Lukoil, Russia's second-largest oil producer, is planning a secondary listing in Hong Kong within a year by buying back its issued shares and refloating them, a move that may get it a higher valuation than in Russia.
The Moscow-based firm aims to buy back shares worth more than US$1 billion, vice-president Leonid Fedun said yesterday. It is in advanced talks that may lead to it hiring China International Capital Corporation and Renaissance Capital to handle its Hong Kong listing, he added.
It will also consider a listing in Shanghai after the planned Hong Kong flotation, when regulation on the mainland allows. Its shares are currently quoted in Russia, Britain and the United States.
A Moscow-based spokesman said Lukoil had not decided how many shares to float in Hong Kong, but in addition to the more than US$1 billion shares it might repurchase, it has already bought back shares previously owned by US oil firm ConocoPhillips and others. Such repurchased shares, representing about 19 per cent of the firm, may also be floated.
Asked what type of investors Lukoil will target in Hong Kong, the spokesman said: 'The main idea is to attract big investors.' He declined to say whether it would invite mainland oil firms to take stakes.
China National Petroleum Corporation, parent of listed PetroChina, has co-invested with Lukoil in oil and gas output in Kazakhstan and exploration in Uzbekistan. China would next year import 4 billion cubic metres of gas produced by Lukoil in Uzbekistan, the spokesman said.
Gordon Kwan, Mirae Asset Securities' head of energy research, said: 'Lukoil is an alternative [to mainland oil firms] in a well-diversified oil [investment] portfolio, and only if investors are knowledgeable and comfortable with Russian political risks.'
While trading at 3.6 times this year's forecast earnings, compared to 9.6 times of PetroChina and 6.4 times of China Petroleum & Chemical (Sinopec), he said investors have to bear risks from 'harassment' of private energy firms by Vladimir Putin's government. He cited large fines levied against Lukoil for alleged anti-trust violations and Putin's 2009 withdrawal of Russia from the Energy Charter Treaty, which protected property rights of energy investors in international courts, as examples.
Lukoil posted a 15 per cent rise in net profit last year to US$10.36 billion.