Originally created 08/14/04

Yukos shares bounce back on hope of fair-priced sale for key asset



MOSCOW -- Yukos stock rebounded strongly Friday on hopes the company's key asset would be sold at a fair market price, enabling it to pay off a crippling tax bill.

On the dollar-denominated RTS exchange, Yukos stock closed up 13 percent at $4.30 on Friday.

Analysts said investors were cheered by an announcement Thursday that Russia's Justice Ministry was hiring Western investment bank Dresdner Kleinwort to assess the value for sale of Yukos' subsidiary Yuganskneftegaz, which pumps as much oil as Algeria and accounts for 60 percent of Yukos production.

The money would go toward settling Yukos' crushing $3.4 billion back tax bill for 2000. Yukos faces a similar claim for 2001 and is being audited for 2002. Analysts have said its final tax bill for 2000-2003 could total $10 billion or more.

Russian authorities seized Yuganskneftegaz in July and announced plans to sell it to recover the money Yukos owes in back taxes. The government has portrayed the oil company's legal troubles and the separate charges facing its jailed former CEO Mikhail Khodorkovsky as punishment for what the government alleges were abusive tax and bookkeeping practices.

But critics allege the investigation is really about punishing Khodorkovsky for his political ambitions, and rewarding Kremlin allies.

Thursday's announcement appeared to allay fears that Yuganskneftegaz would be sold for a fraction of its true value to a state-run or Kremlin-friendly company.

"This is the first indication that we have had that the court will not allow an arbitrary and presumably ridiculously low valuation to be applied to Yukos assets," Chris Weafer, chief strategist for Alfa Bank, wrote in a note to investors.

It remains unclear how much of Yuganskneftegaz the government would sell and whether the funds raised would be used to cover only the 2000 back-tax bill or Yukos' entire account. Analysts have said that Yuganskneftegaz could be valued at anything from $7 billion to $30 billion.

Despite multiple appeals to the government, Yukos has been unable to broker a deal to spread out its tax payments. With its bank accounts frozen and an asset freeze in place, the company had earlier warned it might run out of money by mid-August.

"We've been able to extend the timeframe by a bit," Yukos chief financial officer Bruce Misamore told Dow Jones Newswires on Friday. He declined to be more specific, or say how much cash the company currently has.

Fears of reduced supply from Russia have helped propel world crude prices to record levels in recent weeks.

Meanwhile, Yukos' plan to raise cash by selling its 56 percent stake in Siberian gas venture Rospan appeared stalled Friday.

According to a report by the Vedomosti business daily, Russian authorities have approached Deutsche Bank - which acts as depository for Rospan's shares - seeking to freeze 100 percent of the company's stock.

The paper quoted a Russian lawyer as saying this would be impossible since the company is only held indirectly by Yukos via a Cyprus-registered offshore, and the remaining 44 percent stake is held by Russian-British joint venture TNK-BP.

TNK-BP have said it would buy out the Yukos stake for $357 million.