BP Plc’s billionaire partners rejected a proposal from the U.K. energy producer for TNK-BP, their Russian oil venture, to pay a $1 billion dividend, increasing pressure to resolve a shareholder impasse.
“A payment now of an additional dividend is not prudent,” Stan Polovets, chief executive officer of AAR, which represents BP’s partners, said today in an e-mailed statement. “At a time of continuing market uncertainty and while corporate governance at TNK-BP remains strained, we believe that a cautious stance by shareholders is called for.”
TNK-BP hasn’t paid dividends on any 2012 income as it has lacked a functioning board since December. Ex-German Chancellor Gerhard Schroeder and James Leng, a former chairman at Corus Group Ltd. and Rio Tinto Group, quit the board last year amid a shareholder dispute arising from BP’s failed attempt to form an alliance with Russian state-run OAO Rosneft.
“AAR may be withholding cash as a way to pressure BP into solving the shareholders conflict,” Alexander Nazarov, an oil and gas analyst at OAO Gazprombank in Moscow, said by e-mail.
TNK-BP can distribute additional dividends with a unanimous vote from the current directors, while regular dividends can only be approved by a full board. Russia’s third largest oil producer has paid BP $19 billion in dividends since 2003 and accounts for a quarter of the London-based company’s global output.
“We are confident that the money will remain in the company and that we can ensure it is correctly deployed in the future,” Toby Odone, a BP spokesman in London, said by e-mail about TNK-BP’s cash. Dividends from TNK-BP don’t directly fund BP’s payouts to its shareholders, he said.
BP could use the cash now as it pays for the cleanup of the Gulf of Mexico oil spill in 2010, Nazarov said.
BP said June 1 that it will pursue a possible sale of its half of TNK-BP. Both AAR and Rosneft have since announced that they would seek to buy shares.
BP is scheduled to report second-quarter results tomorrow. TNK-BP reported a 63 percent decline in second-quarter net income to $808 million from a year earlier as oil prices dropped. Net debt at the Moscow-based company fell to $5.57 billion at the end of period from $7.52 billion three months earlier.
Shares in OAO TNK-BP Holding, the venture’s traded unit and holder of most of its assets, fell 1 percent to 76.21 rubles in Moscow. BP gained 1.3 percent to 444.45 pence in London.
TNK-BP Holding will probably maintain high dividends even while payouts from its parent company to AAR and BP are blocked, Troika Dialog said today in a report.