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14 Aug, 2007 05:37

Rumours save Surgutneftegas from market plunge

Most of Russia's blue chips are going down, but the country's fourth largest oil producer Surgutneftegas is still bucking the trend. Some analysts say the oil company's recent gains may be due to continued speculation about a takeover by an energy company

Surgutneftegas' shares have been rising for two weeks running, having long underperformed the energy sector. The company is valued at around $16 BLN – half that of TNK-BP – yet produces around the same amount of oil as its rival. Now there could be added interest from strategic investors.

“The speculation is – and I think there's some truth in it – that management-related entities are buying up Surgutneftegas and looking perhaps to sell it on to another buyer and the obvious buyer for that is the government,” claims Roland Nash, head of research at Renaissance Capital.

Cue Rosneft and Gazprom long rumoured to be eyeing Surgutneftegas as a takeover target. Some analysts say Rosneft's assets are similar to those of Surgutneftegas, making it the more likely candidate.

Whether the oil giant will be able to finance such a large acquisition is a separate issue.

“It's won a number of assets during the YUKOS auctions, and it still has to digest those and sort of present itself as 'a new Rosneft'. To jump into a transaction that may require double-digit-billion borrowings again. when you look at the company's current efforts to cut the debt rather then increase it – they just don't have the financial ability right now to do that,” suggests Artyom Konchin, Aton Capital analyst.

Surgutneftegas has never fully disclosed its ownership structure, raising doubts about transparency and dampening investor sentiment. But if there's any truth in this intrigue over a possible state buyout, it may not have to rely on the market much longer for its future prosperity.