MOSCOW/LONDON (Reuters) - Russia’s Rosneft (ROSN.MM) is under no pressure to sell assets to fund debt repayments and will decide how to streamline its business once cost savings from a takeover of rival TNK-BP become clear, its finance chief said on Monday.
Announcing Rosneft’s (ROSN.MM) $55 billion takeover of rival TNK-BP last year, Chief Executive Igor Sechin said the state-controlled oil major would look to sell non-core and less profitable assets.
Bankers who helped finance the buyout said they were led to expect payback in the form of mandates for up to $15 billion in disposals that could include producing oilfields in West Siberia, sources familiar with the matter said last week.
“We are not moving as some expected us to move. We are moving at our own pace... We are also going through a very thorough synergy analysis and one needs to be patient,” Rosneft’s Chief Financial Officer, Svyatoslav Slavinsky, said in a telephone interview.
He said banks would be hired to manage the disposals “in due course”, and played down any suggestion that Rosneft had a preferred banking partner.
Slavinsky served as head of corporate and investment banking at Citi in Moscow before moving to Rosneft in March.
Rosneft raised debt of $16.8 billion in 2012 and $13 billion earlier this year to finance the TNK-BP deal, using banks including Bank of America Merrill Lynch (BAC.N), Barclays (BARC.L), BNP Paribas (BNPP.PA), Citi (C.N), Credit Agricole (CAGR.PA), JP Morgan (JPM.N), Mizuho, Societe Generale (SOGN.PA) and UniCredit (CRDI.MI).
The prospect of Rosneft asset sales is a bright spot on the horizon for investment bankers faced with weak M&A activity this year.
Yet the timing of such sales is still unclear, and for Slavinsky there are no imminent debt repayments that might justify rushing through such sales to free up funds.
“When approaching the divestiture ideas, we are mindful that we don’t need to raise liquidity to service our debt. We paid down $1.15 billion in the first quarter. From that standpoint, there is no pressure,” Slavinsky said.
Rosneft’s net debt more than doubled in rouble terms from the end of 2012 as it borrowed to fund the buyout of BP (BP.L) and a quartet of Russian billionaires from TNK-BP.
Repayments are a relatively low 239 billion roubles ($7.5 billion) this year, rising to around 500 billion roubles each in 2014 and 2015, Rosneft said in its first-quarter results.
Banking sources told Reuters that Rosneft had indicated the $15 billion of potential sales included parcels of producing assets in West Siberia, where the core of its production is located. Many of the fields are mature and, in places, the company struggles to squeeze out profits.
Rosneft and other Russian oil companies are hoping the new technologies that drove the shale revolution in the United States can be deployed at their own fields to help boost output.
But some analysts have noted the difference between the vast corporate structures that control Russian oil fields and the more entrepreneurial family operations which dominate U.S. shale output. They suggest that some tougher Russian plays could be handed off to entrepreneurs.
Slavinsky declined to comment directly on the prospect of selling West Siberian oilfields, but said Rosneft was aiming to use some principles borrowed from U.S. shale entrepreneurs at its own fields.
Rosneft executives met analysts last week to lay out plans for stabilizing falling production at key West Siberian divisions, mainly through use of newer production technologies.
“We are looking at all the options, not just selling assets that may not perform. We do have tools and technologies to improve performance and we can apply them. We are trying to be thoughtful and creative regarding what we can use in terms of technologies.”
“West Siberia is still our focus. We do not deny it but we approach it from a slightly different angle,” Slavinsky said.
Writing by Melissa Akin; editing by Douglas Busvine and Tom Pfeiffer