OREANDA-NEWS. October 27, 2009. Rosneft was declared winner of a license tender for the Labagan block in the Nenets Autonomous District. Rosneft has offered RUB2.63bn (~US90m) for the block, which is estimated to contain more than 25MMt of C1 and C2 oil reserves (~180MMB). Hence, the implied C1+C2 acquisition price offered by Rosneft was approximately US 0.50 per barrel, reported the press-centre of OTKRITIE Financial Corporation.

In our view, this does not look unreasonably cheap, given the lack of production and transportation infrastructure around the field. The starting tender price for the Labagan block was RUB2.02bn. Hence, Rosneft offered a 30% premium in order to secure 180MMB extra oil in the ground, which represents a 0.5% addition to the company’s current 2P reserve base.

View: We believe the news is only marginally positive for Rosneft at this stage. 

Action and valuation: Our valuation and target price for Rosneft are under review.