Russian oil explorer Ruspetro will bank around $250 million (162 million pounds) from its London listing, two sources familiar with the situation said on Wednesday, defying choppy market conditions that have put paid to any sizeable flotations in Europe since the summer.
Deepening concern over the euro zone in the past six months has sent investors running for cover and forced most companies to put on ice their plans for initial public offerings (IPOs) -- considered the riskier end of the share sale spectrum.
Ruspetro, which is London's first main market IPO since Ophir Energy
The company, which had hoped to raise $250-$350 million from the IPO according to a presentation document seen by Reuters, priced its offering of all new shares at 134 pence, the sources said, valuing the company at around $700 million.
Ruspetro, which has oil assets in Western Siberia, had already lined up enough indicative orders to cover the book at this price before launching the offer, a source close to the deal said.
What this shows is that there is still an appetite for issues if the valuation is low enough or if the opportunity is unique or specialist, said Chris Weafer, chief Russia strategist at investment bank Troika Dialog.
Market conditions for big IPOs remain very difficult. They will still have to wait until the second half of 2012 or accept a low valuation, he added.
Troika estimates that some $50 billion worth of potential Russian IPOs are waiting on the sidelines for conditions to improve. Private Russian companies raised $4.5 billion in 2011 IPOs, mostly in London, and $5.5 billion the year before.
The float will be the first by a Russian company since fertiliser producer Phosagro
There will be an over-allotment option worth $25 million or 10 percent of the total raised, according to the sources.
A spokesman for Ruspetro declined to comment.
Ruspetro will use the proceeds of the float to develop existing operations and pay down pre-IPO debt of $444 million, according to a presentation seen by Reuters.
The company is 29 percent owned by management including Executive Director Alexander Chistyakov, a former director of several state utility firms.
Some 48 percent is controlled by a vehicle called Limolines -- itself 50 percent owned by Andrey Likhachev, chairman of tycoon Oleg Deripaska's power unit EuroSibEnergo, and 50 percent by investment fund Altera Capital.
Altera is run by Kirill Androsov, a former deputy economy minister who went on to serve as deputy chief of staff to Prime Minister Vladimir Putin from 2008-2010.
Ruspetro chief executive Donald Wolcott is a former director of Yukos, once Russia's largest oil company, which was forced into bankruptcy by back-tax claims and whose assets were largely nationalised.
Bank of America Merrill Lynch is sole global co-ordinator on the offering, with Mirabaud Securities and Renaissance Capital acting as bookrunners.
(Additional reporting by John Bowker and Olga Popova in Moscow and Kylie MacLellan in London, Writing by John Bowker, Editing by Douglas Busvine and Jodie Ginsberg)