Sibir Energy Knocks Down Sibneft
By Irina Reznik
Sibir Energy, which is battling Sibneft for the return of the Yugraneft asset, achieved a major victory over Roman Abramovich's company yesterday. The Moscow District Federal Arbitration Court reduced Sibneft’s claims to Yugraneft by a factor of nearly 25. Experts believe the court’s ruling will potentially make life for Sibneft much more complicated.
Five years ago, Sibir Energy, controlled by Chalva Tchigirinsky, and Sibneft established the Sibneft Yugra joint venture on a fifty-fifty basis. Sibir Energy brought to the joint venture 99.34 percent of Yugraneft, which owns the licenses to develop the South Priobskoye and Palyanovskoye oilfields in western Siberia. Proven reserves at these fields stand at 465 million barrels of oil. In September 2002 and February 2003, the partners at Sibneft Yugra conducted additional share issues. Voting for Yugraneft under power of attorney was the direct of the Moscow division of Millhouse Capital, David Davidovich, who declined acquisition of new shares. As a result, 49 percent of Yugraneft’s stake in Sibneft Yugra went to offshore companies controlled by Sibneft – Gregory Trading, Richard Enterprises and Ferenco Investment & Services – all for $16,000.
In April 2004 Sibir Energy announced that an illegal dilution of Yugraneft’s stake in Sibneft Yugra had taken place behind Sibir Energy's back and promised to fight for asset's return. In December 2004 the Moscow Arbitration Court initiated a bankruptcy case for Yugraneft on application of the company itself, which had lost all of its licenses.
Chalva Tchigirinsky said that Yugraneft intended to have its stake in OOO Sibneft Yugra returned through bankruptcy proceedings. In April, Sibir Energy succeeding in having external administration placed on Yugraneft for a period of 18 months. The court then recognized the claims against Yugraneft on the part of Sibir Energy, Magma and Evikhon (controlled by Chalva Tchigirinsky) in the amount of 873 million rubles. Sibir Energy's part stands at 832 million rubles. According to Dimitry Afanasiev, Sibir Energy’s legal counsel and a partner at Egorov, Puginsky, Afanasiev & Partners, this sum represents 97 percent of the company's overall debt. According to Afanasiev & Partners, the remaining 3 percent – 27.4 million rubles – belong to organizations affiliated with Sibneft (Noyabrskneftegaz and OOO Regata).
Sibir Energy didn’t remain Yugraneft's principal creditor for long, however. Sibneft succeeded in entering claims amounting to 684 million rubles into the Yugraneft creditors register. In May, an appeal made by Roman Abramovich's company was satisfied. The court reduced Sibir Energy’s claims in the Yugraneft creditors register from 832 million rubles to 369 million rubles. As a result, Sibir Energy's stake in Yugraneft’s debt amounted to 36 percent, and Sibneft’s stake rose to 64 percent.
Yesterday the pendulum swung in Sibir Energy's favor. The Moscow District Federal Arbitration Court satisfied Sibir Energy's appeal and annulled the rulings of both the court of original jurisdiction and the court of appeals to include Sibneft's claim, amounting to 684 million rubles, in the Yugraneft creditors register. The case was sent back to the court of original jurisdiction for a new hearing, according to Dimitry Afanasiev.
Moreover, the Moscow District Federal Arbitration Court also annulled the ruling of the Ninth Arbitration Court to reduce Sibir Energy’s claims. The case has been sent back to the appeals court for a new consideration. Afanasiev is confident that Sibneft will no longer be able to obstruct the work of the Yugraneft external administrator or the creditors committee by attempting to liquidate the company and seek payment of “non-existent debts.”
However, a Sibneft source believes that the court’s ruling does not change anything. He is absolutely certain of the company’s rightness and declined to comment on its further steps.
Experts consider yesterday's ruling to be key in the conflict between Sibir Energy and Sibneft. Steven Dashevsky at Aton says the company, which is owned by Roman Abramovich, will find it difficult to influence the bankruptcy of Yugraneft, which will attempt to have its lost property (e.g. licenses) returned. Dashevsky did not rule out that a potential purchaser of Sibneft would probably have to reimburse either the full or partial value of Sibir Energy’s lost assets.
Lev Snykov, an analyst at FIM Securities, adds that yesterday’s court ruling might significantly complicate things for Gazprom, which is considered the most likely buyer of Sibneft. However, he thinks this fact will likely reduce the acquisition value for the monopoly.
Henry Cameron, CEO of Sibir Energy, said that Sibneft will have to defend suits filed by Sibir Energy regardless of whether it is transferred to another owner or not.