Blog > Oil and Energy > E.On (EONGY) grabs Gazprom’s (OGZPY) gas field
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E.On (EONGY) grabs Gazprom’s (OGZPY) gas field

Today's Financial News - Posted October 6, 2008

Gazprom (OGZPY) just sold nearly a quarter of the Yuzhno Russkoye natural gas field to Germany’s E.On (EONGY). And what did Gazprom get back for this sacrifice? It’s own stock. How did Germany’s largest utility company manage to buy into one of the world’s largest gas fields using nothing but Gazprom stock?

by Stephanie Grimmett

Baltimore — (TFN):  E.On (OTC:EONGY) took a bite out of Gazprom (OTC:OGZPY) today.

Germany’s largest utility company just got nearly a quarter of Gazprom’s Yuzhno Russkoye natural gas field. And all it had to do was give back some of the Russian giant’s stock. Not bad.

Gazprom has said its decided to push its borders a bit and wants to trade chunks of its prized Russian natural gas fields for foreign assets. But it hasn’t actually made much progress, including today’s deal.

E.On was planning to give away a piece of its Hungarian gas trading-and-storage business and power utility, but the two energy companies couldn’t agree on value (or, less diplomatically:  Gazprom kept demanding a higher return for a cut in the gas field as oil prices moved up this summer, and E.On didn’t want to pay. And then that whole war-in-Georgia thing made the Germans a little less comfortable sitting across the table from the state-controlled Gazprom’s execs everyday.).

It seems European companies (and others, but mostly the Europeans. Gazprom does loom large on their eastern front.) aren’t too sure about selling stakes in their resources to Gazprom. And the company’s strong-arm tactics don’t exactly go over well in foreign boardrooms.

So what did Gazprom get out of the deal with E.On? 2.93% of its own stock. E.On still holds 3.5%. Ouch.

Gazprom is claiming the Hungarian assets were inadequate and that it couldn’t miss the chance to buy back shares at such low prices.

But in reality (Sorry for using a phrase popularized by MTV, but other options are much less, um, tasteful.) Gazprom got served.

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Posted by Stephanie Grimmett · Filed Under Oil and Energy 

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