RusEnergy

On a Side 05-19-2006 Aton Capital Marathon asset sale. US company in agreement to sell West Siberia subsidiary to Lukoil
MARATHON Oil of the US has entered into a definitive agreement to sell its Russian subsidiary Khanty-Mansiysk Oil (KMOC) to a West Siberian oil producing affiliate of state oil giant Lukoil. Under the terms of the agreement, Lukoil will pay about $787 million, plus working capital and other closing adjustments, Marathon said. The transaction is expected to close in mid-July, subject to government approvals and other closing conditions. Besides KMOC, Marathon will also sell its stakes in two minor oil producers in the region - Paytykh Oil and Nazymgeodobycha. "Since acquiring these assets almost three years ago, Marathon has doubled oil production to more than 30,000 barrels per day, resulting in the creation of substantial value," said Marathon chief executive Clarence Cazalot. "We have elected to monetise the value of these particular assets, while continuing to evaluate other attractive opportunities in Russia," he added. In May 2003, Marathon paid about $275 million to Russian individuals to buy a controlling interest in Khantymansiyskneftegazgeologia, a company with about 250 million barrels of proven and probable reserves and an estimated 900 million barrels of total oil resources in the Khanty-Mansiysk region in West Siberia. Following the acquisition, the company was renamed KMOC and its output doubled under the Western management brought in by Marathon. KMOC has nine operating licences, including three producing fields in the Khanty-Mansiysk region - Potanay, East Kamennoye and Paitykhskoye. Six fields are still under appraisal and development - Galyanovskoye, Middle Nazymskoye, Aprelskoye, Tsentralnoye, Bolshoye and Olkhovskoye, Marathon said. According to Aton Brokerage in Moscow, the implied valuation of the agreement at $3.10 per barrel of proven and probable reserves and at $77 per barrel of current oil production "looks value accretive for Lukoil". Some industry observers in Moscow suggest that Marathon may re-invest some of the proceeds from the sale into a long-discussed joint venture with Russian state-owned oil company Rosneft. The venture is set to explore and develop oilfields in the Timan-Pechora province in Russia's north, where Rosneft is seeking to expand to counter its rival Lukoil. 05-18-2006 Kommersant - by Anna Skornyakova, Natalya Skorlygina
The company sold all its Siberian assets to LUKOIL
American Marathon Oil leaves Russia again after its return 3 years ago. It arranged to sell companies Khantymansiyskneftegazgeologiya, Paytyh Oil, and Nazymgeodobycha, which are owned by American Khanty Mansiysk Oil Corporation, for $787 million to LUKOIL. The Yukos case has seriously shattered Marathon's confidence in Russian economy, so the company decided to give up business in Russia. LUKOIL and Marathon Oil announced their agreement on LUKOIL's buying Marathon's assets yesterday. Beside the $787 million, LUKOIL is to compensate for floating capitals of the purchased companies. LUKOIL told Kommersant that the amount of the compensation is being discussed and will be decided upon by July.
The assets sold by Marathon include over 95 percent of Khantymansiyskneftegazgeologiya shares, and 100 percent of Paytyh Oil and Nazymgeodobycha shares. These 3 companies belong to US-based Khanty Mansiysk Oil Corporation. Marathon had bought Khanty Mansiysk Oil from Shell, western funds, and private individuals for $275 million in 2003. The 3 companies of Khanty Mansiysk Oil own 9 license areas on both banks of the Ob river in the Khanty-Mansi Autonomous Area, where they have extracted 257 million tons by January 1, 2006.
LUKOIL expects to extract more oil and to develop new oil fields. It also intends to join Urayneftegaz, a part of LUKOIL-West Siberia, in the production activity, which will bring over $100 million. According to Kommersant's information, Rostekhnadzor sent Rosnedra, the Federal Mineral Resources Agency, a demand to revoke some of Marathon's oil field licenses. Thus, Rosnedra are to inquire into the companies' compliance with license agreements. However, Rosnedra have already held such inquiry in autumn 2005, and have not discovered any violations.
It is not the first time that Marathon Oil leaves Russia. It exchanged 37.5 percent of Sakhalin-2 project shares for Shell-owned assets of non-Russian business in 2000. However, inspired by oil extraction increase, it bought Khanty Mansiysk Oil Corporation in 2003 and offered to Rosneft to create a joint subsidiary. Severnaya Neft, Rosneft's subsidiary, Khanty Mansiysk Oil, and oil-refining and sales US assets of Marathon might have joined the subsidiary.
Yet, the Yukos case have changed Marathon's plans. The company's financial director Janet Clark said that Marathon will probably make corrections to its business strategy in Russia. "We have not taken into account the constant changes in Russia's financial sector, or the political situation which made us step back and think what is the best way to go on," she said. Paul Weeditz of Marathon Oil did not link the leave of Russia to Yukos. Yet he said: "When we were buying this asset, we planned to develop it, but not to sell."