Sibir Energy, MOGC Join To Fight Sibneft Over Yugraneft

LONDON (Dow Jones)--Henry Cameron, CEO of Sibir Energy Plc, and Evgeny Sevastianov, First Vice President of the Moscow Oils And Gas Company (MOGC), at a Moscow news conference Thursday said that they have joined forces to fight Sibneft, the Russian major oil company owned by Roman Abramovich.

"Sibneft will be forced to hand back the Yugraneft assets which were misappropriated. MOGC and Sibir have lost an oilfield, the value of which could be as much as $1.5 billion," said Cameron.

Sibir's legal counsel Dmitriy Afanasiev, a partner at EPAM, said: "No buyer of Sibneft can now claim to be a bona fide purchaser, having been made aware of Sibneft's involvement in the dilution of Yugraneft's shareholding and of the pending proceedings against Sibneft and other parties."

Sevastianov confirmed that the MOGC Chairman of the Board, Moscow Mayor Yuri Luhzhov has stated: "The Yugra oilfield is our asset. We will use every legal means possible to recover our property."

Sevastianov added that the City of Moscow has always said that it wants to maintain its partnership with Sibir Energy through MOGC, a vertically integrated company created to provide a stable supply of crude oil and stable product prices for Moscow residents and businesses.

Cameron said that the Sibneft Yugra dilution affects approximately 4,500 Sibir shareholders, including major institutional investors. He described the dilution as a setback to the efforts of Russian political and business leaders to create a stable and attractive investment climate.

Afanasiev, referring to the 50/50 oil and gas joint venture between Sibir's Yugraneft and Sibneft called Sibneft Yugra, said: "At two purported shareholder meetings, on 10 September 2002 and 4 February 2003, David Davidovich, a senior official of Millhouse Capital (the U.K. company which controls Sibneft) was appointed to represent Yugraneft under a power of attorney issued by Andrei Matevosov, the General Director of Sibneft-Yugra, himself a Sibneft executive.

"Sibir Energy and its Russian subsidiary Yugraneft did not know of the shareholders' meetings, at which the charter capital of Sibneft Yugra was increased and stock issued for a nominal sum of approximately $16,000."

Afanasiev continued: "Davidovich violated his fiduciary duties to Yugraneft by declining to purchase Yugraneft's rightful share of stock. Instead, three off-shore companies believed to be controlled by Sibneft subscribed for the stock for the nominal sum referred to, clearly demonstrating that this was a fictitious transaction, given the magnitude of the assets involved. As a consequence, Yugraneft's stock in the Sibneft Yugra asset was reduced to less than one percent."

"Sibneft did not notify the other Sibneft Yugra shareholders of the increase in charter capital and subsequently blocked attempts to convene Board and shareholder meetings," Afanasiev added.

"Sibir Energy continues to pursue court cases in Russia, and will soon initiate legal actions against the perpetrators of this fraud elsewhere," said Cameron.