Lukoil’s new model would need to take into account the company’s loss of a strategic investor, namely the U.S.-based ConocoPhillips. The head of Lukoil Mr. Vagit Alekperov said that the company’s management decided to acquire a sizeable percentage of its own shares of stock in order to ensure commercial stability. 

The shares on the books of the company would allow the managers to make important decisions for Lukoil in the interests of the company. According to Mr. Alekperov, Lukoil’s management that would be responsible for steering the Russian oil producer consists of 800 people.  

The new concept for Lukoil’s development envisions that the oil producer will transform itself into a public company with a vast number of shareholders having small stakes in the enterprise. Strategic decisions will be left in the hands of the company’s management.

The new business model will be presented to the company’s board of directors in the middle of January 2011. As of the end of September 2010, Mr. Alekperov himself was in possession of a 20.599-percent stake in Lukoil. The company’s vice president Mr. Leonid Fedun was the owner of 9.27 percent of shares. Mr. Valeriy Graifer, the chairman of the board of directors had 0.007 percent. First executive vice president Ravil Maganov controlled 0.486 percent, and Sergei Mikhailov, who serves as Lukoil’s board member and the director of Management Consulting, had 0.44 percent.

Lukoil has more than 8 percent of its shares in its treasury, according to Lukoil’s investor relations director Andrei Gaidamaka. The shares of stock kept in the company’s treasury include the 7.66-percent stake that Lukoil bought back from ConocoPhillips in addition to several other shares.     

In the first quarter of 2010, ConocoPhillips announced that it would reduce its ownership interest in Lukoil from 20 percent to 10 percent by the year 2012. In mid-summer, Lukoil reached an agreement with its American investor to purchase back a 7.6-percent stake in itself for USD 3.44 billion. Under the terms of the agreement, Lukoil also acquired the option to buy as much as 11.61 percent of its own shares of stock from ConocoPhillips in the form of depository receipts. The option was to be exercised prior to September 26, 2010. Lukoil repurchased a 7.6-percent stake in itself from ConocoPhillips on August 16. The price for the transaction was USD 3.4 billion. On September 26, the company repurchased the second 4.99-percent stake in itself. This 4.99-percent stake was immediately sold to UniCredit at the cost of USD 56 per share for the total price of USD 2.38 billion.    

On September 29, Redruth Investments, which is associated with Mr. Alekperov, purchased the equity-linked notes from UniCredit for 25 million Lukoil’s American Depositary Receipts. Lukoil can repurchase the 25 million American Depositary Receipts from UniCredit within one year at the fair market price, not exceeding USD 56 per one security. The option will terminate if the market price falls under USD 50 per security. On September 30, ConocoPhillips still owned a 5.91-percent interest in the company.