Bloomberg News

Novatek to Buy $1.38 Billion Nortgas Stake From Gazprom Partner

November 06, 2012

OAO Novatek, Russia’s second-biggest natural gas producer, agreed to buy a 49 percent stake in OAO Gazprom (OGZD)’s Nortgas production unit for $1.38 billion as it seeks to expand its resource base and boost output.

Novatek will buy the stake from businessman Farkhad Akhmedov’s REDI Holdings, in a transaction that is set to close by year-end, the Tarko-Sale, Siberia-based company said today in a regulatory filing. Gazprom owns the other 51 percent.

“The ability to acquire a significant asset such as Nortgas is consistent with our overall strategy to expand our reserve base and raise our production profile in our core region of operations,” Novatek Chief Executive Officer Leonid Mikhelson said in the statement.

Novatek has challenged OAO Gazprom, the country’s gas exporter and the world’s biggest producer of the fuel, for domestic clients and is developing a project to liquefy natural gas for shipment to customers abroad.

The gas producer, controlled by billionaires Mikhelson and Gennady Timchenko, is seeking to double its gas output by 2020 and said in April last year that it was interested in a stake in Nortgas. Nortgas had proved reserves of 1.7 billion barrels of oil equivalent under Petroleum Resource Management System methodology at the end of 2011, of which 13 percent were classified as liquid hydrocarbons, Novatek said today, citing an audit by DeGolyer & MacNaughton.

Novatek had proved reserves of 11.3 billion barrels of oil equivalent at the end of 2011 under PRMS methodology, according to its website.

The shares gained 2.2 percent to 325.57 rubles at the close in Moscow, the most since Oct. 31. The stock dropped 7.8 percent on Nov. 1 after Novatek lost a domestic gas-supply contract amounting to about 28 percent of last year’s sales volumes to OAO Rosneft (ROSN), Russia’s biggest oil producer.

To contact the reporter on this story: Anna Shiryaevskaya in Moscow at ashiryaevska@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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