Repsol, Alliance Form JV for Russian E&P Partnership

Repsol Chairman Antonio Brufau and Alliance Group Chairman Musa Bazhaev signed an agreement Tuesday in Moscow to form a joint venture that serves as a growth platform for both companies in the Russian Federation, the world’s largest oil and gas producer.

This agreement seeks to combine Alliance’s knowledge and access to exploration and production business opportunities in Russia with Repsol’s know-how and technological and financing capabilities to create a long-term exploration and production partnership in Russia.

The joint venture is envisioned to have a total asset base of approximately $840 million following asset and cash contributions by the shareholders. Alliance and Repsol will hold a 51% and a 49% stake respectively in the joint venture.

Under this collaboration, Alliance will transfer its upstream subsidiaries Saneco and Tatnefteodatcha, which comprise exploration and production licenses at 14 fields with proven and probable oil reserves of 171.5 million barrels as of 31st December 2010 and current production of around 20,500 barrels of oil per day. Alliance’s asset contribution is valued at $570 million. Repsol will carry out a capital increase in the joint venture and also pay cash to Alliance to obtain a 49% participation.

In addition to the exploitation of the assets contributed by Alliance, the agreement envisages the pursuance of growth opportunities through the joint acquisition of oil and gas assets in Russia. The joint venture will have preferential rights regarding new upstream business opportunities identified by either Alliance or Repsol in Russia. The formation of the joint venture is pending regulatory approval. Alliance has been advised by Bank of America Merrill Lynch and Baker & McKenzie and Repsol by Barclays Capital and DLA Piper.

"The creation of the joint venture will allow us to further expand our upstream operations in Russia through joint exploitation of the Volga-Urals assets and realisation of new business opportunities. Repsol is an international leader in oil and gas management, technology and financing and we now have the opportunity to share these resources with common objectives," said Eric Forss, Chairman of Alliance Oil Company.

"This alliance will grant Repsol immediate access to producing assets in Russia, one of the world’s largest hydrocarbon resource holders. We are certain that Alliance Oil’s local expertise and Repsol’s technological capabilities and know-how will provide a solid foundation for future growth in Russia," said Repsol’s Executive Chairman, Antonio Brufau.

Repsol already owns a 3.5% stake in Alliance as a result of the merger between Alliance and West Siberian Resources, in which Repsol initially held 10%, in 2008. Repsol also owns a 74.9% stake in Eurotek-Yugra, which owns two exploration and production licenses, known as Karabashsky-1 and -2, and five licenses for geological study in the prolific West-Siberan basin.


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