OREANDA-NEWS. October 16, 2009. According to comments made by company chairman Mikhail Friedman at a meeting with President Medvedev, TNK-BP anticipates a significant long-term oil production rise and refining volume growth due to development of the Uvat and Russkoye fields and an upgrade of the Saratov Refinery. Friedman also stated that in 2009 TNK-BP could raise oil production by 4% YoY, reported the press-centre of OTKRITIE FC.

View: Although Friedman did not specify whether his comments pertained to TNK-BP International or TNK-BP Holding, we estimate TNK-BP Holding’s 2009 incremental production at 4% YoY. According to our forecast, TNK-BP Holding could extract 73.4m tons of oil (1.48m bpd) in 2009. However, we estimate TNK-BP International’s 2009 oil production at 80m tons (1.6m bpd), which assumes zero production growth rate YoY because of the drop in Slavneft’s oil production, in which TNK-BP owns a 50% stake.

In the long-run, we expect that 11% of TNK-BP Holding’s oil output could come from the Uvat group of fields (located in Western Siberia). While the capacity of the Saratov Refinery could increase from 5m (36.5m barrels) tons to 6m tons (43.8m barrels) annually, the main contributor to TNK-BP Holding’s refining volumes is its Ryazan Refinery.

Valuation: TNK-BP Holding’s common stocks trade at a 23% discount on P/E to the rest of the energy sector.

Action: We read this news as a short-term positive for TNK-BP Holding’s stocks. We have no a target price and a recommendation for the stock.