BP To Offload Most Of TNK-BP

Zacks Investment Research

Top BP Plc (NYSE:BP) officials have given the idea that the company is about to offload a major portion of its stake in its Russian joint venture, TNK-BP, to the country’s state-operated oil company, Rosneft.

The deal looks to be a desperate attempt by BP to save its $16 billion share-swap deal with Rosneft. However, BP did not comment on the news or deny it.

BP officials said that shareholders of its Russian partner, TNK-BP, will soon be intimated about the company’s 50% stake divestiture in TNK-BP joint venture through a formal letter.

For BP’s Russian shareholders, this sell-off would hold negative insinuations as it would empower the company’s major regional competitor, Rosneft, with the capacity to hold or alter appointments and crucial decisions in TNK-BP. On the other hand, it could inspire cooperation from Rosneft for other deals with BP.

Russia’s AlfaAccessRenova (AAR) consortium, representing four Russian billionaire shareholders in Russian-British joint oil venture TNK-BP, had earlier charged BP of keeping it in the dark about the share-swap deal and violating their joint venture shareholder agreement, blocking the agreement through court injunction.

Under the present TNK-BP shareholder agreement, any official notification from BP for the stake sale will set off a 75-day period, within which AAR will be allowed to make any counter offer. If AAR wishes to make any offer, it would have 90 more days during which the British company will be required to carry out negotiations to sell to AAR.

However, BP will be able to divest its stake to Rosneft even if AAR makes a better offer. Meanwhile, AAR insisted on making a counter offer, and wants to take on a legal act to resist BP’s move.

There are many speculations regarding the possible consequences of the agreement. Hence, it remains to be seen whether both companies will negotiate terms to ensure completion of the deal.

BP, along with its competitors, ExxonMobil Corp. (NYSE:XOM) and Chevron Corp. (NYSE:CVX), currently retain a Zacks #3 Rank, which translates into a short-term Hold rating. For the longer term, we maintain our Neutral recommendation.

 
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