Merger rumours around Surgut - What will happen to Hungary's MOL?

PORTFOLIO.HU

Monday, 22, June 2009 05:06:00 PM

Talks have resurfaced about a possible merger between Russia's largest oil company Rosneft and Surgutneftegas, which holds a 21% stake in Hungary's MOL. The parties have played down the rumours, but Rosneft's shares rallied on the Moscow stock exchange last Friday.

The rumour about the merger, which have been recurring from time to time over the past few years, was also fuelled by the election of Surgut chief Vladimir Bodganov into Rosneft's Board of Directors.
Surgut sits on a cash pile of USD 23 bn, while Rosneft has debt of about USD 19 bn.

Rosneft Chairman Igor Sechin refuted the rumour in a rather funny way, according a Reuters report.

"Judging by the reaction of Vladimir Leonidovich (Bogdanov) - he is sleeping over there - nothing is planned. And I can also confirm, nothing is being planned," a smiling Sechin told a shareholder who asked him about the merger.

"The rumour mill is now running in overdrive that Surgut may acquire a blocking minority stake in Rosneft for cash and that there may be a change in the position of CEO of Rosneft," Reuters cited Chris Weafer, chief strategist at UralSib brokerage.

"This is something of a seasonal story but this year appears to have much greater credibility," he added.

Alexander Razyvayev from Gallion Capital said one of the options discussed was Rosneft issuing 25% in new capital and Surgut spending its entire cash pile to buy it.

Bogdanchikov said, however, that no new share issue was planned for purchase by Surgut.

Sechin, Russia's top energy official, said some USD 16 billion in debts have been refinanced and partly repaid in 2008, and it was USD 7 bn in the first half of this year.

“The company feels confident," he told a gathering of some 740 shareholders.

He also promised Surgut state support in its fight with Hungarian fuels group MOL, in which Surgut bought a 21% stake for EUR 1.4 bn (USD 2.0 billion) earlier this year from Austria's OMV, earning the ire of MOL and Hungary's government.