Russneft has scaled back its valuation ahead of its IPO to $2.2bn-$2.7bn, Vedomosti daily reported on November 21, citing the announcement of the private Russian oil company on the Moscow Exchange.
The company, controlled by billionaire Mikhail Gutseriev and partners, was previously argued by them to be valued at $4.5bn-$5bn ahead of the Moscow Exchange IPO, which is planned for November 24. The company also has debt of around $1.3bn.
The IPO could be expanded from 10% to 20% of ordinary shares, which will be put up for sale by the Cyprus-registered Belyrian Holdings, through which the Gutseriev family controls 67% in Russneft. The rest is controlled by oil trading major Glencore.
By selling the stake the Gutserievs could make RUB29bn-RUB35bn or $444mn-$544mn, and will remain in control of 47% of the shares.
Analysts surveyed by Interfax in the beginning on November believed the timing for the IPO to be favorable as investors might seek medium-sized oil companies to buy into, now that Bashneft shares would no longer be available after the recently announced minority buyback by Rosneft.
However, the latest analyst survey by Vedomosti shows that high demand for Russneft might not be expected, given the narrow range of local and foreign investors already present at the Russian market.
The valuation of up to $5bn was seen as too high, especially when comparing Russneft to Bashneft, which is currently valued at $7.7bn on the expectations of a Rosneft minority share buyback, with strong output and refining dynamics.
To compare, the expected output of Bashneft in 2016 is 20mn tonnes of oil versus 7mn tonnes expected for Russneft.
Russneft's new valuation amounts to about a fourth of the recently sold oil group Bashneft, which is in line with previous analysts estimates.
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