BP Rises on Report Rosneft to Buy Billionaires’ TNK-BP Stake

BP Plc (BP/) rose the most in more than four months in London trading after a report that OAO Rosneft has agreed to buy half of the TNK-BP Russian venture.

BP gained as much as 4.3 percent, the most since June 1, and traded up 4 percent at 452.70 pence as of 12:08 p.m. local time. Sky reported that AAR, which represents BP’s billionaire parters in TNK-BP, and state-backed Rosneft agreed to a $28 billion deal in Moscow yesterday for AAR’s half of the venture. BP had sought bids for its own half of Russia’s third-largest oil producer after relations broke down with the billionaires.

The possible sale of AAR’s half to Rosneft may throw into doubt BP’s attempts to dispose of its share of the Russian venture that accounts for a quarter of the company’s global output. BP Chief Executive Officer Bob Dudley, a former head of TNK-BP, has said he’s still committed to Russia as he revamps the company’s business after the 2010 Gulf of Mexico oil spill.

“It’s better for BP to swim with the big fish in Russia,” said Iain Armstrong, an analyst at Brewin Dolphin Ltd. in London. “Rosneft is a stronger partner, and the valuation is higher than most people had for the 50 percent stake.”

AAR’s exit would leave BP free to pursue other projects in Russia after the partners last year blocked a share swap and Arctic drilling alliance between BP and Rosneft in court. BP put its half up for sale in June, and both AAR and Rosneft had said they were interested in making an offer.

Rosneft Financing

Officials at BP, Moscow-based Rosneft and AAR declined to comment on speculation about the sale of TNK-BP today.

Rosneft has worked with non-Russian banks to finance an offer for TNK-BP and has reduced the interest it has offered to pay on the $15 billion loan agreement after banks oversubscribed on the deal, people with knowledge of the terms said yesterday.

“It’s clear that BP feels the relationship with AAR has broken down irretrievably,” Colin Smith, head of energy research at VTB Capital in London, said in a telephone interview. “While there have been discussions about Rosneft making a bid, BP has always been careful to point out that no outcome can be assured.”

BP and AAR openly clashed several times during their partnership. In 2008, Dudley was forced to resign as head of the venture and leave Russia after months of battling between the shareholders over strategy. Mikhail Fridman, one of the billionaires, quit as CEO of TNK-BP this year, saying the relationship with BP had run its course.

TNK-BP hasn’t paid dividends on any 2012 income because it has lacked a full board since December. A year ago, AAR rejected a $32 billion offer for its half from BP and Rosneft. That came after Fridman and BP’s other billionaire partners blocked a $7.8 billion share swap and exploration agreement with Rosneft in court, saying BP was required to pursue all opportunities in Russia exclusively through TNK-BP.

Surpass PetroChina

An expanded Rosneft including half of TNK-BP would increase crude oil output to 3.29 million barrels a day, according to figures given by both companies. That would surpass PetroChina Co. which had 2.43 million barrels a day of output in April, the most among the world’s publicly traded energy companies, according to data compiled by Bloomberg.

Russian President Vladimir Putin is inviting foreign producers into Russia to help keep the country’s oil output at a post-Soviet high of 10 million barrels a day. Rosneft, which is 75 percent owned by the government, is the country’s biggest producer. BP held 1.25 percent of Rosneft after buying about $1 billion of shares in its 2006 initial public offering.

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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