TNK-BP has agreed to sell Udmurtneft to state-owned China Petroleum & Chemical Corp. (Sinopec). TNK-BP did not disclose the price of the deal.
A few days ago, Russian press reported Gazprom officials as saying that the Russian company might bid together with MOL for Udmurtneft. However, Gazprom found the more than USD 3bn price as unreasonable while MOL (similar to Sinopec) considered US$ 3-4bn as more realistic. The differences in the valuation led to delays in a joint offer. Moreover, Kremelin also supported the participation of the Chinese company rather than that of MOL.
Reuters reports local Russian brokers as saying that if the price was above US$ 2.5bn, Udmurtneft was valued at over Russia's average of US$ 4 per barrel of reserves. This indicates that locals have serious doubts about the reported 1bn barrel of crude oil reserves of Udmurtneft. Therefore, the news not just cancelled an opportunity for MOL but also lifted a significant risk factor, we believe.
Not fully independently from this story, Gazprom deputy CEO Alexander Medvedev visits Hungary to discuss various topics with MOL. The most important area of talks relates to gas storage/transmission investments in Hungary. Although we do not now any details of the plans, we can easily imagine that MOL would ask for accees to upstream assets in exchange for its participation.
We keep our Buy recommendation on the stock with a price target of HUF 27,223.