OREANDA-NEWS. August 11, 2010. Rosneft paid Yukos Capital in accordance with a court order to settle its debt with the company. The Russian oil producer reportedly made payments of USD 0.85m on 6 August and RUB12.9bn (USD431m) on 9 August, reported the press-centre of OTKRITIE Financial Corporation.

In 2006, when Yukos Capital, a former subsidiary of Yukos, initiated proceedings against Rosneft and Rosneft’s subsidiary OJSC Samaraneftegas, alleging default on 6 ruble-denominated loans. Later, Yukos Capital challenged the decisions in several Russian courts and sought payment from Rosneft via arbitration courts in various jurisdictions, including wales, England, New York, and the Netherlands. On 25 June 2010, the Supreme Court of the Netherlands declared inadmissible Rosneft’s appeal on the decision of the Amsterdam Court of Appeals enforcing the ICAC awards in the Netherlands.

View: Since the news was expected, and the settlement was already discounted by the market, we see it as neutral for the stock. Also, according to Rosneft 2Q10 results, Yukos Capital has agreed to refrain from new litigation concerning the ICAC awards. Although, the first market reaction was marginally negative.

Valuation and Action: We reiterate our BUY rating for Rosneft and a target price of USD11/share. The stock trades on a 2010EV/EBITDA of 4.4x, which implies a 25-30% discount to emerging market peers.