Azarov says Ukraine is planning to IPO Naftogaz’ E&P business

Ukraine is planning an IPO of the exploration & production branch of state-owned Naftogaz,  Interfax reported yesterday, citing comments made by Prime Minister Mykola Azarov. Azarov estimated the value of the exploration & production company at USD 5-10 bln. Previously, the Energy Ministry disclosed intentions to place 25% of Naftogaz itself for USD 5-6 bln in 2012-2013. Antonina Davydenko: Though talk of an IPO for Naftogaz has been floating for some time, this is the first statement that outlines potential restructuring of Naftogaz by spinning off its production segment from its gas transportation and distribution arms. Naftogaz’s production division includes Ukrgasproduction and Chornomornaftogaz. We view the potential price range disclosed by Azarov as realistic given the new company is allowed to sell its output at market prices. If the company continues to sell at the state imposed rate, its value might not exceed USD 1 bln. However, the price will largely depend on placement conditions: the percent of state ownership and level of operational control preserved by the state.