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Integra brochure
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January 25, 2006

“Soaring oil prices and, hence, strong oil companies’ earnings generate a rash of investments in field development”

The Russian oilfield service industry whose collapse was foretold as recently as a year ago is reviving. However, the number of market players is rapidly reducing as bigger companies are buying up smaller competitors. The latest in the series of deals is Integra’s acquisition of a 75% stake in  Tyumenneftegeofisika OJSC (TNGF). Analysts attribute the upswing to the fact that in view of the soaring oil prices and the government’s sale of unexplored fields oil companies have had a chance and, most important, have the need to hire oilfield service companies. Integra bought the Tyumenneftegeofisika shares from NOMOS Bank for $30 mln in late December, said the company’s president Felix Lyubashevsky. TNGF turnover reached $38 mln in 2005, and Integra is planning to raise it to $50 mln this year. “We are looking to extend our product line, but our plan is to grow organically and not through acquisitions”, president Lyubashevsky said. However, the company is not going to abandon the extensive way of growth. Integra is eyeing buy of oilfield companies and is in negotiations to acquire core manufacturing assets. “Small-size firms have to be sold because this is a very capital-intensive business, and they survive only through low-balling and are unable to invest in development”, Integra’s spokesman said, emphasizing that this is a natural process. Experts are positive on the consolidation trend. “We welcome Russian companies’ desire to increase turnover and the number of assets”, said Alexander Romanikhin, president of the Association of Oil and Gas Equipment Manufacturers. The consolidation will prevent large international companies such as Schlumberger and Halliburton from overtaking small Russian firms and expelling local oilfield companies from the market, he said. Experts attribute the upswing in the industry to the situation in the oil market. “Soaring oil prices and, hence, strong oil companies’ earnings generate a rash of investments in field development”, said Natalia Yanakaeva, an analyst at Centerinvest, “The government is putting up for auction about 1 thousand fields this year (last year the number was several-fold lower), and oil producers feel the need of oilfield services”. According to Yanakaeva, Integra will look for independent companies. “For now, they are buying up any exploration and workover companies, there is almost no bargaining. Supposedly, when Integra collects a sufficient number of assets, it will start getting rid of the weakest ones”, Yanakaeva said. “Another asset that may be of interest to Integra is Tatarstan-based company Alnas”, said analyst of Centerinvest Gennady Sukhanov. The plant that manufacturers submersible pumps is currently owned by Yukos. The disgraced company is likely to sell the non-core asset, but the main claimant to Yukos’ property will hardly be interested in it, therefore Integra’s chances to buy Alnas for a fair price are pretty good.