Rosneft focuses on efficiency, asset integration

By Michael Stott

MOSCOW (Reuters) - Russia's biggest oil company, Rosneft (ROSN.MM: Quote, Profile, Research, Stock Buzz)(ROSNq.L: Quote, Profile, Research, Stock Buzz), is focused on boosting efficiency and digesting a wave of recent acquisitions to meet tough performance targets, Chief Financial Officer Peter O'Brien told Reuters on Tuesday.

State-controlled Rosneft has grown dramatically after buying most of the assets of fallen oil major YUKOS, which was bankrupted by a series of huge tax demands.

Recent speculation in Russia suggested Rosneft might acquire even more local oil assets by swallowing other, smaller rivals but O'Brien dismissed this.

"Our focus is on integrating the portfolio and optimizing the structure of our assets," O'Brien told the Reuters Russia Investment Summit.

Rosneft brought in O'Brien from U.S. investment bank Morgan Stanley to help take the company public, raising $10.6 billion in an initial public offering (IPO) in London and Moscow in July 2006.

"We made a number of commitments during the IPO process ... and we intend to deliver and exceed on some of those," O'Brien said. Investors "should be confident that the IPO targets will be met and even exceeded on an organic basis", he added.

The Russian government, Rosneft's 75 percent shareholder, shared the objective of driving efficiency and had set some tough performance targets for the company, he added.

"The objectives in terms of efficiency have been made very clear from our board, and specifically our chairman and they are paramount," O'Brien said. "We only have a specific amount of time to demonstrate that we can compete."

Rosneft's chairman is Igor Sechin, the Kremlin deputy chief of staff and a close long-time ally of President Vladimir Putin.

The company's free float is just 15 percent, but O'Brien said Rosneft wanted to increase that proportion over time to make the shares more liquid. He declined to be specific about timing. The remainder of the company's stock is held as treasury shares.

Rosneft's GDR price, currently $8.25, is around a dollar down on the year despite oil prices at near-record levels. O'Brien said the price was "still doing relatively well compared to our peer group" and added that it was now up to Rosneft to show it could deliver on its expanded asset base.

"We've added substantial downstream capacity and we should be able to demonstrate improved margin performance," he said.

O'Brien promised that Rosneft would present a strategy document to investors, before the end of this year, laying out some of the objectives for the company through to 2010.

These would include competitive margin and netback performance and a look at upstream assets, he added.

Part of the focus would be on addressing headcount issues in some of the YUKOS assets but O'Brien declined to specify how much money might be set aside for restructuring or how many jobs might go.  Continued...