BP PLC BP. BP AGREEMENT WITH ROSNEFT RE TNK-BP

  BP PLC (BP.) - BP AGREEMENT WITH ROSNEFT RE TNK-BP

RNS Number : 2121P
BP PLC
22 October 2012




press release 





22 October, 2012





                     BP AGREES HEADS OF TERMS TO SELL ITS

                        TNK-BP SHAREHOLDING TO ROSNEFT

                                      

· Payment by  Rosneft to  be a  mix of $17.1  billion in  cash, and  shares 
representing 12.84 per cent of Rosneft

· BP intends to use  $4.8 billion of the  cash consideration to purchase  a 
further 5.66 per cent of Rosneft from the Russian government

· On completion of the proposed  transaction, BP expects to hold 19.75  per 
cent of Rosneft shares, including BP's existing holding of 1.25 per cent,  and 
to have received $12.3 billion in cash





BP today announced that it has signed heads  of terms to sell its 50 per  cent 
share in TNK-BP to Rosneft, the major Russian integrated oil and gas  company. 
Under the heads of terms Rosneft has agreed in principle to buy BP's share  in 
TNK-BP.



The proposed transaction consists of two tranches:



(i) BP would sell its 50 per cent shareholding in TNK-BP to Rosneft for  $17.1 
billion in cash  and Rosneft  shares representing a  12.84 per  cent stake  in 
Rosneft;



(ii) BP intends to  use $4.8 billion  of the cash  consideration to acquire  a 
further 5.66 per cent stake in  Rosneft from the Russian government. BP  would 
acquire the Rosneft shares from  the Russian Government at  a price of $8  per 
share (representing a  premium of  12 per cent  to the  Rosneft share  closing 
price on the bid date: 18 October 2012).



Signing of the definitive agreements is conditional on the Russian  government 
agreeing to the sale of the 5.66 per cent stake in Rosneft and it is  intended 
that the TNK-BP sale and this further investment in Rosneft would complete  on 
the same day. Therefore, on completion  of the proposed transaction, BP  would 
acquire a total 18.5 per cent stake in Rosneft and net $12.3 billion in  cash. 
This would  result  in  BP holding  19.75  per  cent of  Rosneft  stock,  when 
aggregated with BP's 1.25 per cent  current holding in Rosneft. At this  level 
of ownership, BP  expects to be  able to  account for its  share of  Rosneft's 
earnings, production and reserves on an  equity basis. In addition BP  expects 
to have two seats on Rosneft's nine person main board.



In accordance with  the heads  of terms, BP  and Rosneft  have an  exclusivity 
period of  90 days  to negotiate  fully-termed sale  and purchase  agreements. 
After signing definitive  agreements, completion would  be subject to  certain 
customary  closing   conditions,   including  governmental,   regulatory   and 
anti-trust approvals, and is currently  anticipated to occur during the  first 
half of 2013. In addition, BP will agree not to dispose of any of the  Rosneft 
shares acquired  in  the transaction  for  at  least 360  days  following  the 
completion of the transaction.



BP's chairman Carl-Henric  Svanberg said: "This  is an important  day for  BP. 
Russia is vital to world energy security and will be increasingly  significant 
in years to come. Russia  has also been an important  country for us over  the 
past 20 years. Our  involvement has moved  with the times.  TNK-BP has been  a 
good investment and we are now laying a new foundation for our work in Russia.



"Rosneft is set to be a major player in the global oil industry. This material
holding in Rosneft will, we believe,  give BP solid returns. We consider  that 
this is a deal which will deliver both cash and long term value for BP and its
shareholders. It  provides us  with  a sustainable  stake in  Russia's  energy 
future and is consistent with our Group strategy.



"Over the coming months we will work  hard to complete the transaction and  we 
look forward to  the next step  of deepening our  already strong  relationship 
with Russia."



BP's group chief executive  Bob Dudley said: "This  investment builds on  BP's 
track record of value creation in  Russia. It is consistent with our  strategy 
of deepening our positions in the world's most prolific oil and gas regions.



"BP intends to  be a long  term investor in  Rosneft - an  investment which  I 
believe will  deliver value  for our  shareholders over  the next  decade  and 
beyond.



"Rosneft is a company working to become  a global leader in the sector. It  is 
developing its substantial asset base with new technologies and improving  its 
management processes and corporate  governance. As a  major investor BP  looks 
forward to being able to contribute to Rosneft's success and add value through
our participation on the Board. In  this regard BP is supportive of  Rosneft's 
intention to pursue further equity in TNK-BP in due course."



BP intends to retain the shares  resulting from the proposed transaction,  and 
will evaluate  how  the  cash  proceeds  will  be  utilised.At  minimum  BP's 
intention is to offset any dilution to  earnings per share as a result of  the 
sale of  its interest  in TNK-BP  as  well as  continue with  its  progressive 
dividend policy.



BP supports Rosneft  in its  plans to  acquire additional  equity stakes  from 
other shareholders in TNK-BP.



This proposed  transaction would  constitute a  Class 2  transaction under  UK 
Listing Rules.



Morgan Stanley & Co. Ltd.  is acting as principal  financial advisor to BP  on 
the proposed transaction. UBS Investment  Bank is acting as financial  advisor 
and corporate  broker  to  BP. Goldman  Sachs  International,  Lambert  Energy 
Advisory Ltd.  and  Renaissance Capital  have  also each  acted  as  financial 
advisors. Credit  Suisse  Securities (Europe)  Ltd.  has provided  a  fairness 
opinion to BP's Board on the  proposed transaction. Linklaters LLP are  acting 
as principal legal advisors on the proposed transaction.



















Notes to editors:



· The proposed sale  of the TNK-BP shareholding  to Rosneft consists of  a 
cash element  of $17.1  billion and  1,360,449,797 Rosneft  shares. Shares  in 
Rosneft traded at  close of  business on  the bid  date (18  October 2012)  at 
$7.13.

· TNK-BP is a vertically integrated Russian oil company with a diversified
upstream and downstream portfolio  in Russia and  Ukraine. TNK-BP is  Russia's 
third largest oil producer, employs c.50,000 people and operates in nearly all
of Russia's major hydrocarbon regions, including: West Siberia (in the Tyumen,
Khanty-Mansiysk, Yamal-Nenetsk and Novosibirsk  Regions), the Volga-Urals  (in 
the Orenburg and Saratov  Regions) and East Siberia  (in the Irkutsk  Region). 
Average daily production of  TNK-BP in 2011 was  1.987 million barrels of  oil 
equivalent a day (boe/d), including the interest in Slavneft.

· TNK-BP is accounted for in BP's consolidated financial statements  using 
the equity  method of  accounting  for investments  in associates.  The  value 
attributed to TNK-BP in BP's consolidated balance sheet as at 30 June 2012 was
$10,715 million and BP's share  of net income for  the year ended 31  December 
2011 was $4.1 billion.

· In  2011 Rosneft,  a  fully integrated  national  oil and  gas  company, 
produced 2.45 million barrels a day of oil,  up 52 per cent since 2006. As  at 
the end of 2011, Rosneft's proved developed reserves stood at 9.96 billion boe
with proved undeveloped reserves of 8.39 billion boe.

· Rosneft's proved oil reserve replacement ratio was 127 per cent in 2011.
It has  begun a  programme  to develop  its  substantial tight  oil  reserves, 
recently estimated at 5.8 billion barrels.

· Last  year  Rosneft's  net  income  totalled  $10.8  billion.  Rosneft's 
dividend for 2011 was 25 per cent of IFRS net income.

· BP  has a  long relationship  with Rosneft  including an  alliance  that 
started in 1998 to  explore the Russian  continental shelf offshore  Sakhalin. 
Rosneft and BP are 50/50 owners of  the 530,000 barrels a day German  refining 
joint venture Ruhr Oel GmbH.

· Today's announcement marks  a further stage in  a process that began  in 
June when BP announced its intention to  sell its share in TNK-BP. Since  then 
BP held detailed negotiations with Rosneft and Alfa Access Renova.



Cautionary note  to US  investors -  Certain estimates  of Rosneft's  reserves 
included in  this  announcement are  not  calculated in  accordance  with  SEC 
guidelines.



Cautionary Statement

This release contains certain forward-looking statements, including statements
regarding the expected timing of the transaction described, the expected terms
of  and  timing  of  the  execution  of  definitive  agreements,  expectations 
regarding the  accounting  treatment  of  BP's  expected  share  of  Rosneft's 
earnings, production and reserves, prospects for BP's level of  representation 
on Rosneft's board of directors, Rosneft's prospects in the Russian and global
markets, expectations regarding  the returns  on BP's  anticipated holding  in 
Rosneft, including expected cash returns  and the expected long-term value  of 
such holding,  BP's  intentions  to  contribute  to  Rosneft's  success,  BP's 
intentions to retain Rosneft  shares received in the  transaction and to be  a 
long-term investor  in Rosneft,  BP's  intentions to  offset any  dilution  to 
earnings per share as a result of the transaction, expectations regarding BP's
future dividend  policy and  other  statements which  are generally,  but  not 
always, identified  by  the  use  of words  such  as  'want',  'intended  to', 
'expected to',  and similar  expressions. Forward-looking  statements  involve 
risks and uncertainties because they depend on circumstances that will or  may 
occur in the future. Actual results may differ materially from those expressed
in such statements, depending on a  variety of factors, including the  ability 
of the  parties  to  the  transaction  to  negotiate  satisfactory  definitive 
agreements and the terms thereof, the actions of regulators and the timing  of 
the receipt  of governmental  and regulatory  approvals, the  availability  of 
other attractive investment opportunities, the  timing of bringing new  fields 
onstream, future levels of industry  product supply, demand and pricing,  OPEC 
quota  restrictions,  operational   problems,  general  economic   conditions, 
political stability  and  economic growth  in  relevant areas  of  the  world, 
changes in  laws and  governmental regulations,  regulatory or  legal  actions 
including the types of enforcement action  pursued and the nature of  remedies 
sought, exchange rate fluctuations, development and use of new technology, the
success or  otherwise  of  partnering, the  actions  of  competitors,  trading 
partners, creditors, rating agencies and others, natural disasters and adverse
weather conditions,  changes  in  public expectations  and  other  changes  to 
business conditions, wars and acts of terrorism or sabotage, and other factors
discussed in the "Cautionary  Statement" in BP's Annual  Report and Form  20-F 
2011 (SEC File  No. 1-06262) as  filed with the  United States Securities  and 
Exchange Commission.





Further information:



BP press office London: +44 (0)20 7496 4076, bppress@bp.com



                                   - ENDS -

                     This information is provided by RNS
           The company news service from the London Stock Exchange

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MSCUURARUOARUAA -0- Oct/22/2012 11:05 GMT
 
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