Carlyle Group in talks to acquire most of Lukoil’s overseas oil assets
(Bloomberg) – Russia’s Lukoil PJSC agreed to sell most of its international assets to private equity giant Carlyle Group, three months after being hit by U.S. sanctions.
The deal doesn’t include assets in Kazakhstan, the oil producer said Thursday in a statement, without disclosing financial terms. The transaction is subject to regulatory approvals and talks with other potential buyers continue, it said.
The U.S. last year blacklisted the company and peer Rosneft PJSC as the Trump administration ramped up pressure on the Kremlin to end the war in Ukraine. The move sent shockwaves across countries where Lukoil operates, prompting some governments to press Washington for special licenses.
The proposed transaction has been structured to be “fully compliant” with the requirements of the U.S. Office of Foreign Assets Control, Carlyle said in a separate statement. The firm said it’ll ensure “operational continuity, preserving jobs, stabilizing the asset base and supporting safe, reliable performance.”
Carlyle is seeking more time from OFAC as it works to complete due diligence and to obtain the requisite regulatory approvals, according to a person familiar with the matter. No precise valuation has been set on the deal, said the person, who spoke on the condition of anonymity as the details aren’t public.
Lukoil didn’t immediately respond to a request for follow-up comments.
Lukoil announced in October it had agreed to sell its international assets to energy trader Gunvor Group, but the deal collapsed after the U.S. Treasury described Gunvor as the Kremlin’s “puppet.” The assets subsequently drew attention from companies including ExxonMobil, Chevron and Abu Dhabi National Oil Co.
As Russia’s most internationally diversified oil company, Lukoil has stakes in refineries in Europe, significant holdings in oil fields from Iraq to Kazakhstan and a network of 5,300 fuel stations in 20 countries, including the U.S.
In a regulatory filing in Austria last year, Lukoil International reported consolidated assets of almost €40 billion and about €15 billion of debt for 2022, relative to over 140 units worldwide, including minority stakes and joint ventures. Those are the most recent consolidated numbers available, and the distress created by sanctions would suggest a substantial valuation discount is likely.
Kazakh interest
Kazakhstan has expressed an interest in buying out Lukoil’s share of joint projects in the country and has submitted a request to OFAC, Interfax reported this week, citing Energy Minister Yerlan Akkenzhenov.
Following the imposition of sanctions, Lukoil’s international oil-trading business has had to wind down operations in some locations. In the U.S., gasoline stations linked to the company experienced issues with card payments, while its fuel-retail unit Oy Teboil Ab filed for bankruptcy in Finland.
It’s unclear if the deal would include Lukoil’s stake in the giant West Qurna 2 field in Iraq, with Exxon and Chevron as potential suitors.
Special waivers that have allowed certain Lukoil operations and transactions to continue have been extended several times, but most are due to expire Feb. 28.
