OREANDA-NEWS. October 15, 2010. Deputy Economics Minister Stanislav Voskresensky told that Rosneft CEO Eduard Khudainatov plans to meet with Finance Minister Kudrin in the next few days to discuss an extension of tax breaks for the Vankorskoye field developed by Rosneft. At the end of last week, Kudrin expressed the view that reduced export duties could still be applied to crude exports from the Vankor field for a “minimal period of time”. Initially, the Finance Ministry insisted that the Vankor project should return to regular export duties in January 2011, reported the press-centre of OTKRITIE Financial Corporation.

View: We believe the pending meeting of Kudrin and Khudainatov is likely to provide some clarity on the potential extension of Vankor export duty relief. Our base case expectation is that the government could allow reduced rates at Vankor throughout 1H11. On our estimates, this would allow Rosneft to save USD 1.2-1.4bn, which is equivalent to about 2% of the company's current market cap. At present, the reduced export duty is approximately 30% of the regular rate. We believe a decision on Vankor export duties would be positive for Rosneft, although we feel this has to some extent been factored into the current price.

Valuation and Action: Rosneft trades at a 2011E P/E of 6.5x and a 2011E EV/EBITDA of 4.4x. We maintain our BUY rating on stock and our target price of USD 11/share. We recommend accumulating positions in Rosneft ahead of the potential extension of Vankor export duty breaks.