Sun, Nov 28, 2004 - Page 11 News List

Yukos drawing up contingency plan

TAX PROBE Executives at the Russian oil giant said they were compiling an emergency plan to head off production problems after the auction of its prize asset next month

NY TIMES NEWS SERVICE , MOSCOW

The Russian oil giant Yukos said on Friday that management was putting together an emergency plan to continue running the company for a few months, even after the auction of its prize asset next month.

Yukos executives said that a contingency plan for the next three to four months would be developed to try to head off production problems or "social tensions" among oil workers and other employees at its biggest subsidiary, Yuganskneftegas, and its other divisions, according to a statement the company issued on its Web site on Friday.

Managers, in a separate statement, said the problems of the oil company were the fault of Russian authorities.

"The management board places the responsibility for the damage to Yukos and to any further risks that the company may face, firmly in the hands of the Russian general prosecutor's office," the management board said in the statement.

Yukos will consult investors on two issues at a shareholders' meeting on Dec. 20: whether to liquidate or to file for bankruptcy protection.

But Christopher Weafer, chief equity strategist at Alfa Bank, said that in some ways, "it doesn't matter whether shareholders recommend that management try to file for bankruptcy because a Russian court still has to approve it."

It is unlikely that any Russian court would flout the Kremlin's wishes and allow Yukos to file; President Vladimir Putin said earlier this year that he did not want to see Yukos file for bankruptcy protection.

After more than a year of attacks on Yukos and its founder, Mikhail Khodorkovsky, the oil company continues pumping and exporting crude. But the company owes more than US$24 billion in taxes, and Yuganskneftegas has been put on the auction block to cover the bill.

Yukos' top six managers -- including its chief executive and chief financial officer, both Americans -- had all left Russia this week, either on business travel or to avoid prosecution.

The chief financial officer, Bruce Misamore, said on Thursday that he would not return to Moscow until Russian authorities could guarantee his safety. Misamore earlier this week was called in for questioning by prosecutors in the tax case against Yukos, but declined to return to Moscow from the management meeting in London.

The chief executive, Steven Theede, is traveling in Europe and in the US.

Even without its top executives, analysts said Yukos could conceivably run on autopilot for a few weeks leading up to the Dec. 19 auction of Yuganskneftegas, which produces 60 percent of Yukos' 1.7 million barrels a day.

Yukos supplies about 2 percent of the world's crude oil supply, and the Kremlin-backed attack on the oil producer has rocked energy markets. The company's statement on Friday seemed to concede what many industry and political experts here say has been the obvious goal of the state's attack.

"This extraordinary pressure from the general prosecutor's office has specific aims: the removal of the management, the derailing of any settlement process with the Russian authorities and the total destruction of Yukos," the company said in its statement.

At the Dec. 19 auction, Gaz-prom is considered to be the front-runner to snap up Yuganskneftegas -- so much so that oil analysts are openly factoring the Yukos asset into the market value of Gazprom.

"We believe a Gazprom bid for Yuganskneftegas is looking more likely, and that Gazprom would seem to be the most likely candidate to gain Yukos' assets, in light of the government's majority stake," wrote Paul Collision, oil analyst at Brunswick UBS, in a note to clients on Friday. He estimates Gazprom has or will soon have the available cash or other resources to bid for Yuganskneftegas, which produces a million barrels of oil a day.

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