Foreign investment bonanza fuels boom

Global Finance, Jun 2002 by Norton, Guy

New issue activity on the equity front is also picking up as oil companies have sought to take advantage of improving investor sentiment to both Russia in general and oil companies in particular.

In February this year YUKOS Universal launched a $147 million accelerated sale of a 1% stake in its 65% owned subsidiary YUKOS, Russia's second-largest oil company. The deal, lead managed by UBS Warburg and Credit Suisse First Boston, was more than twice oversubscribed at an issue price of $6.55 per share.

More Opportunity for All

It's not just the giants that have been able to raise equity financing. Last year, for example,Teton Petroleum, the only US publicly traded oil and gas exploration company in Russia, raised $2 million through a private placement of stock. It has secured a further $3 million this year. "We're seeing more high-net-worth individuals and institutions that realize the value of investing in Russia," says Teton's Cooper. Teton has used the proceeds of its equity issuance to boost production at its oilfield in western Siberia from 500 barrels per day to 5,000 barrels. As a result it has seen its share price more than double, from $0.20 last year to $0.50 currently. "Russia has proved it's a reliable place to put your money over the past two years," Cooper says.

He adds that there is still considerable upside in the company's share price: It's trading at the equivalent of $0.35 per barrel of proven reserves when it is able to export oil at $22 per barrel. He says that an equivalent company based in Texas would be valued at $5 per barrel of proven reserves.

Guy Norton is a freelance journalist based in London who specializes in Central and Eastern European finance. Email: editorial@gfmag.com