as much as $400-500 million. The next step would be the consolidation of the oil assets of the Gutseriev family.
RussNeft would float up to 10% shares in IPO on the Moscow Exchange, the Company`s majority owner said to the journalists. Gutseriev`s evaluation of this stake is $400-500 million, and if the market confirms such estimation, the consolidation of oil assets on the basis of RussNeft will begin. Apart from RussNeft, the Gutseriev family owns Neftisa, Forte Invest and Global Energy.
“At first, we intended to consolidate our assets and then go for an IPO, but later we took more reasonable decision - to test the market”, - explained Gutseriev in his interview with RBC-TV.   Currently the Company reserves are almost 540 million tons, production for this year will be 8 million tons, and the Company wants to know how much such reserves and production cost, the businessman says.
The aggregated reserves of the family oil assets are around 800 million tons, while the production – around 17 million tons. “At the moment our oil companies sell 16 million tons of crude and up to 10 million tons of petroleum products overseas, getting solid currency”, RBC quotes businessman`s words. The combined company, according to him, is valued at near $10 bln.
 The Businessman asserts that RussNeft will maintain its efficiency at current oil prices, although his long term forecast is $50-60 per barrel. He didn’t specify the RussNeft`s production cost, but claimed to have the lowest rate in the national industry.  The CEO of LUKOil Vagit Alekperov in the beginning of the year 2016 warned that many of the oil production projects, including the existing ones, may be terminated at the price below $24 per barrel. Chairman of the BOD of Gazpromneft Alexander Dyukov asserted that increase in oil production at the developed oilfields of his company would be profitable even at $18-20/barrel.

Mikhail Gutseriev added, that in the run-up of the IPO, the company`s management “put everything in order”, for instance the debt was reduced to $1.2 billion (the only RussNeft`s creditor bank now is VTB-bank). Before October 2015 the indebtedness of RussNeft to Glencore, VTB and Gutseriev himself was several times higher – $5.3 billion. Gutseriev promised to allocate the funds, which are to be made from the IPO, for the further debt reduction.
Another option for RussNeft listing on Moscow Exchange was described by co-owner of BIN Group Mikhail Shishkhanov (the nephew and principal business partner of Gutseriev) in his interview with RBC two weeks ago. According to Shishkhanov, in the 4th quarter of 2016, RusNeft may place up to 40% of its shares on Moscow Exchange: the Company has found investor from CIS, who is ready to put up about $1 billion. Western banks and companies from CIS countries (Kazakhstan, Azerbaijan and Belarus) show interest to the Company`s IPO, says Gutseriev.
The representative of the big investment fund informs that they did not get any offer from RussNeft and he himself is not able to evaluate the Company`s business attractiveness, while analyst of Veles-Capital Vasily Tanurkov believes the value of $4-5 billion is exaggerated and in fact the Company fair evaluation is no more than $2.9 billion. If the market offers less, than the IPO will likely be postponed, as the Company`s shareholders have clear awareness of its value and there is no necessity to hurry with the placement, the director of Small Letters Vitaliy Kryukov reckons. But Kryukov considers current time as quite opportune for IPO - the market is expecting the price to rise.

THE MONEY OF RUSSNET

Gutseriev reveals that revenue of the Company would exceed RUB 100 bln while EBITDA would amount to RUB 25 billion. The Company did not make financial reporting for 2015, but Moody`s analysts assigned an average revenue estimate of  $1.7billion (RUB 104.2 billion according to the average Central Bank exchange rate for 2015), and corrected EBITDA - of $648 million ( RUB 39.7 billion) for the last year.