RussNeft Makes Loans in Russia

OAO Oil and Gas Company RussNeft comprises 30 producing entities that develop fields with NEP over 600 million tons, 3 oil refineries, 300 gasoline filling stations in five Russian regions etc. The current production is 16.5 million tons year on year. The revenue in 2005 by Russian Accounting Standards (RAS) – 66.87 billion rubles, the net profit – 4.14 billion rubles. 100% of RussNeft is controlled by company’s president Mikhail Gutseriev and his family.
Assets acquisition on loan funds is the favourite strategy of RussNeft’s president Mikhail Gutseriev. During 2002-2004 the company spent 19.1 billion rubles on assets acquisition. At first, the company was supported by Binbank established by Mr. Gutseriev. Then, Glencore – an international trader - became RussNeft’s main creditor. By the end of 2005 it had had over 40% out of Russian company’s $ 2 billion debt. Till last December 49% of Russian company’s shares have been held by Glencore as collateral and apart from February 2005 the trader has 39.8%-49% in RussNeft’s subsidiaries – Varyeganneft, Ulyanovskneft and joint venture Nafta-Ulyanovsk.
But now Sberbank has become RussNeft’s largest creditor. According to RussNeft’s report for the 1st quarter $ 1.011 billion of the loan fall within Glencore – Intersil Limited structure. Banks-rate.ru reads RussNeft and its affiliated structures’ arrears before Sberbank as of January, 1 2006 was $ 1.5 billions. Whereas, $ 1 billion falls within RussNeft itself. A loan for 3 years was taken on December, 15 2005 company’s report for the 1st quarter says.
RussNeft  and Sberbank refused to comment on the transaction yesterday. A source close to RussNeft told Vedomosti that the funds were obtained for further acquisition of TNK-BP’s assets last December – Saratovneftegas, Orsknefteorgsintez refinery, Orenburgnefteproduct, a lube  oil plant, and also Krasnodarekoneft refinery. The loan security are the controlling stakes of the four first companies.
RussNeft does not unveil the discount rate of the loan. Its report only says that the service expenses for three years are $ 330 billion. Trast bank’s analyst Mikhail Galkin considers the loan rate to be too high. He says Russian major producing companies usually take loans at 6.5-8.5% rate. And RussNeft’s ruble bonds are traded with 9.2% revenue position.
It was for a reason that RussNeft asked a state bank for help, a source close to the company says. ‘The times are changing, the government thinks to limit foreign companies’ access to the reserves, - Vedomosti’s interlocutor says.- Sberbank is country’s major financial institution and a reliable partner. That is why Mr. Gutseriev has decided to resort to Russian money.’
However, Solida’s analyst Denis Borisov is sure that the company will not do without new loans. He points out that Mr. Gutseriev has ambitious plans. This year Russeft plans to produce 20 million tons of oil. And in the long-term perspective Mr. Gutseriev plans its company to have the production at the point of 100 million tons of oil. He said that he will increase company’s production by means of foreign projects, and the production in Russia will reach 20 million tons.