* Moody's: Chinese deal could help Rosneft fund purchases
* Rosneft's debt ratio higher than European peers
* Vedomosti newspaper reports Rosneft's interest in Bashneft
By Vladimir Soldatkin and Anastasia Teterevleva
MOSCOW, June 25 Speculation that Russia's state
oil company intends to pursue its buying spree revived on
Tuesday, despite a denial from mid-sized oil firm Bashneft
that it is Rosneft's latest target.
Since its record $55 billion deal for rival TNK-BP, all
non-state oil producing assets have been seen as potential
acquisitions for Rosneft, whose powerful CEO Igor Sechin, an
ally of President Vladimir Putin over more than two decades, has
fashioned Rosneft into an instrument of Kremlin control of
Russia's most important industry.
Rosneft's ambitions are potentially constrained by its debt,
which reached $70 billion by the end of the first quarter,
almost as much as Rosneft itself is worth at current share
prices. But deals to pump nearly a million barrels of oil to
China could bring $60-$70 billion in export-backed financing.
China National Petroleum Corp. has not confirmed that the
crude will be paid for up front in what it called its largest
single oil trade.
Rosneft raised most of its debt to finance the TNK-BP
acquisition from BP and its local partners, the largest
in Russian corporate history. Analysts say the main challenge is
now integrating TNK-BP's huge asset base and its people.
But "the possibility of a new wave of M&A activity from
Rosneft should not be ruled out given the level of the potential
liquidity injection (from China)," J.P. Morgan analysts wrote in
a research note on Tuesday.
Russian business daily Vedomosti reported on Tuesday that
Rosneft was interested in buying Bashneft, with 300,000 in daily
oil production, from Russian oil-to-telecoms conglomerate
Sistema signed a deal last week to sell its 49
percent stake in oil firm Russneft for $1.2 billion, read by
some as a sign it was abandoning its ambitions in oil.
But owner Vladimir Yevtushenkov told Reuters his company was
not involved in negotiations to sell Bashneft to Rosneft.
Bashneft is worth $12.7 billion, according to Reuters data.
Its shares closed down 1.7 percent in late trade,
underperforming a 0.1 percent rise in the broader Moscow stock
market, reflecting concerns about Rosneft's ability to do
another big deal efficiently and favourably for minorities.
Bashneft and Rosneft declined to comment.
Bashneft's fields would provide few synergies with Rosneft's
key deposits, but it will soon get a 120,000 bpd boost from its
new Trebs and Titov fields in the northern Timan-Pechora
province, where Rosneft also has some operations.
The Trebs and Titov license was obtained in a controversial
process which ended with Bashneft as the only contender. The
license terms included difficult-to-meet refining requirements.
As early as 2006, Rosneft said it was interested in Trebs
and Titov but ultimately declined to participate in the license
round held in 2010.
Bashneft also has refineries with capacity of over 24
million tonnes per year in the Ural mountains region.
"Rosneft has always looked at all the assets in Russia. It's
in their blood. The main attraction of Bashneft is that it's
relatively small," Alexei Kokin, analyst with Uralsib brokerage,
SMALL IS BEAUTIFUL
But even after Rosneft's balance sheet gets help from China,
analysts have a mixed view on its acquisition power.
The company has said it is contemplating a programme to help
it cope with integrating TNK-BP and pay down debt, but denies
any immediate pressure to do so.
Julia Pribytkova, a senior analyst with Moody's Investors
Service, said Rosneft's debt to core earnings ratio stood at
2.2, higher than at its European peers, and would become a risk
to its rating if it exceeded three times.
"A Chinese financing deal could help Rosneft continue
acquisitions, but adopting this strategy will be constrained by
the political landscape, not money," Pribytkova said.
"Rosneft would be interested in big players, which are
controlled by influential groups so potential acquisitions could
be subject to the political alliances they form."