OREANDA-NEWS. August 06, 2010. The commission overseeing foreign investment granted permission for TNK-BP Holding to increase its equity stake in Verkhnechonskneftegaz (VChNG) from 68.52% to 74%, Interfax reported yesterday. Other shareholders of VChNG include Rosneft (25.94%) and the Eastern Siberian Gas Company VSGK (5.48%). VSGK, which is 50/50 controlled by TNK-BP and the Irkutsk Region administration, is now expected to sell its 5.48% stake in VChNG to TNK-BP, although no price has been disclosed. VChNG develops the large Verkhnechonskoye field (estimated recoverable C1+C2 reserves over 200MMt or nearly 1.5bn BOE) in the Irkutsk Region, which enjoys exemptions from both the mineral extraction tax (MET) and the export duties, reported the press-centre of OTKRITIE Financial Corporation.

View: We believe the news is only marginally positive for TNK-BP Holding since it does not imply a substantial change in its equity interest in VChNG. In any case, VSGK is co-controlled by TNK-BP and the Irkutsk administration and we consider the pending acquisition to be essentially a formality.

Valuation and Action: TNK-BP Holding currently trades on a 2010E EV/EBITDA of less than 3x. We maintain our positive view on the stock and our target price of USD2.52/share.