Alliance Oil Company Ltd.

400 Pages·2010·4.28 MB·English

IMPORTANT NOTICE
This document (the ‘‘Document’’) is a prospectus for the purposes of Directive 2003/71/EC (the ‘‘Prospectus
Directive’’) and has been prepared solely in connection with the proposed offering (the ‘‘Offering’’) of
Notes (the ‘‘Notes’’) of Alliance Oil Company Ltd. (the ‘‘Issuer’’) and guaranteed by CJSC Alliance Oil,
OJSC Alliance Oil Company, LLC Alliance-Bunker, CJSC Alliancetransoil, OJSC Amurnefteproduct, OJSC
Khabarovsknefteproduct, LLC Khvoinoye, LLC Kolvinskoe, OJSC Pechoraneft, LLP Potential Oil, OJSC
Primornefteproduct, CJSC Saneco, OJSC Tatnefteotdacha and OJSC Eastern Transnational Company,
(collectively, the ‘‘Guarantors’’).
THIS OFFERING IS AVAILABLE ONLY TO INVESTORS WHO ARE EITHER (1) QUALIFIED
INSTITUTIONAL BUYERS (‘‘QIBS’’) IN RELIANCE ON THE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT OF 1933 (THE ‘‘SECURITIES
ACT’’) PROVIDED BY RULE 144A OR (2) OUTSIDE OF THE UNITED STATES IN COMPLIANCE
WITH REGULATION S UNDER THE SECURITIES ACT (‘‘REGULATION S’’).
IMPORTANT: You must read the following before continuing. The following applies to the Document
following this page, and you are therefore advised to read this carefully before reading, accessing or
making any other use of the Document. In accessing the Document, you agree to be bound by the
following terms and conditions, including any modifications to them any time you receive any information
from us as a result of such access.
NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES
FOR SALE IN ANY JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE SECURITIES
HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE SECURITIES ACT, OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION
AND THE SECURITIES MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES (AS
DEFINED IN REGULATION S UNDER THE SECURITIES ACT), EXCEPT PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE OR LOCAL
SECURITIES LAWS.
THE FOLLOWING DOCUMENT MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY
OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER. ANY
FORWARDING, DISTRIBUTION OR REPRODUCTION OF THE DOCUMENT IN WHOLE OR IN
PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN
A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER
JURISDICTIONS.
Confirmation of your representation: In order to be eligible to view the Document or make an investment
decision with respect to the securities, investors must be either (1) a QIB (within the meaning of Rule 144A
under the Securities Act (‘‘Rule 144A’’)) or (2) outside the United States. The Document is being sent at
your request and by accepting the e-mail and accessing the Document, you shall be deemed to have
represented to us that (1) you and any customers you represent are either (a) QIBS or (b) you and the
electronic mail address that you gave us and to which this e-mail has been delivered are not located in the
United States and (2) you consent to delivery of such Document by electronic transmission.
You are reminded that the Document has been delivered to you on the basis that you are a person into
whose possession the Document may be lawfully delivered in accordance with the laws of the jurisdiction
in which you are located and you may not, nor are you authorised to, deliver the Document to any other
person.
The materials relating to the Offering do not constitute, and may not be used in connection with, an offer
or solicitation in any place where offers or solicitations are not permitted by law. If a jurisdiction requires
that the offering be made by a licensed broker or dealer and BNP Paribas, Credit Suisse Securities
(Europe) Limited, J.P. Morgan Securities Ltd., Joint stock commercial bank – Bank of Moscow (open joint
stock company) or VTB Capital plc (collectively, the ‘‘Managers’’) or any affiliate of the Managers is a
licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by the Managers or
such affiliate on behalf of the Issuer in such jurisdiction.
No person may communicate or cause to be communicated any invitation or inducement to engage in
investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the
issue or sale of the Notes other than in circumstances in which Section 21(1) of the FSMA does not apply.
The Document has been sent to you in an electronic form. You are reminded that documents transmitted
via this medium may be altered or changed during the process of electronic transmission and consequently
none of the Managers or any person who controls them, nor any director, officer, employee or agent of
any of them or affiliate of any such person accepts any liability or responsibility whatsoever in respect of
any difference between the Document distributed to you in electronic format and the hard copy version
available to you on request from the Managers.
Alliance Oil Company Ltd.
(Registered number 25413, incorporated with limited liability under the laws of Bermuda)
as issuer of
US$350,000,000 9.875% Guaranteed Notes due 2015
Unconditionally and irrevocably guaranteed on a joint and several basis by
CJSC Alliance Oil, OJSC Alliance Oil Company, LLC Alliance-Bunker, CJSC
Alliancetransoil, OJSC Amurnefteproduct, OJSC Khabarovsknefteproduct, LLC Khvoinoye,
LLC Kolvinskoe, OJSC Pechoraneft, LLP Potential Oil, OJSC Primornefteproduct, CJSC
Saneco, OJSC Tatnefteotdacha and OJSC Eastern Transnational Company
Issue price of Notes: 100%
AllianceOilCompanyLtd.(the‘‘Issuer’’)isissuingUS$350,000,000aggregateprincipalamountof9.875%guaranteednotesdue2015(the‘‘Notes’’).Interest
ontheNoteswillaccruefrom11March2010atarateof9.875%perannumoftheiroutstandingprincipalamountpayablesemi-annuallyinarrearon11
March and 11 September of each year, commencing on 11 September 2010. Each of the PartlyOwned Guarantors(as defined below) will separately enter
intoaDeedofGuaranteewithBNYCorporateTrusteeServicesLimitedastrusteefortheholdersoftheNotes(the‘‘Trustee’’)tobedatedonorabout11
March 2010 (each a ‘‘Deed of Guarantee’’ and together, the ‘‘Deeds of Guarantee’’) and each of the Fully Owned Guarantors (as defined below) will enter
intothetrustdeedwiththeTrusteeandtheIssuertobedated11March2010(the‘‘TrustDeed’’)tounconditionallyandirrevocablyonajointandseveral
basis guarantee the due and punctual payment of all amounts at any time becoming due and payable in respect of the Notes (each a ‘‘Guarantee’’ and
together,the‘‘Guarantees’’).TheNoteswillbesubjectto,andhavethebenefitoftheTrustDeed.
Payments on the Notes will be made free and clear of any withholding taxes imposed by Bermuda or the Russian Federation to the extent described in
‘‘Terms and Conditions of the Notes’’ herein. The Notes may be redeemed by the Issuer in whole but not in part at 100% of their principal amount, plus
accruedandunpaidinterest,iftheIssuerbecomesobligedtopaycertainadditionalamountsandotherwiseasdescribedunder‘‘TermsandConditionsofthe
Notes-RedemptionandPurchase—RedemptionforTaxationReasons’’.Unlesspreviouslyredeemedorpurchasedandcancelled,theNoteswillberedeemedat
theirprincipalamounton11March2015.
An investment in the Notes involves certain risks. Prospective Investors should have regard to the factors described under the section headed ‘‘Risk Factors’’
beginningonpage22.
The Notes will be unsecured and unsubordinated obligations of the Issuer and will rank equally in right of payment with the Issuer’s existing and future
unsecured andunsubordinatedobligations. TheNotes will be irrevocably andunconditionallyguaranteedona joint andseveral basis byOpen Joint Stock
Company Oil Company Alliance (‘‘NK Alliance’’), Limited Liability Company ‘‘Alliance-Bunker’’ (‘‘Alliance-Bunker’’), Closed Joint-Stock Company
‘‘Alliancetransoil’’ (‘‘Alliancetransoil’’), Limited Liability Company ‘‘Khvoinoye’’ (‘‘Khvoinoye’’), Kolvinskoe Limited Liability Company (‘‘Kolvinskoe’’),
Closed Joint Stock Company SANECO (‘‘Saneco’’) and Open Joint Stock Company Eastern Transnational Company (‘‘VTK’’) (the ‘‘Fully Owned
Guarantors’’) and Closed Joint-Stock Company Alliance Oil (‘‘Alliance Oil’’), Public Joint Stock Company ‘‘AMURNEFTEPRODUCT’’
(‘‘Amurnefteproduct’’), OPEN Joint Stock Company ‘‘Khabarovsknefteproduct’’ (‘‘Khabarovsknefteproduct’’), Joint Stock Company ‘‘Pechoraneft’’
(‘‘Pechoraneft’’), ‘‘Potential Oil’’ Limited Liability Partnership (‘‘Potential Oil’’), Public Joint Stock Company ‘‘Primornefteprodukt’’ (‘‘Primornefteproduct’’)
and Public Joint Stock Company ‘‘Tatnefteotdacha’’ (‘‘Tatnefteotdacha’’) (the ‘‘Partly Owned Guarantors’’ and, together with the Fully Owned Guarantors,
the‘‘Guarantors’’).TheGuaranteeswillbeunsecuredandunsubordinateddebtobligationsoftheGuarantorsandwillrankequallyinrightofpaymentwith
allexistingandfutureunsecuredandunsubordinatedobligationsoftheGuarantors.
This document (the ‘‘Prospectus’’) has been submitted for approval to the Financial Services Authority in its capacity as competent authority under the
FinancialServices andMarketsAct 2000(‘‘FSMA’’) (the‘‘UK ListingAuthority’’) andascompetentauthorityunderDirective 2003/71/EC(the‘‘Prospectus
Directive’’). Application has been made to the UK Listing Authority for the Notes to be admitted to the official list of the UK Listing Authority (the
‘‘OfficialList’’)andtotheLondonStockExchangeplc(the‘‘StockExchange’’)fortheNotestobeadmittedtotradingontheStockExchange’sRegulated
Market(the‘‘RegulatedMarket’’).ReferenceintheProspectustotheNotesbeing‘‘listed’’(andallrelatedreferences)shallmeanthattheNoteshavebeen
admittedtotheOfficialListandadmittedtotradingontheRegulatedMarket.Thisdocumentconstitutesa‘‘Prospectus’’forthepurposesoftheProspectus
Directive and the Prospectus (Directive 2003/71/EC) Regulations 2005 (the ‘‘Prospectus Regulations’’). The Regulated Market is a regulated market for the
purposes of the Markets in Financial Instruments Directive 2004/39/EC. There is no assurance that a trading market in the Notes will develop or be
maintained.
ThisProspectuswillbefiledwiththeRegistrarofCompaniesinBermudapursuanttosection26(2)(b)oftheCompaniesAct1981ofBermuda.
TheNotes and Guaranteeshavenot been andwill not be registered underthe United States SecuritiesAct of1933 (the‘‘US Securities Act’’) or with any
securities regulatory authority of any State or other jurisdiction of the United States, and may not be offered or sold within the United States except
pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act. The Notes and Guarantees are
being offered and sold by BNP Paribas, Credit Suisse Securities (Europe) Limited and J.P. Morgan Securities Ltd. (the ‘‘Joint Lead Managers’’) and Joint
stock commercial bank – Bank of Moscow (open joint stock company) and VTB Capital plc (the ‘‘Co-Managers’’ and, together with the Joint Lead
Managers,the‘‘Managers’’)outsidetheUnitedStatesinaccordancewithRegulationSundertheUSSecuritiesAct(‘‘RegulationS’’)andwithintheUnited
States to qualified institutional buyers (‘‘QIBs’’) in reliance on Rule 144A under the US Securities Act (‘‘Rule 144A’’). Prospective purchasers are hereby
notifiedthatsellersoftheNotesmayberelyingontheexemptionfromtheprovisionsofSection5oftheUSSecuritiesActprovidedbyRule144A.Neitherthe
Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or
accuracyofthisProspectus.Anyrepresentationtothecontraryisacriminaloffence.TheNotesaresubjecttorestrictionsontransferabilityandresaleand
maynotbetransferredorresoldexceptaspermittedundertheUSSecuritiesActandapplicablestatesecuritieslawspursuanttoregistrationthereunderor
exemptiontherefrom.Foramorecompletedescriptionofrestrictionsonoffers,salesandtransfers,see‘‘SubscriptionandSale’’and‘‘TransferRestrictions’’.
TheNotesthatarebeingofferedandsoldinaccordancewithRegulationS(the‘‘RegulationSNotes’’)willinitiallyberepresentedbyaRegulationSglobal
note(the‘‘RegulationSGlobalNote’’)inregisteredform,withoutinterestcouponsattached,whichwillberegisteredinthenameofanomineeforandwill
bedepositedwithacommondepositaryforEuroclearBankS.A./N.V.(‘‘Euroclear’’)andClearstreamBanking,socie´te´anonyme(‘‘Clearstream,Luxembourg’’)
on or about 11 March 2010 (the ‘‘Closing Date’’). Notes which are offered and sold in reliance on Rule 144A will initially be represented by beneficial
interestsinarestrictedglobalnote(the‘‘Rule144AGlobalNote’’and,togetherwiththeRegulationSGlobalNotes,the‘‘GlobalNotes’’)inregisteredform,
withoutinterestcouponsattached,whichwillbedepositedonorabouttheClosingDatewithacustodianfor,andregisteredinthenameofCede&Co.as
nomineefor,TheDepositoryTrustCompany(‘‘DTC’’).BeneficialinterestsintheGlobalNoteswillbeshownon,andtransfersthereofwillbeeffectedonly
through,recordsmaintainedbyDTC,EuroclearandClearstream,Luxembourgandtheiraccountholders.Definitivenotesinrespectofbeneficialinterestsin
theRegulationSGlobalNoteandtheRule144AGlobalNote(‘‘RegulationSDefinitiveNotes’’and‘‘Rule144ADefinitiveNotes’’,respectively,andtogether,
the‘‘DefinitiveNotes’’)willnotbeissuedexceptasdescribedunder‘‘SummaryofProvisionsrelatingtotheNoteswhileinGlobalForm’’.
TheNotes are expected tobe rated‘‘B’’ byFitch Ratings(‘‘Fitch’’) and‘‘B+’’ byStandard& Poor’s (‘‘S&P’’). A ratingis notarecommendationto buy,
sellorholdsecuritiesandmaybesubjecttorevision,suspensionorwithdrawalatanytimebytheassigningratingorganisation.
Joint Lead Managers and Joint Bookrunners
BNP PARIBAS Credit Suisse J.P. Morgan
Co-Managers
Bank of Moscow VTB Capital
The date of this Prospectus is 9 March 2010
IMPORTANT INFORMATION
The Prospectus comprises a prospectus for the purposes of the Prospectus Directive and for the
purpose of giving information with regard to the Issuer and its consolidated subsidiaries and affiliates
taken as a whole (the ‘‘Group’’), the Guarantors, the Notes and the Guarantees, which, according to
the particular nature of the Issuer, the Group, the Guarantors and the Notes and the Guarantees, is
necessary to enable investors to make an informed assessment of the assets and liabilities, financial
position, profits and losses and prospects of the Issuer, the Group and the Guarantors, and the rights
attaching to the Notes and the Guarantees. The Issuer accepts responsibility for the information
contained in this Prospectus. To the best of the knowledge of the Issuer (which has taken all
reasonable care to ensure that such is the case), the information contained in this Prospectus is in
accordance with the facts and does not omit anything likely to affect the import of such information.
Each Guarantor accepts responsibility for the information contained in this Prospectus relating to
itself and to its Guarantee. To the best of the knowledge of each Guarantor (each of which has taken
all reasonable care to ensure that such is the case), the information contained in this Prospectus
relating to itself and its Guarantee is in accordance with the facts and does not omit anything likely
to affect the import of such information.
THE NOTES ARE OF A SPECIALIST NATURE AND SHOULD ONLY BE BOUGHT AND
TRADED BY INVESTORS WHO ARE PARTICULARLY KNOWLEDGEABLE IN INVESTMENT
MATTERS. AN INVESTMENT IN THE NOTES IS SPECULATIVE, INVOLVES A HIGH
DEGREE OF RISK AND MAY RESULT IN THE LOSS OF ALL OR PART OF THE
INVESTMENT.
No person has been authorised to give any information or to make any representation other than
those contained in this Prospectus and any information or representation not so contained must not
be relied upon as having been authorised by or on behalf of the Issuer, the Trustee or the Managers.
Neither the delivery of this Prospectus nor any sale made in connection herewith shall, under any
circumstances, create any implication that there has been no change in the affairs of the Issuer or the
Guarantors or the Group since the date hereof or that there has been no adverse change in the
financial position of the Issuer or the Guarantors or the Group since the date hereof or that the
information contained in it or any other information supplied in connection with the Notes and the
Guarantees is correct as of any time subsequent to the date on which it is supplied or, if different,
the date indicated in the document containing the same. Neither the Issuer nor any other person
assumes any obligation (and expressly declares that it has no such obligation) to update or change
any information contained in this Prospectus once there is no longer a requirement under the
Prospectus Directive for the Prospectus to be updated.
No representation, warranty or undertaking, express or implied, is made and no responsibility is
accepted by the Managers or the Trustee as to the accuracy or completeness of the information
contained in this Prospectus or any other information supplied in connection with the Notes and
Guarantees. Each person receiving this Prospectus acknowledges that such person has not relied on
any of the Managers or the Trustee in connection with its investigation of the accuracy of such
information or its investment decision and each person must rely on its own examination of the
Issuer and the merits and risks involved in investing in the Notes and Guarantees. None of the
Managers accepts any responsibility whatsoever for the contents of this Prospectus or for any other
statement made or purported to be made by it, or on its behalf, in connection with the Issuer, the
Guarantors, the Notes or the Guarantees. Each of the Managers accordingly disclaims all and any
liability whether arising in tort, contract or otherwise which it might otherwise have in respect of this
Prospectus or any such statement.
This Prospectus does not constitute an offer to sell or an invitation to subscribe for or purchase any
of the Notes in any jurisdiction in which such offer or invitation is not authorised or to any person
to whom it is unlawful to make such an offer or invitation. Laws in certain jurisdictions may restrict
the distribution of this Prospectus and the offer and sale of the Notes. Persons into whose possession
this Prospectus or any of the Notes are delivered must inform themselves about, and observe, any
such restrictions. Each prospective purchaser of the Notes must comply with all applicable laws and
regulations in force in any jurisdiction in which it purchases, offers or sells the Notes or possesses or
distributes this Prospectus. In addition, each prospective purchaser must obtain any consent, approval
or permission required under the regulations in force in any jurisdiction to which it is subject or in
which it purchases, offers or sells the Notes. The Issuer shall not have any responsibility for
obtaining such consent, approval or permission. This prospectus may not be used for, or in
(i)
c102132pu010Proof6:8.3.10B/LRevision:0OperatorDada
connection with, any offer to, or solicitation by, anyone in any jurisdiction or under any
circumstances in which such offer or solicitation is not authorised or is unlawful. For a description of
these further restrictions on offers and sales of the Notes and distribution of this Prospectus, see
‘‘Subscription and Sale’’ beginning on page 209.
No action is being taken to permit a public offering of the Notes or the distribution of this
Prospectus (in any form) in any jurisdiction where action would be required for such purposes.
The contents of this Prospectus should not be construed as legal, financial, business or tax advice.
Each prospective investor should consult his or her own legal adviser, financial adviser or tax adviser
for legal, financial or tax advice in relation to any purchase or proposed purchase of Notes.
Prospective purchasers should be aware that they might be required to bear the financial risks of an
investment in the Notes for an indefinite period of time.
In connection with the offering of the Notes, the Managers and any of their affiliates, acting as
investors for their own accounts, may purchase Notes and in that capacity may retain, purchase, sell,
offer to sell or otherwise deal for their own accounts in such Notes and other securities of the Issuer
or the Guarantors or related investments in connection with the offering of the Notes or otherwise.
Accordingly, references in this Prospectus to the Notes being issued, offered, acquired, placed or
otherwise dealt in should be read as including any issue or offer to, or acquisition, placing or dealing
by, the Managers and any of their affiliates acting as investors for their own accounts. The Managers
do not intend to disclose the extent of any such investment or transactions otherwise than in
accordance with any legal or regulatory obligations to do so.
Recipients of this Prospectus are authorised to use it solely for the purpose of considering an
investment in the Notes and may not reproduce or distribute this Prospectus, in whole or in part,
and may not disclose any of the contents of this Prospectus or use any information herein for any
purpose other than considering an investment in the Notes. In making an investment decision,
prospective investors must rely upon their own examination of the Issuer, the Group and the
Guarantors and the terms of this Prospectus, including the risks involved.
None of the Issuer, any Guarantor, the Managers nor the Trustee is making any representation to
any offeree or purchaser of the Notes regarding the legality of an investment by such offeree or
purchaser.
The Managers and their respective affiliates have performed and expect to perform in the future
various financial advisory, investment banking and commercial banking services for, and may arrange
loans and other non public market financing for, and enter into derivative transactions with, the
Issuer and its affiliates (including its shareholders and the Guarantors).
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER RSA 421-B WITH THE STATE OF NEW HAMPSHIRE
NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS
LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE
SECRETARY OF STATE OF THE STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT
FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY
SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR
A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS
PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR
RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR
TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY
PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT, ANY REPRESENTATION
INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
INTERNAL REVENUE SERVICE CIRCULAR 230 DISCLOSURE
PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, THE GROUP HEREBY
INFORMS YOU THAT THE DESCRIPTION SET FORTH HEREIN WITH RESPECT TO US
FEDERAL TAX ISSUES WAS NOT INTENDED OR WRITTEN TO BE USED, AND SUCH
(ii)
c102132pu010Proof6:8.3.10B/LRevision:0OperatorDada
DESCRIPTION CANNOT BE USED, BY ANY TAXPAYER FOR THE PURPOSE OF
AVOIDING ANY PENALTIES THAT MAY BE IMPOSED ON THE TAXPAYER UNDER THE
US INTERNAL REVENUE CODE. SUCH DESCRIPTION WAS WRITTEN TO SUPPORT THE
MARKETING OF THE NOTES. TAXPAYERS SHOULD SEEK ADVICE BASED ON THE
TAXPAYER’S PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.
STABILISATION
In connection with the issue of the Notes, Credit Suisse Securities (Europe) Limited (the ‘‘Stabilising
Manager’’) (or persons acting on behalf of the Stabilising Manager) may over-allot Notes or effect
transactions with a view to supporting the market price of the Notes at a level higher than that
which might otherwise prevail. However, there is no assurance that the Stabilising Manager (or
persons acting on behalf of the Stabilising Manager) will undertake stabilisation action. Any
stabilisation action may begin on or after the date on which adequate public disclosure of the terms
of the offer of the Notes is made and, if begun, may be ended at any time, but it must end no later
than the earlier of 30 days after the issue date of the Notes and 60 days after the date of the
allotment of the Notes. Any stabilisation action or over-allotment must be conducted in accordance
with all applicable laws and rules.
(iii)
c102132pu010Proof6:8.3.10B/LRevision:0OperatorDada
ADDITIONAL INFORMATION
The Issuer and Guarantors have agreed that, so long as any Notes are ‘‘restricted securities’’ within
the meaning of Rule 144(a)(3) of the US Securities Act, the Issuer and Guarantors will, during any
period in which it is neither subject to Section 13 or 15(d) of the US Securities Exchange Act of
1934, as amended (the ‘‘US Exchange Act’’) nor exempt from reporting thereunder pursuant to Rule
12g3-2(b) under the US Exchange Act, provide to any holder or beneficial owner of any such
‘‘restricted security’’, or to any prospective purchaser of such restricted security designated by such
holder or beneficial owner, the information specified in, and meeting the requirements of, Rule
144A(d)(4) of the US Securities Act upon the request of such holder or beneficial owner.
This Prospectus is being furnished by the Issuer in connection with an offering exempt from the
registration requirements of the US Securities Act solely for the purpose of enabling a prospective
investor to consider the acquisition of Notes described herein. The information contained in this
Prospectus has been provided by the Issuer and other sources identified herein. This Prospectus is
being furnished on a confidential basis to QIBs in the United States. Any reproduction or distribution
of this Prospectus, in whole or in part, in the United States and any disclosure of its contents or use
of any information herein in the United States for any purpose, other than considering an investment
by the recipient in the Notes offered hereby, is prohibited. Each potential investor in the Notes, by
accepting delivery of this Prospectus, agrees to the foregoing.
(iv)
c102132pu010Proof6:8.3.10B/LRevision:0OperatorDada
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
Financial Information
The Group emerged in its current form in April 2008 as a result of a merger between West Siberian
Resources Ltd. (‘‘WSR’’) and NK Alliance (the ‘‘Merger’’). Following completion of the Merger, the
Group’s financial statements have been prepared using the accounting model prescribed by IFRS 3
‘‘Business Combinations’’ for ‘‘reverse takeovers’’ that requires NK Alliance to be treated as the
accounting acquirer for the consolidated financial information and WSR being presented as the
acquiree. Accordingly, WSR’s and NK Alliance’s operations and results are presented separately for
periods from 1 January 2006 to 31 December 2007. From 1 January 2008 to 9 April 2008, the
operations and results of the Group reflect the operations and results of NK Alliance only. From 10
April 2008, the operations and results of the Group reflect the combined operations of WSR and NK
Alliance. The Group has a very limited history of operating as a consolidated business. The manner
in which the information is reported in the audited financial statements for the year ended
31 December 2008 may not necessarily correspond exactly to the manner in which the information is
presented in the audited financial statements for NK Alliance and WSR. See ‘‘Risk Factors—The
Group has recently emerged in its current form as a result of a merger and, therefore, has only a limited
history of operating as a consolidated business’’.
The financial information set forth herein has, unless otherwise indicated, been derived from the
Group’s unaudited interim condensed consolidated financial statements as at and for the nine months
ended 30 September 2008 and 2009 (the ‘‘Unaudited Interim Financial Information’’), as set forth on
pages F-2 through F-14 of this Prospectus, the Group’s audited consolidated financial statements as
at and for the year ended 31 December 2008 (the ‘‘Group Audited Annual IFRS Financial
Statements’’), as set forth on pages F-15 through F-62 of this Prospectus, NK Alliance’s audited
consolidated financial statements as at and for the year ended 31 December 2007, as set forth on
pages F-63 through F-122 of this Prospectus, NK Alliance’s audited consolidated financial statements
as at and for the year ended 31 December 2006, a copy of which may be found at
www.allianceoilco.com (the ‘‘NK Alliance Audited Annual IFRS Financial Statements’’), WSR’s audited
consolidated financial statements as at and for the year ended 31 December 2007, as set forth on
pages F-123 through F-159 of this Prospectus and WSR’s audited consolidated financial statements as
at and for the year ended 31 December 2006, a copy of which may be found at
www.allianceoilco.com (the ‘‘WSR Audited Annual IFRS Financial Statements’’ and together with the
Unaudited Interim Financial Information, the Group Audited Annual IFRS Financial Statements, the
NK Alliance Audited Annual IFRS Financial Statements and the WSR Audited Annual IFRS
Financial Statements, the ‘‘Financial Statements’’), all prepared in accordance with International
Financial Reporting Standards (‘‘IFRS’’) issued by the International Accounting Standards Board (the
‘‘IASB’’). The U.S. dollar is the reporting currency for the Financial Statements.
The Group Audited Annual IFRS Financial Statements and the WSR Audited Annual IFRS
Financial Statements included in this Prospectus and at www.allianceoilco.com have been audited by
PricewaterhouseCoopers AB (‘‘PwC’’), independent auditors, as stated in their reports appearing
herein, which reports express an unqualified opinion on the financial statements. The address of PwC
is SE-405 32, Go¨teborg, Sweden (visiting address: Lilla Bommen 2, Go¨teborg, Sweden).
The NK Alliance Audited Annual IFRS Financial Statements included in this Prospectus and at
www.allianceoilco.com have been audited by ZAO Deloitte & Touche CIS (‘‘Deloitte & Touche’’),
independent auditors, as stated in their report appearing herein, which report expresses an unqualified
opinion on the financial statements. The address of Deloitte & Touche is Lesnaya street, 5, Moscow
125047, Russian Federation. Deloitte & Touche is a member of the non-commercial partnership,
‘‘Audit Chamber of Russia’’ (certificate no. 3026 dated 10 May 2009).
Presentation of Non-IFRS Financial Information
As presented in this document, ‘‘EBITDA’’ means earnings before interest, taxation, depletion,
depreciation, and amortization. Also, when applicable, ‘‘EBITDA’’ is further adjusted and presented
in this Prospectus after excluding the following income statement items: impairment of goodwill,
impairment of property, plant and equipment, impairment of oil and gas properties, gain/(loss) on
disposal of shares in subsidiaries and other adjusting items which do not occur on an annual basis
(‘‘Adjusted EBITDA’’). The Group EBITDA and Adjusted EBITDA are supplemental measures of the
Group’s performance and liquidity that are not required by or presented in accordance with IFRS.
Furthermore, EBITDA and Adjusted EBITDA should not be considered as an alternative to income
(v)
c102132pu010Proof6:8.3.10B/LRevision:0OperatorDada
after taxes, income before taxes or any other performance measures derived in accordance with IFRS
or as an alternative to cash flow from operating activities as a measure of the Group’s liquidity or as
a measure of cash available to the Group to invest in the growth of its business.
The Group presents EBITDA and Adjusted EBITDA because the Group believes it is frequently used
by securities analysts, investors and other interested parties in evaluating similar issuers, most of
which present EBITDA when reporting their results. The Group also presents EBITDA and Adjusted
EBITDA as a supplemental measure of the Group’s ability to service its indebtedness. Nevertheless,
both EBITDA and Adjusted EBITDA have limitations as an analytical tool and should not be
considered in isolation from, or as a substitute for, analysis of the Group’s results of operations. As a
measure of performance, both EBITDA and Adjusted EBITDA presents some limitations for the
following reasons:
(a) they do not reflect the Group’s cash expenditures or future requirements for capital expenditures
or contractual commitments;
(b) they do not reflect changes in, or cash requirements for, the Group’s working capital needs;
(c) they do not reflect the significant interest expense, or the cash requirements necessary to service
interest or principal payments, on the Group’s debt;
(d) although depreciation, depletion and amortization are non-cash charges, the assets being
depreciated, depleted and amortized will often have to be replaced in the future and neither
EBITDA or Adjusted EBITDA reflects any cash requirements for such replacements;
(e) they do not reflect foreign exchange gains or losses; and
(f) other companies in the Group’s industry may calculate these measures differently from the way
in which the Group does, limiting its usefulness as comparative measures.
Rounding adjustments have been made in calculating some of the financial information included in
this document. As a result, financial information set forth herein may not be exact arithmetic
aggregations of the figures that precede them.
Market Data
Market data used in this Prospectus, including statistics in respect of the Russian oil and gas industry
have been extracted from sources which the Issuer believes to be reliable, including Platts, BP
Statistical Reviews of World Energy and other publicly available information. Such information, data
and statistics may be approximations or estimates or use rounded numbers. The Issuer has relied on
the accuracy of this information without independent verification and only accepts responsibility for
accurately reproducing such information. So far as the Issuer is able to ascertain from this publicly
available information, no facts have been omitted which would render the reproduced information
misleading or inaccurate.
In addition, some of the information contained in this Prospectus has been derived from the official
data of Russian Government agencies including the Central Bank of Russia (the ‘‘CBR’’), the
Ministry of Energy of the Russian Federation (the ‘‘Ministry of Energy’’) and the Federal State
Statistics Service of the Russian Federation (the ‘‘FSSS’’). The official data published by Russian
federal, regional and local governments is substantially less complete or researched than those of
Western countries. Official statistics may also be produced on different bases than those used in
Western countries. Any discussion of matters relating to Russia in this Prospectus is, therefore,
subject to uncertainty due to concerns about the completeness or reliability of available official and
public information. The veracity of some official data released by the Russian Government may be
questionable. The Issuer only accepts responsibility for accurately reproducing such information. So
far as the Issuer is able to ascertain from this publicly available information, no facts have been
omitted which would render the reproduced information misleading or inaccurate.
Urals Crude Oil Prices
Where a single average price of Urals crude oil is presented, it is referencing the average price
between Urals Crude (CIF Mediterranean) and Urals Crude (CIF Rotterdam) according to Platts.
(vi)
c102132pu010Proof6:8.3.10B/LRevision:0OperatorDada
ENFORCEABILITY OF JUDGMENTS
The Issuer is a limited liability company incorporated under the laws of Bermuda. With the exception
of LLP Potential Oil, each of the Guarantors are organised under the laws of the Russian
Federation, and most of the Guarantors and the Issuer’s directors and executive officers reside in
Russia. Most of the assets of the Group and of such persons are located outside of the United States
and the United Kingdom. Each of the Issuer and the Guarantors have appointed an agent for service
of process in England; however, it may not be possible for investors to effect service of process
within the United States or the United Kingdom on the directors and executive officers of the Issuer
or any of the Guarantors or enforce judgments against such persons or the Issuer or the Guarantors.
Judgments rendered by a court in any jurisdiction outside the Russian Federation will be recognized
by courts in Russia only if an international treaty providing for the recognition and enforcement of
judgments in civil cases exists between the Russian Federation and the country where the judgment is
rendered. No such treaty exists between the United States or the United Kingdom and the Russian
Federation for reciprocal enforcement of foreign court judgments. However, the Issuer is aware of at
least one instance in which Russian courts have recognized and enforced an English court judgment.
The basis for this was a combination of the principle of reciprocity and the existence of a number of
bilateral and multilateral treaties to which both the United Kingdom and the Russian Federation are
parties. The courts decided that such treaties constituted grounds for the recognition and enforcement
of the relevant English court judgment in Russia. In the absence of established court practice,
however, it is difficult to predict whether a Russian court will be inclined in any particular instance to
recognise and enforce an English court judgment on these grounds. Consequently, it may be
impossible to enforce judgments of U.S. courts or English courts against the Guarantors and their
officers or directors in the courts of the Russian Federation, including judgments predicated upon the
civil liability provisions of U.S. federal securities laws or any state or territory within the United
States or English law, when they are brought in original actions or in actions to enforce judgments of
U.S. courts or English courts, without re-examination of the issues in the Russian Federation.
Moreover, a court of the Russian Federation may refuse or limit enforcement of a foreign judgment,
inter alia, on public policy grounds (see ‘‘Risk Factors—Risks Relating to the Russian Federation’’).
The Notes and the Guarantees will be governed by English law and will provide the option for
disputes, controversies and causes of action brought by parties thereto against us to be settled by
arbitration in accordance with the London Court of International Arbitration (the ‘‘LCIA’’) Rules.
The Russian Federation is a party to the United Nations (New York) Convention on the Recognition
and Enforcement of Foreign Arbitral Awards (the ‘‘New York Convention’’). Consequently, an arbitral
award from an arbitral tribunal in the United Kingdom and United States would generally be
recognized and enforced in the Russian Federation on the basis of the rules of the New York
Convention. However, it may be difficult to enforce arbitral awards in the Russian Federation due to:
* the limited experience of the Russian courts in international commercial transactions;
* official and unofficial political resistance to the enforcement of awards against Russian
companies in favour of foreign investors; and
* corruption and/or the difficulties of existing mechanisms for enforcement of such awards in the
Russian Federation.
In addition, any arbitral award may be limited, in particular, by mandatory provisions of Russian
laws relating to the exclusive jurisdiction of Russian courts and the application of Russian laws with
respect to bankruptcy, winding up or liquidation of Russian companies. The Arbitrazh Procedure
Code of the Russian Federation also contains an exhaustive list of grounds for the refusal of
recognition and enforcement of foreign arbitral awards by Russian courts, including, but not limited
to, public policy, which such grounds are substantially similar to those provided by the New York
Convention. The Arbitrazh Procedure Code and other Russian procedural laws could change, and
other grounds for Russian courts to refuse recognition and enforcement of foreign arbitral awards
could arise.
Under current Russian law, state duty may be payable upon the initiation of any action or
proceeding (including any proceeding for enforcement) arising out of the Notes or the Guarantees in
any court of the Russian Federation.
An award in arbitration proceedings in the United Kingdom or United States conducted in
accordance with English law granted against the Issuer based on the Notes would be enforceable in
Bermuda under the Bermuda International Conciliation and Arbitration Act 1993 (which incorporates
(vii)
c102132pu010Proof6:8.3.10B/LRevision:0OperatorDada
the New York Convention) either by action or by leave of the Supreme Court or a judge thereof, in
the same manner as a judgment or order to the same effect, and where leave is so given, judgment
may be entered in the terms of the award. Enforcement of an award may be refused if the person
against whom it is invoked proves:
(a) that a party to the arbitration agreement was (under the law applicable to him) under some
incapacity; or
(b) that the arbitration agreement was not valid under the law to which the parties subjected it or,
failing any indication thereof, under the law of the country where the award was made; or
(c) that he was not given proper notice of the appointment of the arbitrator or of the arbitration
proceedings or was otherwise unable to present his case; or
(d) that the award deals with a difference not contemplated by or not falling within the terms of
the submission to arbitration or contains decisions on matters beyond the scope of the
submission to arbitration; or
(e) that the composition of the arbitral authority or the arbitral procedure was not in accordance
with the agreement of the parties or, failing such agreement, with the law of the country where
the arbitration took place; or
(f) that the award has not yet become binding on the parties, or has been set aside or suspended
by a competent authority of the country in which, or under the law of which, it was made.
Enforcement may also be refused if the award is in respect of a matter which is not capable of
settlement by arbitration, or if it would be contrary to public policy to enforce the award.
The Judgments (Reciprocal Enforcement) Act 1958 of Bermuda applies to a final and conclusive
judgment of the superior courts of the United Kingdom under which a sum of money is payable (not
being in respect of multiple damages, or a fine, penalty, tax or other charge of similar nature). Where
that Act applies, enforcement of such judgment in Bermuda must proceed under that Act, and the
judgment must be registered as if it were expressed in Bermuda currency at the rate of exchange
prevailing on the date of the judgment. With respect to any other proceedings, the Bermuda court
may make an award in any currency and has the discretion to give an award in the currency in
which the claim is expressed.
Courts in Kazakhstan will not enforce any judgment obtained in a court established in a country
other than Kazakhstan unless there is in effect a treaty between such country and Kazakhstan
providing for reciprocal enforcement of judgments and then only in accordance with the terms of
such treaty. There is no such treaty in effect between Kazakhstan and England. However, each of
Kazakhstan and England is a party to the New York Convention, and English arbitral awards are
generally recognized and enforceable in Kazakhstan provided the conditions to enforcement set out in
the New York Convention are met. A new Law on International Commercial Arbitration was
adopted by the Kazakhstan Parliament effective 28 December 2004. This law is intended to resolve
uncertainty created by prior decisions of the Constitutional Council of Kazakhstan regarding
enforcement of the New York Convention in Kazakhstan and which were effective 15 February 2002
and 12 April 2002 by providing clear statutory guidelines for the enforcement of arbitral awards
under the conditions set forth in the New York Convention.
(viii)
c102132pu010Proof6:8.3.10B/LRevision:0OperatorDada