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The Wall Street Journal: Imperial Rejects Gazprom’s Stake Bid

November 23, 2007

MOSCOW — Oil producer Imperial Energy Corp. said Thursday that it rebuffed an offer from the banking arm of Russia’s OAO Gazprom, which had been seeking to buy a stake in the London-listed company.

Imperial previously said that OAO Gazprombank wanted to buy a 25% stake in the company in new stock at a discount to market levels. Such a stake is currently valued at more than $300 million.

The announcement that Imperial rejected the bid drove the shares down 8.3% to £10.97 ($22.65) late Thursday, off 99 pence.

The oil company’s shares had rallied earlier on the possible appearance of state-owned Gazprombank as a shareholder, which many observers said would help smooth friction with Russian regulators.

Gazprombank couldn’t be reached for comment.

Shares in Imperial — whose operations focus on Russia and the Commonwealth of Independent States — have suffered in the past, mainly because of statements by Oleg Mitvol, the deputy head of the Russian Natural Resources Ministry’s environmental-protection agency.

In April, Mr. Mitvol accused the company of not complying with a key license and said its reserve data don’t agree with state records.

The regulator has since challenged a DeGolyer & MacNaughton audit of Imperial’s Kiev-Yeganskoye, Festivalnoye and Sneznoye fields in the Tomsk region in Western Siberia — which account for about 40% of the company’s total reserve base — claiming data have been overstated.

Imperial has denied the regulator’s accusations and has commissioned DeGolyer & MacNaughton to update the company’s oil reserves, with a report scheduled to be published in the spring.

Regulatory pressure from Russia’s Natural Resources Ministry subsided earlier this year at developments previously led by Royal Dutch Shell PLC and Russian-British joint venture OAO TNK-BP Holding when state-controlled Gazprom became a majority shareholder in the projects.

However, Oriel Securities analyst Richard Rose said the fact that talks broke down between Imperial and Gazprom won’t affect Imperial’s ability to develop its asset base in Russia. Talk of political risk between the company and Russia has been “overstated,” Mr. Rose added.

Imperial remains open to cooperation with Gazprombank. “Both groups take the view that there is room for mutual cooperation between them in Russia’s petroleum industry in other ways,” Imperial said, without giving further details.

–Benoît Faucon and Kimberly Vlach in London contributed to this article.

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