OREANDA-NEWS. July 28, 2010. Russia's Federal Service for Supervising Natural Resources (Rosprirodnadzor) has advised Rosnedra to withdraw the license for the Termokarstovoye gas condensate field from Terneftegaz, a joint venture between France's Total and Russia's independent gas producer NOVATEK, according to RIANovosti. No other details were provided, reported the press-centre of OTKRITIE Financial Corporation.

Termokarstovoye field's reserves amount to 47.3bcm of natural gas and 10.3mmt of liquids, according to the Russian ABC1+C2 classification. Currently NOVATEK has a 72% stake in this venture, Total - 28%. According to the agreement between the companies, Total should increase its stake to 49%. Also, the two companies promised to invest USD1bn in this project and begin production in 2012.

View: We assume that Rosprirodnadzor’s decision was based upon a scheduled inspection during which license violations of were found, but according to NOVATEK there the decision was unwarranted. Regardless, we do not foresee problems for the Russian-French joint venture at this stage. First of all, the companies have 3 months to amend all violations, and we believe they will do so. Second, this venture was supported by PM Putin, which implies some protection from the Prime Minister’s office.

Valuation and Action: NOVATEK trades on a 2010 EV/EBITDA of 10.7x. We have a BUY rating for the stock and target price of USD10.0/share. We expect neutral reaction on this information.