Russian Ministry to Sell Part of YUKOS Unit

Russia's Justice Ministry said Tuesday it intended to sell part of OAO YUKOS' (YUKO.RS) largest oil unit, in an unexpected turn that could speed up the resolution of Russia's conflict with the country's largest oil company.

Investment bank Dresdner Kleinwort Wasserstein valued the unit, Yuganskneftegaz, at $10.4 billion, local news agencies cited Alexander Buxman, head of the Moscow division of the Justice Ministry, as saying. DrKW, an arm of Dresdner Bank AG (DRB.YY), confirmed that it handed over the long-awaited valuation to ministry officials but declined to corroborate the figure.

Earlier this year, bailiffs said they wanted to sell Yuganskneftegaz to cover YUKOS' multibillion-dollar tax arrears.

"As the valuation of Yuganskneftegaz has been completed...." the Justice Ministry "has resolved to sell part of Yuganskneftegaz's property through the Russian Federal Property Fund," the ministry said.

A person familiar with the situation said that DrKW had valued Yuganskneftegaz - which produces more than 1 million barrels of oil a day - in a range of $15.7 billion to $18.3 billion.

The person was at a loss to explain the discrepancy between DrKW's range and the ministry's figure, saying that $10.4 billion "wasn't a recommended price."

Buxman explained the relatively low valuation for Yuganskneftegaz by saying that DrKW had assigned a "discount of up to 60%" on the asset "to take into account the high risks for the potential buyer."

YUKOS shares at first rose on the news that only part of Yuganskneftegaz would be sold, as investors were cheered by a possible break in the stalemate between Yukos and the Russian government. But shares plunged more than 9.4% to $4.73 on the RTS after the ministry disclosed the lower-than-expected valuation. They remained near that level at 1330 GMT.

"It's obvious that the process is being accelerated for a reason known only to a few people at the top," said Andrei Rozhkov, an oil analyst at the Moscow-based Kapital brokerage.

Buxman said the sale of a minority stake in Yuganskneftegaz wouldn't yield enough to cover YUKOS' outstanding tax debts of $3.73 billion for 2000 and 2001, but he didn't say how many shares would be sold or provide any details on the sale.

Oil company OAO Surgutneftegaz (SNGS.RS) is the most viable contender for a stake in Yuganskneftegaz, as is natural gas monopoly OAO Gazprom (GSPBEX.RS), Rozhkov said.

Separately, Russia's Tax Ministry will carry out an audit of YUKOS for 2003, the Prime-Tass news agency reported, citing a source. The ministry had filed claims of more than $7 billion for 2000 and 2001, and is currently carrying out an audit for 2002.

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