MOSCOW (Reuters) - TMK, Russia’s largest maker of steel pipes for the oil and gas industry, is preparing its U.S. subsidiary IPSCO Tubulars for an initial public offering (IPO) of shares.
The announcement comes amid concerns among some Russian officials about a potential expansion of U.S. sanctions against Moscow and as Russia itself has pledged to cut its oil output by 300,000 barrels per day as a part of the global deal.
OPEC and non-OPEC oil producers look poised to agree at a meeting on Thursday to extend output cuts until the end of 2018, four OPEC sources said as the group seeks to clear a global glut of crude and avoid another price crash.
IPSCO has submitted a draft registration statement to the U.S. Securities and Exchange Commission (SEC) relating to the proposed IPO of its new and existing shares, it said in a statement.
TMK declined to comment further. It has previously said it was considering different options for IPSCO but intends to keep a controlling stake.
The OPEC and non-OPEC states agreed to cut supply by about 1.8 million barrels per day (bpd) to boost prices. The deal, currently due to expire in March, has pushed up oil prices but also encouraged U.S. shale oil producers to ramp up output.
“The rapidly expanding operations in the shale oil industry, combined with the general rise of the U.S. stock market, have provided an opportunity for TMK to monetize its exposure to the U.S. at a valuation which is significantly higher than IPSCO’s contribution to the valuation of the Russian entity,” analysts at VTB Capital said in a note.
The number of shares to be offered and the price range for the offering have not yet been determined, IPSCO said, and the offering is subject to the completion of an SEC review, market conditions and further approval by TMK.
Both IPSCO and TMK plan to offer IPSCO’s shares if they decide to go ahead with the listing, and both plan to use the proceeds from the deal for debt repayment.
Controlled by Russian businessman Dmitry Pumpyansky, TMK paid around $1.7 billion for the IPSCO assets in 2008 and 2009, VTB Capital said in a note in October.
“IPSCO’s current contribution to our estimate of TMK’s NPV (net present value) stands at some $0.7 billion. However, we suggest that a company which is placed in the middle of the U.S. shale oil boom development with shares listed on a premium stock market deserves a higher valuation,” VTB Capital said.
TMK has not been affected by Western sanctions. They were imposed against some Russian companies and individuals in 2014 over Moscow’s annexation of Crimea from Ukraine.
IPSCO has said it plans to produce over one million tonnes of pipes in 2017 and expects to be running at full production capacity next year as drilling activity in the United States remains high.
Reporting by Polina Devitt and Andrey Kuzmin; Editing by Jason Neely and Edmund Blair