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Novatek Retreats Most Since 2009 as Rosneft Clinches Supply Deal

Nov. 1 (Bloomberg) -- OAO Novatek, Russia’s biggest non-state natural gas producer, dropped the most in more than three years after it lost a key supply contract with state-run OAO Inter RAO UES.

Novatek’s depositary receipts fell 12 percent, the most since February 2009, to $100 by the 3:40 p.m. close in London. The shares slid 7.8 percent to 313.89 rubles in Moscow.

OAO Rosneft, Russia’s biggest oil producer, won the 25-year contract from Novatek to supply OAO Inter RAO UES’s power plants with natural gas, Rosneft and Inter RAO said in statements today.

The lost contract may wipe 12 percent from Novatek’s fair value, JPMorgan Chase & Co. analysts wrote in a note today. “We would expect a visible negative reaction in the name,” Andrei Gromadin, a Moscow-based analyst at JPMorgan, said in the note.

Novatek supplies Inter RAO with about 15 billion cubic meters of gas a year, or about 28 percent of last year’s sales volumes.

Novatek may be compensated for the loss of Inter RAO sales “by exporting gas to Germany for example,” Julian Rimmer, a trader with CF Global in London, said by e-mail. “$100 will prove a good level to buy.”

Rosneft surged 8.8 percent to $8.05 in London, the highest level in nearly three months.

To contact the reporters on this story: Maria Levitov in London at mlevitov@bloomberg.net; Anna Shiryaevskaya in Moscow at ashiryaevska@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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