MOSCOW, Jan 23 (Reuters) - Sweden-listed oil firm West Siberian Resources WSIBsdb.ST (WSR) and Russia’s Alliance Oil will continue with their merger plans despite WSR’s dramatic fall in value, the firms said on Wednesday.
“We are not looking at changing the parameters of the deal,” WSR’s Maxim Barsky told Reuters.
The world’s financial markets have experienced significant pressure over recent weeks as fears the U.S. economy will go into recession mount, causing shares in the vast majority of listed companies globally to fall.
WSR, which has its operations in Russia, last week said payment for Alliance Oil would consist of around 1.75 billion new West Siberian shares. Under the terms of the deal, Alliance shareholders would own 60 percent of stock in the merged firm.
The deal would have valued Alliance at $1.5 billion and WSR at $1 billion, but WSR’s shares have plunged since Jan 15, when the announcement was made.
WSR’s shares closed down 4.94 percent at 4.43 Swedish crowns ($0.679), down 16 percent from 5.3 crowns on Jan 14, one day before the announcement.
“The deal should be completed in March. The main thing is the cashflow, and we generate it by producing oil,” said Barsky, who will continue as managing director of the combined company.
WSR should expect oil reserve increases of around 10 percent soon in the near future, he added.
Alliance has also previously said the deal would be in April.
“Yes, the market has fallen, but it can also bounce back,” a company spokesman said.
For the deal to go through, the Russian regulatory authorities must approve the merger and an extraordinary shareholders’ meeting must take place at WSR.
If formed, the group will have proven and probable oil reserves of 430 million barrels. Production capacity would be 51,000 barrels per day (bpd) while it would be able to refine 70,000. It would also operate 255 gas stations in eastern Russia.
Alliance Oil is controlled by the Bazhaev family and the firm’s management.
Reporting by Vladimir Soldatkin, writing by Amie Ferris-Rotman; editing by Elaine Hardcastle