BP PLC (BP.) - BP AGREEMENT WITH ROSNEFT RE TNK-BP
RNS Number : 2121P
22 October 2012
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
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
(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
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
"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
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
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
· 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
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
BP press office London: +44 (0)20 7496 4076, email@example.com
- ENDS -
This information is provided by RNS
The company news service from the London Stock Exchange
MSCUURARUOARUAA -0- Oct/22/2012 11:05 GMT
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