Moving into Russian Upstream, Eni Acquires Yukos Assets for $5.83B

Eni S.p.A. on Wednesday announced that EniNeftegaz (60% Eni, 40% Enel S.p.A.) has successfully acquired Lot 2 in the Yukos liquidation procedure for a total price of 151.536 billion rubles ($5.83 billion).

Lot 2 includes the following:

--100% of OAO Arctic Gas Company
--100% of ZAO Urengoil Inc.
--100% of OAO Neftegaztechnologia

These three companies own five oil and gas fields and condensate fields and parts of three others in the Yamal Nenets (YNAO) region, the world's largest gas producing region. Together they have around 5 billion boe (Russian reserve reporting standards) of oil and gas reserves.

Eni and Enel have offered Gazprom an option to acquire a 51% interest in these three companies within two years. In the event that Gazprom exercises its call option, the assets will be operated through a joint venture between Eni and Gazprom that will have access to Eni's most advanced technologies.

The lot also includes:

--various minor assets that will be sold or liquidated
--20% of OAO Gazprom Neft that will be wholly owned by Eni.

Eni has granted Gazprom the option to acquire the 20% shareholding in Gazprom Neft at any time within the next two years at a price of $3.7 billion, plus financing and transaction costs.

Gazprom Neft (formerly known as Sibneft) is Russia's fifth-largest oil company. It produces over 900,000 boe/d, with a refining capacity of 690,000 bpd (all figures include Gazprom Neft's 50% equity share of Slavneft).

This transaction marks Eni's entrance into the Russian upstream market as a major player and is the third-largest foreign acquisition to date in Russia's oil and gas sector.

These agreements are an additional step in implementing the Strategic Partnership between Eni and Gazprom signed in November 2006, under which the two companies established an alliance to develop upstream, midstream and downstream energy projects inside and outside of Russia.

Paolo Scaroni, CEO of Eni, commented: "This transaction is a major step forward in Eni's strategy of securing reserves in the world's leading hydrocarbon-producing countries. This project is a good example of Eni's ability to capitalize on its strategic positioning in midstream and downstream gas to support the expansion of its upstream activities. This transaction, which is in the context of a fruitful ongoing relationship between Italy and Russia, underlines the value of our strategic partnership with Gazprom."