Lukoil, Russia's integrated oil company, plans a second phase of privatization in which Russian and foreign investors will be invited to buy shares in the company.
First, Russian investors will be offered shares totaling 20.4% of the company's registered capital.
Lukoil estimates its current market value at $850 million, based on Russian voucher market prices and investments in Lukoil at recent voucher auctions.
Another 15% of the company's shares will later be offered to foreign investors. Lukoil plans to become the first major Russian production company to place blocks of its share on western markets.
Lukoil hopes to raise as much as $10 billion from the two offerings.
This second round of privatization follows a 3 month voucher auction stage near completion. Hundreds of thousands of Russians are said to have invested 3 million share vouchers in Lukoil.
The company also said western financial organizations have bought its shares. CS First Boston bank is said to have bought 2.8% of Lukoil shares and more than 5% of Lukoil-Kogalymneftegas shares for investors.
A further 10% of Lukoil, temporarily owned by the state, is ear-marked for offering through a voucher auction.
Lukoil said the book value of the company was $29 million the day the joint stock company was established in April 1993.
RESTRUCTURING
Lukoil hired McKinsey & Co. to advise on restructuring. This will include consolidation of all shares under one company. Lukoil is currently a joint stock company with 11 subsidiaries.
Substantial cuts in shift worker levels have been made, and a management organization in western Siberia has been eliminated. Lukoil also set up its own drilling company and a workover company to operate independently of the production company in an effort to reduce costs.
Other elements of the strategy include:
- Stabilizing oil production by boosting yield from existing wells, developing new fields, and exploration. Last year Lukoil produced 48.8 million metric tons of crude oil, or 15% of Russia's total output (OGJ, June 20, p. 24). Last year's production was off 14.5% from 1993. The decline in 1994 is expected to be only 5%, compared with an 8% drop for Russia as a whole.
- Increasing refining capacity by upgrading old units and construction of new ones. In addition to plans for construction of a refinery in Krasnodar, Lukoil will lease the Mazhekai refinery in Lithuania and participate in its privatization.
- Doubling the number of retail outlets in Russia from the current 1,300.
- Expanding activities abroad. Priorities outside Russia include the Asian and Baltic republics and eastern Europe. Lukoil has been offered share in exploration and development of blocks in Tunisia and Egypt by Italy's Agip.
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