Today, the Board of Directors of JSOC Bashneft has decided that the Company should sell its stake in the authorized share capital of OJSC United Petrochemical Company (UPC) to OJSC JSFC Sistema; currently, Bashneft owns a 98% stake in UPC’s authorized share capital. The Board has submitted this proposal to the Extraordinary Meeting of Shareholders of Bashneft for approval. The decision made by the Board forms part of the strategy for divesting non-core assets.

In accordance with the Board’s decision, the Extraordinary Meeting of Shareholders of Bashneft is to be held by absentee voting on August 26, 2013. The Board of Directors has set the date for compiling a list of those entitled to participate in the Meeting (July 18, 2013) and approved the following agenda:

1. On approval of related-party transactions.
2. On JSOC Bashneft’s participation in associations.

The Meeting is to consider approving the sales and purchase agreement for the above-mentioned stake in UPC worth 6.2 billion roubles. The transaction value was determined based on independent appraisal made by one of the Big Four audit firms.

As part of establishing long-term market relations between Bashneft and UPC, the Meeting of Shareholders will consider approving the contract for selling up to 1.1 million tonnes of Bashneft’s petroleum products to OJSC Ufaorgsintez, which forms part of UPC, before December 31, 2014. The selling price for petroleum products will be calculated in accordance with the approved pricing formula based on current market indicators.

The Meeting is also to approve renewing the sales and purchase agreement between JSOC Bashneft and OJSC RussNeft under which RussNeft is to sell up to 3 million tonnes of oil to Bashneft before August 31, 2014; this oil will subsequently be processed at Bashneft’s own refineries.

Besides, the Meeting will consider Bashneft’s participation in the International Association of Oil & Gas Producers (OGP) and IPIECA, the global oil and gas industry association for environmental and social issues. Bashneft’s intention to join OGP and IPIECA proves that the Company aims to follow best international practices the sphere of HSE and social responsibility.

Note:In June 2013, Bashneft completed the consolidation of petrochemical assets within OJSC United Petrochemical Company started in February 2013. During the consolidation, UPC purchased 100% stakes in LLC Tuimazinskoye Gas Processing Plant and LLC Shkapovskoye Gas Processing Plant from Bashneft and established LLC Bisphenol. Subsequently, LLC Tuimazinskoye Gas Processing Plant and LLC Shkapovskoye Gas Processing Plant signed agreements on purchasing property, plant and equipment previously leased from Bashneft, while LLC Bisphenol acquired facilities for producing bisphenol A from Bashneft.

As part of consolidating petrochemical assets, OJSC UPC also issued additional ordinary shares. As a result of placing this additional issue, UPC acquired 65.3% of ordinary shares (56.5% of the authorized share capital) of OJSC Ufaorgsintez, while Bashneft retained its stake in UPC’s authorized share capital totalling 98%.