[Goldfisch]

ConocoPhillips seen eyeing 25% of Lukoil

By CBS MarketWatch
Last Update: 7:02 AM ET Aug. 27, 2004


SAN FRANCISCO (CBS.MW) -- ConocoPhillips is viewed as most likely to place the highest bid for a 7.6 percent stake in Russian oil giant Lukoil, according to a published report.

The Russian government set a starting price of $1.93 billion for its remaining interest in Lukoil, the Wall Street Journal reported. The stake goes up for auction next month.

Houston-based ConocoPhillips (COP: news, chart, profile) has been negotiating with Lukoil for more than a year over buying the stake in Russia's largest oil company as part of a broader deal, the Journal said, citing people close to the situation.

In June, the Financial Times reported that ConocoPhillips was in talks to acquire a 25 percent stake in Lukoil for $5.75 billion.

On Friday, Reuters also pointed out ConocoPhillips' plans for a larger stake, citing an industry source familiar with the matter.

The source said Conoco was looking to buy extra Lukoil shares on the market after the government disposes of the 7.6 percent stake during the auction, scheduled for Sept. 29, according to Reuters.

Attention on Lukoil has sharpened as a result of the recent spike in prices for crude oil, not to mention the tax problems and fraud allegations that continue to swirl around another major Russian oil company, Yukos.

James Mulva, the CEO of ConocoPhillips, and his Lukoil counterpart, Vagit Alekperov, met last month with Russian President Vladimir Putin and emerged with the Kremlin's support, according to the Journal.

The head of Russia's Federal Property Fund, Kirill Tomashchuk, said ConocoPhillips had expressed a firm intention to bid, as had U.S. investor David Guggenheim, according to the Journal.

In January, ConocoPhillips sold 795 retail outlets in New Jersey and Pennsylvania to Lukoil for $266 million. Some 2,000 of Lukoil's 4,700 service stations are in the United States, primarily the Northeast.

The 7.6 percent stake would be part of a broader deal under which ConocoPhillips and Lukoil would form a 50-50 joint venture to develop oil reserves in Russia's northwest region, the Journal reported, citing people familiar with the situation.

Lukoil would primarily contribute assets, such as development licenses, according to the Journal, while ConocoPhillips' share would be mostly financial. ConocoPhillips also has negotiated special protections for its rights as a minority shareholder in Lukoil and could add to its stake in the future, the Journal said.

The auction starting price values Lukoil at $29.83 a share, the Journal reported, and bidders would have to pay a deposit of $15 million to participate.

Shares of ConocoPhillips ended Thursday's session at $72.70, up 64 cents.