Conoco's Lukoil Divestiture Not Part of $10B Asset Sale

HOUSTON (Dow Jones), Mar. 19, 2010

ConocoPhillips plans to gradually sell its 20% stake in Russian oil producer OAO Lukoil Holdings (LKOH.RS) over the next few years, but the transaction is not part of its ongoing $10 billion asset sale, a person familiar with the matter said Thursday.

The Houston-based company has "received assurance there will not be interference from the Russian government" in the sale of the stake, the person said.

ConocoPhillips declined to comment for this story.

Last October, ConocoPhillips said it would sell about $10 billion worth of assets over the next two years as part of a restructuring plan to shore up its finances. The company said then that it would keep its stake in Lukoil, but news reports earlier this week said ConocoPhillips is ready to divest half of its shares within the next three years.

Lukoil chairman Valery Grayfer said Wednesday the company would find it necessary to buy back shares held by ConocoPhillips should the U.S. oil firm put part of its 20% stake in Lukoil up for sale, according to media reports.

Analysts estimate the current value of Conoco's current stake at $9 billion.

ConocoPhillips, the third largest U.S. oil company by market value after Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX), acquired in 2004 a 7% stake in Lukoil, an interest that over the years incresed to 20%. The move allowed Conoco to gain access to billions of barrels of Russian reserves and a chance to develop fields in Iraq. It also allowed the company to have a representative on Lukoil's board. But ConocoPhillips's share price never fully reflected the benefits of the transaction as most analysts didn't include the Lukoil reserve addition in their estimates.

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