LUKOIL Does not Want to Redeem Treasury Shares


In order to avoid obligaions concerning redemption of treasury shares during a year, LUKOIL transfered securities, which were bought out from ConocoPhillips, from one subsidiary into anotherAs a result, these shares became ordinary voting shares. Thus, LUKOIL tries to save the number of securities in order to place this block at the Hong Kong Exchange. 

According to the material of the company LUKOIL Finance Limited, it stopped participating in its parent company LUKOIL, where it disposed of 7,6% of voting shares. It is also said that at the same time the share of LUKOIL Investments Cyprus Ltd. increased from 0,64 to 8,24% of voting shares. 

“It has been done to optimise the management of this block of shares”, - Dmitriy Dolgov, Press Officer of LUKOIL, said. He confirmed that a part of these securities LUKOIL plans to transfer to one of Asian exchanges. In the end of last year Leonid Fedun, Vice-President of LUKOIL, said that in 2011 the company planed to place its shares at one of Asian exchanges. “It will be either Hong Kong, or Singapore”, - Mr. Fedun pointed out. He outlined, that the company would not leave other exchanges, and placement of its own shares at a new exchage would increase liquidity and profitability for shareholders. “We are not going to make an additional issue”, - Leonid Fedun outlined. He added that LUKOIL had more than enough shares after it had bought out ConocoPhillips block. The amount of offered securities in China will depend directly on demand. However, presence at the Asian exchange is being delayed. In April, Vaguit Alekperov,  the Head of the company, said that LUKOIL thought that it was reasonable to place its shares at the Hong Kong Exchange immediately after stabilisation of oil prices. 

LUKOIL jibes shares between subsidiaries in order to escape from obligations concerning redemption of treasury shares, Andrey Polishchuk, the analyst of “Brokercreditsecurities”, believes. According to part 3, article 72 of the Federal law On Joint Stock Companies, a company which purchased its shares even with the help of affiliated structures, must realise them “at the price which is not lower than the market price no later than one year after they were purchased”. That is why LUKOIL had to redeem 7,6% of shares which were owned by LUKOIL Finance Limited, because it purchased ConocoPhillips shares exactly with the help of this subsidiary. 

As it has already been stated by RBK daily, the decision on selling the share in the Russian oil company Conoco made in the middle of last year. In last August 7,6% of shares LUKOIL bought out itself, it paid $ 3,44 milliard for the block. 5 more % of its own shares the company bought out together with the group of investors headed by UniCredit Bank in the end of September 2010. 

However, accoring to the Russian legislation, at resale of treasury shares to the third party, even if it is affiliated, the block of shares looses its special status. Thus, by transfering 7,6% of shares LUKOIL made them ordinary voting shares, Igor Fominov, Head Lawyer of Tenzor Consulting Groupexplained. In his opinion, first of all, through the affiliated structure the company wanted to save the amount of votes in its activity management. 

27 July 2011