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M&A - Asia

PREVIEW-Analysts seek details on Conoco's Lukoil stake

* Conference call for 2009 results, due March 24 at 1200 GMT

MOSCOW, March 22 (Reuters) - LUKOIL LKOH.MM, Russia's largest oil firm outside of state control, will hold a conference call on Wednesday to discuss 2009 results, with analysts expected to ask about whether it has plans to buy back shares held by ConocoPhillips COP.N.

Last week a source close to the deal said ConocoPhillips was expected to announce this week plans to halve its 20 percent stake in LUKOIL within three years. [ID:nLDE62G1ZP].

Following the report, Lukoil’s chairman Valery Graifer said it would consider a share buyback if Conoco sells. [ID:nLDE62H0YD]

A 10-percent stake in LUKOIL is valued at around $4.9 billion according to the current share price and analysts believe that, thanks to strong crude prices, the company will be able to generate enough cash to buy it back.

Conoco wants to sell $10 billion in assets and use the proceeds to reduce its debt, but the company has so far provided few details on what it will put on the market.

“We regard ConocoPhillips’ (COP) relationship with LUKOIL as negative, given the lack of joint projects in or outside Russia... and resulting inefficiencies in LUKOIL’s ownership structure,” Renaissance Capital said.

“Therefore (we) welcome last week’s news of a possible sell-down of COP’s 20 percent stake in LUKOIL.”

Metropol analysts added that LUKOIL should have sufficient cash flow from operations to buy back the shares, especially since Conoco is expected to sell them over several years.

“As LUKOIL should be able to generate at least $4 billion in free cash flow in 2010 alone, and ConocoPhillips only plans to sell the stake over three years, no such borrowings may be needed,” analysts from Metropol said.

CASH DISTRIBUTIONS

Last year, LUKOIL announced a new strategy aimed at higher dividends and stronger cash flow. It also said its new development programme to 2019 would save the company $15 billion.

“We are looking for a clear signal from the management that it will significantly raise cash distributions to shareholders, either via dividend payments or a stock buyback,” Troika Dialog brokerage said in a research note.

LUKOIL is due to report fourth-quarter and 2009 results on Wednesday, March 24, the same day that Conoco will hold its annual analysts’ meeting. [ID:nN1845813] [ID:nBw017137a]

For details of a Reuters poll of analysts’ forecasts for LUKOIL’s fourth-quarter and full-year 2009 results please double-click on [ID:nLDE62L0SU] (Reporting by Vladimir Soldatkin; Editing by Greg Mahlich)

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