OAO Rosneft, Russia’s state-owned oil producer, began talks to buy BP Plc’s stake in TNK-BP as the U.K. oil company seeks to exit the venture jointly owned with a group of billionaires.
Rosneft and BP have agreed to start discussions, the Moscow-based company said in a statement today. The billionaire partners are also in negotiations to buy some or all of BP’s stake in Russia’s third-largest oil producer, which UBS AG estimates has a fair value of $23 billion.
BP Chief Executive Officer Bob Dudley decided to look for a sale after clashing repeatedly with the other shareholders, who last year blocked an alliance between the British company and Rosneft. The sale of the TNK-BP stake to Rosneft may open other opportunities for BP in Russia, according to Chris Weafer, chief strategist at Troika Dialog in Moscow.
“It would be the best-case outcome for BP,” Weafer said in an e-mail today. “Having agreed to a deal with the state, it would then get access to other major projects in Russia.”
Rosneft shares dropped 0.4 percent to 197.49 by the close on Moscow’s Micex exchange. TNK-BP Holding slipped 0.7 percent to 77.99 rubles. BP declined 0.6 percent in London.
AAR, the group representing the billionaires, said it is willing to buy half of BP’s 50 percent holding in TNK-BP. That would take AAR’s holdings to 75 percent of the venture.
TNK-BP produced 2.04 million barrels of oil and gas a day in the first quarter, and output at Rosneft, Russia’s largest producer, was about 2.63 million barrels a day. TNK-BP has paid BP $19 billion in dividends since 2003 and accounts for a quarter of the company’s global output.
Rosneft “considers the potential acquisition of BP’s participation in TNK-BP to be an attractive commercial proposition,” Igor Sechin, Rosneft’s CEO and a former deputy prime minister, said in a statement. “There are considerable synergies to be gained in eastern Siberian upstream, gas development, crude and product logistics optimization.”
Mikhail Fridman, one of the billionaire partners, quit as TNK-BP CEO earlier this year and said the venture no longer serves the shareholders’ interests. BP and AAR have failed to agree on board appointments at TNK-BP that would give it a quorum to vote on investment decisions and dividends.
TNK-BP said today that the board, which met last week, rejected a management proposal for the first stage of its Rospan gas and condensate field because of a lack of support from the British company’s representatives, according to an e-mailed statement.
The board was given the option to support the entire project as it was presented or reject it, Vladimir Buyanov, a Moscow-based BP spokesman, said by phone. Because BP’s directors had concerns about parts of the proposal, they voted it down, he said. The first phase of the project calls for the production of 8.6 billion cubic meters of natural gas a year.
AAR last year blocked a $7.8 billion share swap between Rosneft and BP and a deal to explore in Russia’s Arctic, saying it violated the TNK-BP shareholder agreement. The billionaires then rejected an offer from Rosneft and BP to buy their half of TNK-BP for $32 billion.
“Rosneft is the most likely purchaser,” said Stuart Joyner, an analyst at Investec Securities Ltd. in London. “I’m assuming they’ll pay a decent price of about $25 billion, though the value’s probably higher so Rosneft will still be getting a good deal.”
The Russian state, which wants to raise funds by selling state assets including Rosneft shares, may support an acquisition, Kremlin spokesman Dmitry Peskov said.
“The company’s plans for expansion and development are a corporate question,” Peskov said. “If the corporate interests of Rosneft and those of its main shareholder, the government, align then these plans will be supported and welcomed.”
The Kremlin spokesman said that he hadn’t heard of any requests from Rosneft to secure financing from the state.
Rosneft said today there can be no guarantee a deal will take place. BP informed AAR, the group representing TNK-BP’s billionaire investors, on June 1 it has received expressions of interests for its shares in TNK-BP and that it would pursue the opportunity without naming the potential buyer.
BP welcomed Rosneft’s announcement in a statement and said it will continue to negotiate in good faith with AAR while also talking to any other potential buyers. AAR declined to comment.