01 June 2004 00:38
Sibir Energy PLC - Update on Sibneft-Yugra
RNS Number:2700Z Sibir Energy PLC 01 June 2004 1 June 2004 Sibir Energy PLC ("Sibir" or the
"Company") Sibneft-Yugra Joint Venture ("Sibneft-Yugra") Moscow Oil and Gas Company
("MOGC") Introduction On 19 April 2004 the Board of Sibir ("the Board") announced that it had been
granted the temporary suspension of trading on AIM (with immediate effect) of both its ordinary shares of 10 pence each
("Ordinary Shares") and its Convertible Secured Loan Stock 2004 ("Convertible Loan Stock") pending
clarification of certain arrangements relating to its Sibneft-Yugra joint venture. The purpose of this announcement is
to explain as far as possible at this time what appears to have occurred with regard to Sibneft-Yugra and the steps
being taken by the Board to rectify the situation. Formation of MOGC In May 2003 Sibir and Central Fuel Company
("CFC") signed a foundation agreement to establish MOGC, a joint venture company that would combine
Sibir's upstream interests in Sibneft-Yugra, held in its subsidiary, Yugraneft, with CFC's downstream
interests in Moscow (which includes inter alia, the Moscow Oil Refinery). Sibir agreed to transfer its shares in
Yugraneft in return for a 45 per cent. interest in MOGC. On 28 August 2003 shares in MOGC were allotted to Sibir
conditional, inter alia, on completion of the transfer to MOGC of its interest in Yugraneft. Independent valuations
undertaken in connection with the formation of MOGC ascribed a value of US $111.5 million to the shares in Yugraneft and
a value of US$ 136.2 million to CFC's downstream assets. As a result it was agreed that Sibir would obtain a 45 per
cent. economic interest in MOGC and CFC a 55 per cent. interest. Voting rights and representation on the board of
directors of MOGC however would be shared 50:50 between the parties. Dilution of Interest in Sibneft-Yugra On 15 April
2004 the board of MOGC advised Sibir that it had discovered that Yugraneft's interest in Sibneft-Yugra had been
diluted from 50 per cent. to less than 1 per cent. The suspension of the Ordinary Shares and Convertible Loan Stock was
requested as a result of this as soon as was practicable, pending further clarification and verification of the
position. A preliminary investigation undertaken by Sibir confirms that this dilution appears to have occurred and was
done without the knowledge of the board of Yugraneft. The Board intends to pursue with utmost vigour the restoration of
Yugraneft's 50 per cent. shareholding in Sibneft-Yugra and has the support of CFC in taking actions to preserve
MOGC. The Board has obtained legal opinion that the dilutive measures carried out at Sibneft-Yugra were illegal and
Sibir has grounds for the restitution of Yugraneft's 50 per cent. shareholding. Consequences for Sibir and MOGC The
value of Sibir's contribution of Yugraneft to MOGC has clearly been impaired as a result of the dilution in the
Yugraneft holding in Sibneft-Yugra. In recognition of the importance to Sibir of the formation of MOGC, Sibir is in the
process of finalising an agreement (the principal terms of which have been agreed) with CFC and MOGC. The purpose of
this agreement is to enable completion to take place of the capitalisation of MOGC so allowing the allotment to Sibir of
its 45 per cent. interest in MOGC. Pursuant to this agreement the Company will, subject to shareholder approval at an
Extraordinary General Meeting, issue new Ordinary Shares to MOGC as a temporary measure pending restitution of the
interest in Sibneft-Yugra. The agreed mechanism for determining the number of the new Ordinary Shares to be issued to
MOGC will involve Sibir, in accordance with the laws of the Russian Federation, obtaining an independent valuation of
the net assets of Sibir ( including its interest in MOGC) and thereby obtaining a net asset value per Ordinary Share.
The new Ordinary Shares will be issued at this net asset value. In addition CFC will, in accordance with the laws of the
Russian Federation, obtain a new independent valuation of the assets it is contributing to MOGC. These valuations will
determine the number of new Ordinary Shares which Sibir will issue to MOGC for its 45 per cent. interest in MOGC. CFC,
in conjunction with Sibir, has appointed an independent valuer to carry out the valuations and these are expected to be
finalised shortly. The agreement to issue new Ordinary Shares as temporary substitution for Sibneft-Yugra is expected to
be finalised on or about 11 June 2004. As an alternative to this procudure, the Board may, at its discretion, elect to
assign other assets or deposit cash as the temporary measure pending restitution of the interest in Sibneft-Yugra.
Suspension of Sibir Shares When the independent valuations are agreed and the agreement with MOGC and CFC finalised a
further announcement will be made and a circular posted which will set out in full the method by which the dilution
occurred and the terms of the agreement for the temporary substitution of Sibir shares (or other assets or cash) for
Sibneft-Yugra and which will convene an Extraordinary General Meeting seeking shareholder approval for the issue of any
new Ordinary Shares. It is expected that the existing Ordinary Shares in issue and the Convertible Loan Stock will
remain suspended until after the EGM. Enquiries: Sibir Energy PLC Henry Cameron, Chief Executive Tel: (007) 095 792 3045
Robert Kirchner, Corporate Affairs Tel: (007) 095 792 3045 Strand Partners Limited Richard Fenhalls, Chief Executive
Tel: (020) 7409 3494 M Com Nick Miles Tel: (020) 7153 1535 This information is provided by RNS The company news service
from the London Stock Exchange
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