By Patrick Corby
BP is to end it’s lucrative joint venture with Russia in THK-BP selling Rosneft, a Russian oil company, it’s 50% stake of THK-BP in return for cash and shares.
Although a highly profitable business for the company THK-BP has dragged on BP’s share price with constant conflicts with partners, a group of Soviet born billionaires known as Alpha-Access Renova (AAR).
By selling it’s 50% stake in THK-BP the British multinational will receive an estimated $11-$13 billion and a 19% stake in Rosneft (12.5% of shares) worth about $14 billion. Leaving BP as the second largest shareholder in the company after the Russian state.
Shareholders are concerned that BP may be worsening the problem by backing away from THK-BP’s AAR and into Rosneft’s Igor Sechin, the overshadow of the state dominated company. Now the largest nationalisation post-Soviet Union.
BP has owned 1.4% of Rosneft since 2006 constituting one seat and this is likely to change with the 17.6% increase to two seats. BP wins out in the sense that will align itself with the Kremlin as a favoured partner in exploration.
AAR have also been looking to sell off their 50% stake in THK-BP in an independent deal with Rosneft estimated at $28 billion as they are reluctant to stay in the partnership with the state.
With THK-BP the Rosneft company will now own the largest reserves in the world and be pumping more oil and gas than Exxon Mobil – rivalling the US controlled industry. While also keeping BP’s technical expertise and international scope within Russia.
BP is said to be looking to buy back $4 billion of it’s own shares from the proceeds of the deal with Rosneft in a bid to reward shareholders for their holding after the Mexico Gulf disaster in April 2010 restoring the share price which is still 1/3 below pre-disaster levels. If so then this would occur after the Gulf settlement is wrapped up in 2013.