Flying out to a new Siberian oil field that uses a mix of Russian and Western technology, drilling manager Dave Struthers hollers his plans over the racket of the clunky Mi-8 helicopter.
With the help of oil services company Schlumberger Ltd, Struthers's employer, Russia's Sibneft oil SIBN.RTS is drilling a horizontal well, which dives down 2,823 metres (9,262 feet) and soon will snake laterally for a final half kilometre (1,640 feet) or so through a series of layers of oil-bearing sand.
If it works, the well will outperform ones sitting next to it that are producing 100 tonnes of oil per day. If not, data gathered by Schlumberger at this field, Yarainskoye, will tell roughnecks how to do it better next time. "We are going to be a lot smarter in a month than we are today," Struthers yells.
A slow circle of the drilling area shows a rusty tower, the rig, on a sand pile dumped in the middle of an endless swamp gleaming with shallow lakes - virgin territory for Sibneft.
Natural gas, which comes up with the oil, is flared off from a smokestack to the side, though the gas will soon power train engines that are the base's generators and now use diesel fuel.
For the new well, Sibneft has drilled straight down with Russian equipment which is cheap if relatively unsophisticated. Schlumberger will do the last leg, taking the cost of the well, which would be some $3 million if drilled with all Western equipment, to $1.3-1.5 million, Struthers says.
Schlumberger is also using its technology to increase flows at older wells. "The reality is that we are competing against a very cost effective system," Struthers shouts as the helicopter touches down.
Blasted by sub-zero winds in the winter and gnawed by mosquitoes in the summer, this outpost is Sibneft's proof that making a buck, rather than simply producing oil, is the name of its game, and that is a sea change for Russia.
Sibneft's attempt to show off its Western attitude is also a test case for companies that have clashed hard with shareholders and are trying to convince investors times have changed.
Leaner and meaner, Sibneft focuses on "value for money", says chief operations officer Alexander Korsik. "Today, the weather has changed," he says back in Noyabrsk, a town barely 25 years old, built by and for the oil firm. "We have to change the way people think."
Take the drillers, seeking ways into one of the world's top 20 pools of oil reserves. Teams get paid according to how much they produce.
Results are clear. Newly drilled wells last year produced double what new wells produced in 1998, as Sibneft learned to manage reserves and drillers hit the right spots.
Direct production costs last year were 89 cents for a barrel of oil, which now sells for $30 on foreign markets. Costs will rise this year and next but still be low. Output is also rising, as Sibneft buys and finds reserves.
The fields Sibneft owns produced about 41 million tonnes of oil in their heyday, 1989, and only 16.3 million tonnes last year, but healthy gains to some 17 and 17.5 million tonnes are seen this year and next. Sibneft shares are also priced attractively. United
Financial Group (UFG) puts Sibneft's enterprise value to earnings before interest, tax, depreciation and amortisation, at a cheap 1.5, based on 2000 forecasts and a 29 cent stock price.
The average for the Russian oil industry is 1.8, while emerging market comparatives average 5.7 and international integrated oil firms average 10.4.
However, UFG rates Sibneft a hold. "Low multiples reflect investors' discomfort with the companies' principal shareholders," it said. Sibneft's ownership structure is unclear.
Russian business magnate Roman Abramovich said last year that he controlled Sibneft, but he was elected to parliament in December and he should have formally surrendered all of his business interests upon taking up his seat.
Sibneft offers a list of shareholders consisting of chiefly Western investment banks. Backers expect that while times are good and as the company tries to attract capital, it is unlikely to act to anger outside investors, and they point to independent directors on its board and a corporate governance charter.
But Russian post-Soviet history is littered with examples of diluted share issues and accusations of transfer pricing, when a company sells oil at below market rates to another company, whose owners end up with the profits.
UFG pointed out that in 1997-98 Sibneft diluted minority shareholders in its key production subsidiary, Noyabrskneftegaz. "Despite the fact that this conflict was settled at the beginning of 1999, the terms of the deal were perceived as unfair by the market," it said.
Ivan Mazalov, oil analyst at Moscow investment bank Troika Dialog, rates Sibneft neutral despite respect for management's drive to raise return on investment. Reuters
Pentru alte știri, analize, articole și informații din business în timp real urmărește Ziarul Financiar pe WhatsApp Channels
