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Rosneft Clinches Oil Deal, $16.8 Billion Loans for TNK-BP

Rosneft Clinches Oil Supply Deal, $16.8 Billion Loans for TNK-BP
OAO Rosneft signed two loan agreements for $16.8 billion with international banks to buy BP Plc’s half of TNK-BP, the state- run company said in a statement. Photographer: Alexander Zemlianichenko Jr./Bloomberg

OAO Rosneft agreed on a prepaid oil supply deal with traders Glencore International Plc and Vitol Group and raised loans from global banks as the Russian crude producer seeks funds for its $55 billion acquisition of TNK-BP.

Rosneft signed two loan agreements for $16.8 billion with international banks to buy BP Plc’s half of TNK-BP, the state-run company said in a statement. The five-year supply deal may be worth $50 billion with oil prices at $100 a barrel, according to Alexei Kokin, a senior energy analyst at UralSib Capital.

BP and its billionaire partners in the TNK-BP venture signed binding agreements this quarter with Rosneft for the biggest sale ever in Russia, ending their fractious decade-long partnership. The deal will vault Rosneft past PetroChina Co. to become the world’s largest publicly traded oil producer with output of more than 4 million barrels a day, based on third-quarter results.

“It’s not a coincidence that we’re hearing about these at the same time,” Kokin said by phone today in Moscow. “Rosneft is interested in trade financing and can use these contracts to secure additional bank loans.”

Rosneft’s shares rose as much as 2.3 percent after announcing the deals, and closed up 1.1 percent at 265.09 rubles in Moscow, the highest since April 2011.

Oil Prepayment

Supplies to Glencore and Vitol will reach as much as 67 million metric tons of crude over five years from the start of next year, according to a joint statement. That’s 270,000 barrels a day or about 11 percent of the its current output.

“The price formula is in line with the prices that Rosneft receives for crude at medium-term tenders,” Rosneft Chief Executive Officer Igor Sechin said in the statement.

Rosneft’s press service didn’t immediately comment on the size of the prepayment from the oil contract and whether it will be used to fund the TNK-BP acquistion.

The supply deal is expected to start in 2013 and may allow Rosneft to replace crude volumes with oil products, according to the statement. A 100 percent prepayment is unlikely, Kokin said.

BP agreed to sell its half of TNK-BP for $17.1 billion and 12.8 percent of Rosneft, while also pledging to spend $4.8 billion of the proceeds to buy more Rosneft stock from the government. AAR, which represents the owners of the other half of the venture, said it will get $28 billion in cash. Both deals will close in the first half of next year.

Putin, Billionaires

Billionaire Viktor Vekselberg, a partner in the AAR group, said today the shareholders are considering new oil projects after the TNK sale to Rosneft. President Vladimir Putin said last week he “hoped” they would invest their proceeds in Russia’s economy.

A group of 15 international banks is lending $4.1 billion for five years and $12.7 billion for two years, Rosneft said. The lenders are Bank of America Corp., Barclays Plc, BNP Paribas SA, Bank of Tokyo-Mitsubishi UFJ Ltd., Citigroup Inc., Credit Agricole SA, ING Groep NV, Intesa Sanpaolo SpA, JPMorgan Chase & Co., Mizuho Corporate Bank Ltd., Natixis, Nordea Bank AB, Sumitomo Mitsui Banking Corp., Societe Generale SA and UniCredit SpA.

Rosneft proposed a margin of 210 basis points over benchmark rates for a five-year syndicated loan and 175 basis points on a two-year bridge facility, two people with knowledge of the matter said Dec. 4, asking not to be identified because the terms are private. A basis point is 0.01 percentage point.

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