Mikhail Gutseriev will repay to Glencore

The businessman will give 49% of Russneft to the trader.
Glencore International Trader will become a major investor in Russian oil production. After a year and a half of negotiations the company agreed to convert $900 mln of the debt of RussNeft owned by Mikhail Gutseriev as well as shares in the subsidiaries of the oil company into 49% of the shares of the head company. At the same time Mr. Gutseriev is still planning to merge RussNeft with Neftisa another oil company he owns, then the share of Glencore is unclear.   
The Swiss trader Glencore will receive 49% in RussNeft of Mikhail Gutseriev on the account of the debt of the oil company amounting to 900 mln USD, the businessman reported to Rossiya 24 TV channel yesterday. “Glencore will become the shareholder of the head company RussNeft, all the stakes of the subsidiaries will be transferred to us”, Mr. Gutseriev said. He also added the parties are awaiting an endorsement from FAS. At the moment Glencore owns 49% in Ulyanovskneft and Varioganneft included into RussNeft. Glencore was not available to comment.
  According to Kommersant informant close to RussNeft, the total debt of the company makes up around 2.5 bn USD at the moment, 1 bn out of this amount is the debt to the structures Mikhail Gutseriev owns. Repayment of the loan to Glencore started to be negotiated at the end of 2013 (RussNeft refinanced part of the debt and paid 1 bn USD). Thus if the transaction is closed the debt of the oil company will be decreased to 600 mln USD. In February 2014 Mr.Gutseriev said that Sberbank, another major lender may get 10% interest in the consolidated RussNeft and Neftisa (another oil company the businessman owns, he is planning to merge it with RussNeft). According to the informant the option with Sberbank is considered but unlikely to happen. Mikhail Gutseriev himself reported he would have control in the oil company.
Russneft and Glencore have had a long partnership, the trader provided a loan to Mikhail Gutseriev when he established the company from the differentiated assets in 2002, it also trades all of the company’s oil. The Kommersant informant says that this contract will be kept and that it is more important to get the major international partner who will assist in development, with whom one can share risks.
The sources have no information on when RussNeft and Neftisa are going to be merged and if the Glencore share is going to be blurred. One of the informants calls the merging still a priority but reports that it is still negotiated. Mr. Gutseriev started establishing Neftisa since 2010 by buying new assets as well as by transferring part of the assets of RussNeft. Last year the businessman estimated the value of the merged company in 18 bn, the annual production output makes up 700 mln tons. According to the Central Dispatch Department of the Fuel and Energy Complex, the production of RussNeft in 2014 made up 8.53 mln tons, and Neftisa production was not disclosed.
The strategy of RussNeft and Neftisa is also unclear. Mr. Gutseriev said yesterday: “All the investment has been suspended, we invest in production maintenance only”. “If we see that the annual oil price remains 60 USD per bbl, the ruble to dollar rate makes up 60-65 we will be able to build a strategy. We can realize how to deal with CAPEX, which fields to develop”.
Buying RussNeft share is a good investment for Glencore as the company is valued low considering the current oil price, Aleksandr Nazarov from Gazprombank says. RussNeft feels comfortable as it is majorly not involved in oil-processing and has not been influenced by tax changes, the expert adds. More than that Nazarov supposes that participation of Glencore in the capital will contribute to making the company more transparent and attractive for the market, though it is yet too early to speak about IPO.