Standard & Poor’s Ratings Services “rating and outlook on Russia-based oil major Lukoil (BB/Positive/–) remain unchanged after the US$2bn cash acquisition offer for Nelson Resources, a Canadian-listed independent producer operating exclusively in Kazakstan.
Although Lukoil has reached an agreement with Nelson’s principal shareholders concerning 57% of Nelson’s shares, the offer is still subject, among others, to a shareholder decision, which is expected only in the coming months. LUKoil’s financials would be able to accommodate a US$2bn debt-financed acquisition, with funds from operations over the 12 months to June 2005 up to US$6.2bn (US$5.5bn in 2004), and net-unadjusted financial debt down to US$2.1bn at end-June 2005 (from US$2.8bn at year-end 2004).
Nelson’s production assets and probable reserves of 270mn barrels would represent a good strategic fit for Lukoil, for whom Kazakhstan represents a key country for diversification outside of Russia.