The West have never had any confidence in Russian markets, that is why Russian stocks have such low values. There is still a chance of other oligarchs wanting this asset, so they can't go too low. There are takeover rules and minority shareholder rights to be taken account of. Anything over 200p keeps them out of trouble, they won't be offering anything near 365 again.
Has anybody got any contact details/email addresses for someone in the Russian Finance Ministry? I think a comment from them regarding the possible consequences of breaking stock exchange rules might be quite interesting. I just can't believe the Russians are so stupid that they'd allow one individual to profit from shady practices that could so easily destroy all western confidence in their markets.
|Excellent analysis and unfortunately you are probably right on the price. Anything we can do to draw attention to this to a wider audience which would probably make no difference to the price but it might cause some bad publicity for Russian business and put off others from investing there in future. there was the Sibir energy scandal a few years ago and small investors got screwed here as well. Might make a good case analysis for anyone wanting to publish in a well known business publication about the perils of investing in Russia!
A very unexpected year for Exillon with, what is in my opinion, a rather predictable endgame. We are now approaching 12 months (Dec 2013) since offer period officially closed. According to the takeover rules, only after the twelve months can a new tender offer be made that is lower than what has been previously paid. Alexei Khotin has 29% of the issue, followed by his friend Alexander Klyachin who is known to assist him, who has nearly 25%. Now Khotin bought Arips stake for 379p. Klyachin's purchase was all the more complicated. Mikhail Gutseriev sold his 14.9% stake for $132 million, to Gazprombank. Gutseriev bought that stake November 18 for $106 million. So Gutseriev made $26 million. Gazprom bank sold Gutseriev's former stake for $132 million and the 12% it already had - and had purchased for $88 million - for $118 million thus making $30 million from the sale.The buyer of the two stakes was Klyachin. By paying £157 million for 43 million share, he effectively paid 365p per share. Of course this flipping of shares is all very Russian and you would expect nothing less from a country with such corrupt business practices. Importantly the board now consists of Khotin puppets and this can explain the failure to drill or more importantly publish the new Miller and Lents reserves report. Following last years drilling which discovered much better oil - water contacts than previously thought, the 1P and 2P were due a substantial upward revision. Further drilling would have brought us to 25 bopd with excellent net backs. This has all been done to minimise the value of Exillon as much as possible. They have claimed a Q1 2015 publish date for the reserves report which makes no sense. They were ready in July and should have been published as a matter of course. There is no legitimate reason to not have released the report. This date is conveniently after the 12 month period in which they can make a reduced offer. They have been utterly silent about anything to do with drilling or company direction. They will obviously make a reduced offer in the next few months. It is unlikely the board will demand a market price as they are Khotin stooges. Together they have 55% of the share issue so there is little other share holders can do. Of course a third party may enter with an improved bid but this is not likely considering the failure to sell the company last year. It is hard to know how much value they will be able to steal from other shareholders. $1 per 2P barrel reserves is considered normal for undeveloped fields with no infrastructure and $2 to $3 dollar for those, like Exillon, that are well developed, fully understood and with complete infrastructure. Most recent sales in Russia equivalent to Exi have been for over $3 per 2P reserves. There is also the Exillon cash pile to consider, which would be 20p a share. I will guess that we will get $1 per barrel which is around 200p, plus cash giving around 220p.
22 Oct '14
For the Oil Bulls and RUSSIA
Excellent analysis about Russia and Oil, from Seeking Alpha: http://seekingalpha.com/article/2581505-8-major-reasons-why-the-current-low-oil-price-is-not-here-to-stay
15 Oct '14
RE: 'Lift cost' - Gambier?
The lift rate in Russia has been about $18, but that will have changed with recent exchange rate shenanigans. The Russian oil and gas industry is taxed harder than any other. The main tax is the mineral extraction tax (MET) which is on a sliding scale. The tax is based on a urals blend of a barrel of oil. If say a barrel is $70 then MET would be about $12, at $80 a barrel it would rise to about $14. So the company is getting fixed margin regardless of the price of a barrel of oil. Obviously we would not benefit if oil rises to $150 as MET increases accordingly, but at the same time as the price falls MET is reduced. The government has started to reduce tax such was its negative effect on exploration and production. The problem is public spending is locked into tax revenues from oil, if they fall Putin may change the terms, but he is not far from making the industry unprofitable as it is so I can't see that happening. In this market cash reserves and cash flow are everything. Exillon are safe, they have great cash reserves , great cash flows and very low costs. They can weather a very serious storm. Doesn't do much for the valuation of the company though. Still see this being bought on the cheap within a few months.
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