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Daily Telegraph: Questor: Russian profits for Imperial

Edited by David Litterick
Last Updated: 1:16am GMT 01/11/2007

Imperial Energy is one of several Western companies whose Russian operations felt the impact of the country’s sometimes erratic regulatory regime. The oil firm’s shares see-sawed amid threats that its operating licences would be revoked. But is the political discount weighing on Imperial’s shares about to ease?

As with BP, Shell and Peter Hambro Mining, Imperial has faced the wrath of Oleg Mitvol, the deputy head of Russia’s environmental regulator who has made a name for himself with his attacks on foreign resources companies. But two things would appear to be moving in Imperial’s favour – one political, the other operational.

On the political front, there are suggestions that Mitvol may have his wings clipped. But more specifically to Imperial, it is about to start turning its oil reserves into hard cash. Crude from Imperial’s flagship Maiskoye field in Siberia is now flowing into Russia’s Transneft pipeline system (in effect, the national grid) for the first time. It would be strange for Transneft to agree to this if Imperial was about to be shut down.

In addition, there is talk of Imperial doing a strategic deal with the regional government of Tomsk, which would further de-risk the company from political volatilities emanating from Moscow.

Finally, a recent production update on the Maiskoye and Snezhnoye fields has raised estimates by 33pc to 8,500 barrels a day. The company now looks well on course to beat its year-end production target of 10,000 barrels a day. As a result, and even given yesterday’s rise, the shares appear to have significant upside. With the usual Russian health warnings, buy.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/11/01/cxquest101.xml

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