By the OGJ Online Staff
LONDON, Oct. 12 -- Russia's second largest oil producer, OAO Yukos Oil Co., bought 10% of British-Norwegian engineering firm Kværner ASA to ensure fulfillment of work contracts between the two firms in the Khanty-Mansiisk region, officials said Friday.
Kværner, one of its biggest oil field contractors, has already been hit by the worldwide economic recession. The Khanty-Mansiisk autonomous district in western Siberia is home to most of Russia's oil production.
"Yukos has a substantial contractual relationship with Kværner and has an interest in preserving the level of service it has been receiving from Kværner during the period of uncertainty that the company is experiencing," said Yuri Beilin, president of Yukos Exploration and Production.
Yukos formed an alliance with Kværner last year to develop Priobskoye, a lucrative oil field with proven reserves of 4.1 billion boe. Yukos officials estimate Priobskoye will provide 34 % of their oil production in 2005, up from 10 % currently.
Yukos accounts for 38 % of all orders handled by Kværner Hydrocarbons, the London-based division of the group.
Kværner spokeswoman Marit Ytreeide said, "We are very positive about having a big shareholder, especially when that shareholder is one of our clients."
In its initial announcement Friday, Yukos said it had no plans to increase its current stake and that it was too early to consider acquiring a seat on Kværner's board of directors. However, the company later said it "remains open" to increasing its Kværner holding "from time to time, in light of market conditions."
Yukos has a meeting scheduled Thursday to consider its interim dividend for 2001. Some financial analysts suggest it may decide then to increase its stake in Kværner.
The Russian company bought its Kværner shares on the open market. Although Yukos did not reveal what it paid for those shares, others calculated that buying 10 % of Kværner's stock on the open market probably would have cost $13 million.
Kværner's share price has more than halved in the past month since the group announced an additional share issue and the impending departure of CEO Kjell Almskog.
Earlier this week, Kværner warned that its third-quarter profits would be less than expected, as the group sought to raise more than $100 million in capital to stave off bankruptcy. In 2000, Kværner saw profits of $42 million on sales of more than $6 billion.
However, Yukos said the low share price had little to do with the transaction.
Over the past few years, Yukos has aggressively invested in Western technologies and has worked with oil-service firms such as Schlumberger to increase its production.
"We remain the industry leader with the fastest production rate growth of any Russian oil company. The most important thing for us today is to keep production costs from rising and to continue improving efficiency in the Company's activities. These are the fundamentals that need to be in place in order to increase shareholder value over the long term," said Yukos CEO Mikhail Khodorkovsky.