Bloomberg News

Imperial Oil Studies Unsolicited Offer for 25% Stake

November 01, 2007

Imperial Energy Plc, the London-based oil explorer accused by Russia of inflating reserves, got an unsolicited offer from a financial investor for as much as 25 percent of its shares.

The investor proposed subscribing for new shares at a discount to the company's current share price, Imperial Energy said today in a statement. Imperial is reviewing the proposal and there's ``no certainty'' it will agree to the offer, the explorer said, without identifying the investor.

Russia's Natural Resources Ministry has questioned the validity of Imperial's reserves statements in a dispute that analysts say has suppressed the company's share price.

``Imperial Energy is cheap because of the pressure,'' Artyom Konchin, an oil and gas analyst at Aton Capital Group in Moscow, said by telephone today. ``It makes sense for anyone to make an offer.''

Imperial shares fell as much as 28 percent on April 18 after Oleg Mitvol, deputy head of the ministry's environmental inspectorate, said he was concerned Imperial's reserves were falsified. The stock, which jumped 6 percent late yesterday, closed down 1.7 percent today at 1,353 pence.

The ministry sent a letter to the U.K.'s Financial Services Authority in July alleging Imperial's reserves were ``significantly inflated.'' The company denied the ministry's charge, attributing any discrepancies to the differences between Russian and Western methods for estimating reserves.

Political Risks

A well-connected or politically influential investor could boost the company's share price, Konchin said. ``For that to materialize, it has to be somebody whose name you would associate with the reduction of political risks.''

Konchin said OAO Gazprom Neft, the oil division of Russian state-controlled gas producer OAO Gazprom (GAZP), was the most likely bidder. In July 2006, Imperial Energy and Gazprom Neft signed a cooperation agreement on exploration and production in Russia's Tomsk region, where they both operate.

``Gazprom Neft, which is very strong in the Tomsk region, is the prime candidate,'' Konchin said.

Gazprom Neft isn't holding talks with Imperial Energy, spokeswoman Natalya Vyalkina said by telephone today.

Gazprom Neft will need to spend $3 billion to $4 billion a year to increase and maintain output, Chief Executive Officer Alexander Dyukov said Oct. 30, in remarks relayed by Vyalkina.

To contact the reporters on this story: Paul Dobson in London at pdobson2@bloomberg.net; Greg Walters in Moscow at tclark8@bloomberg.net.

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net


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