Moody's: Rosneft agreement with SIBUR on Yugragazpererabotka is credit positive

MOSCOW (MRC) -- Moody's Investors Service has today said that it views as credit positive for OJSC Oil Company Rosneft (Baa1 stable) the announcement that it had agreed to sell its 49% stake in the joint venture OOO Yugragazpererabotka (YGPP) to OJSC SIBUR Holding (SIBUR, Ba1 stable), thus increasing SIBUR's stake in YGPP to 100%, said the agency.

The transaction involves the renegotiation of volume and pricing arrangements for associated petroleum gas (APG), natural gas liquids (NGL) and dry gas supplied by Rosneft to YGPP. The positive effect on the ratings is moderated by the modest scale of the transaction relative to Rosneft's revenue base.

Under the new arrangements, Rosneft undertakes to deliver up to 13.0 billion cubic meters per year of APG to YGPP; purchase around 9.4 bcm of natural gas from SIBUR; and not engage in developing any projects involving AGP processing in the Khanty-Mansi region of Russia's West Siberia. The company will continue to pursue APG processing initiatives in other regions of operations, in particular the Yuzhny Balyk and Purovsky districts, as part of its gas strategy.

For Rosneft the deal will secure 95% utilisation of its APG output in the Khanty-Mansi region via an increase in the committed APG off-take obligations by SIBUR; improve the economics of Rosneft's APG sales in the region by turning it to a profit centre from cost centre; improve Rosneft's margin in its natural gas business, as it will buy gas from SIBUR at a discount to the state-regulated price; and provide material cash contribution from sale of stake in YGPP. While price and volume adjustments will have no material effect on Rosneft's profitability and cash flow generation, proceeds from asset disposal will provide the company with additional liquidity of around USD1.6 billion (according to public sources), which it expects to utilise for deleveraging.

OJSC Oil Company Rosneft, in which the Russian state holds a 69.5% share via its fully owned agent OAO Rosneftegaz (not rated), is Russia's largest integrated oil & gas company. Following its acquisition of TNK-BP (re-named Rosneft International Holdings Limited, or RIHL, Baa1 stable), Rosneft's proved oil and gas reserves as of 31 December 2013 amounted to 41.77 billion barrels of oil equivalent (boe), in accordance with Petroleum Resources Management System (PRMS). In 2013, Rosneft reported consolidated revenue of approximately USD143.7 billion and EBITDA of approximately USD29.7 billion.

SIBUR is a vertically integrated gas processing and petrochemicals company. SIBUR owns and operates Russia’s largest gas processing business in terms of associated petroleum gas processing volumes, and is a leader in the Russian petrochemicals industry.
MRC

MOSCOW (MRC) -- Production of polypropylene (PP) in Russia rose over the first two months of 2014 by 24% year on year. The doubling of PP production capacity in Russia has allowed to increase the output so significantly, according to MRC ScanPlast.

February PP production in Russia fell to 71,400 tonnes (81,600 tonnes in January). Thus, the total output of polymers of propylene totalled over the first two months of the year about 153,000 tonnes, while this figure was 123,500 tonnes in the same period of 2013. Such a significant increase in production was caused by the last year's launch of two new plants (Poliom and Tobolsk-Polymer) with the total capacity of 680,000 tonnes per year.

Only two plants - Stavrolen (PP production was shut down for an indefinite period of time because of the accident on 26 February) and Poliom - reduced their PP production last month. Tomskneftekhim virtually maintained its January capacity utilisation in February.

Conversely, other Russian producers increased their production in February. Ufaorgsintez and Tobolsk-Polymer accounted for the greatest increase in production.

MRC

MOSCOW (MRC) - The output of the finished products made of polymers in Russia decreased by 1.7% in the first two months of 2014, compared with the same period in 2013, according to MRC analysts.

The greatest reduction in the output traditionally occurred for the production of pipes, hoses and fittings, with 61,700 tonnes produced over the reported period, down 23.5% year on year. According to the Federal State Statistics Service, the February production of plastic pipes, hoses and fittings was about 35,000 tonnes, in January it was 26,300 tonnes.

February production of porous plates and sheets was about 16,200 tonnes, while in January it was 14,800 tonnes.
The output of these products decreased by 8.9% over the first two months of the year to about 31,000 tonnes in January and February 2014.

Russia's production of noncombined and reinforced films in February increased to 73,900 tonnes; in January it was 49,200 tonnes. The output of noncombined and reinforced films in Russia reached 123,100 tonnes over the reported period, up 7.5% year on year.

February's output of plastic windows boxes and sills grew to 1.4 mln square meters; in January it was 1.2 million square meters. Russia's production of plastic windows boxes and sills was about 2.6 mln square meters in the first two months of the year, which is actually same as in the same period in 2013.

February's production of polymer doors and door boxes was about 50,700 square meters; in January it was 43,100 square meters. Total production of polymer doors and door boxes in Russia decreased to 93,600 square meters in the first two months of the year, down 4.4% from in January and February 2013.

February output of polymer bottles and flasks in Russia rose to 1.03 million units; in January it was 917 million units.
Russia's production of polymer bottles and flasks was about 2 billion units over the first two months, up 3.8% from the same period in 2013.
MRC

MOSCOW (MRC) -- Matthias Zachert, currently Chief Financial Officer of Merck KGaA in Darmstadt, Germany, will take over as Chairman of the Board of Management of Lanxess AG, German specialty chemicals company, on 1 April, 2014, reported Lanxess on its site.

Until Mr. Zachert joins the company, Lanxess Chief Financial Officer Bernhard Duettmann is performing the responsibilities of the Chairman of the Board of Management.

As MRC informed before, last year, Lanxess developed a new polyester material grade based on polyethylene terephthalate (PET). The new material grade - Pocan TP 555-001 - is excellently suited to manufacturing housings, sockets and other components for light-emitting diodes (LED). What makes the product unique is its excellent light reflection, which hardly declines at all over time, and its high heat stability. Besides, it is reinforced with glass fibers and contains special additives.

Lanxess is a leading specialty chemicals company with sales of EUR9.1 billion in 2012 and roughly 17,500 employees in 31 countries. The company is currently represented at 52 production sites worldwide. The core business of Lanxess is the development, manufacturing and marketing of plastics, rubber, intermediates and specialty chemicals.
MRC

MOSCOW (MRC) -- Clariant, a world leader in specialty chemicals, has announced a 4% price increase across its Business Line Waxes product portfolio, reported the company on its site.

The price increase is effective April 1, 2014 or as contracts allow.

The adjustment is necessary to recover significant rising costs for energy, labor, and product safety, since the last price increase of the Business Line Waxes in 2011.

"Despite our best efforts to offset rising costs, it has become necessary to implement a price increase to ensure we can continue our strategy of innovation and expansion to support our customers," comments Bernhard Ehrenreich, Vice President and Head of Business Line Waxes.

As MRC wrote previously, last year, Clariant introduced AddWorks, its new brand for polymer additives solutions. It consists of: AddWorks, application oriented solutions specifically designed by segments of the plastics industry AddWorks LXR, a new range of polymer additives designed to provide particular effects in a wide variety of applications. AddWorks are developed by matching the needs of companies engineering technologies for polymerization, polymer producers, compounders, and even converters.

Clariant AG is a Swiss chemical company and a world leader in the production of specialty chemicals for the textile, printing, mining and metallurgical industries. It is engaged in processing crude oil products in pigments, plastics and paints.
MRC