British energy giant
) and Russia's state-operated oil company, OAO Rosneft, have
finally closed their deal related to TNK-BP, ahead of schedule.
BP PLC (BP): Free Stock Analysis Report
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ENERPLUS CORP (ERF): Free Stock Analysis
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BP divested its 50% stake in TNK-BP in line with the terms
announced in Oct 2012. BP was entitled to receive $17.12 billion
in cash and shares, giving it a 12.84% equity stake in Rosneft.
Second, the UK giant had planned to buy an additional 5.66% share
in Rosneft from the Russian state with approval already granted.
For this, BP was supposed to siphon $4.87 billion from the cash
Subsequently, BP received a final amount of $16.65 billion from
Rosneft after adjustments. This excluded a dividend of $0.71
billion received by BP in Dec 2012 from TNK-BP. In accordance
with the deal, BP used $4.87 billion of the proceeds to acquire a
5.66% share in Rosneft from ROSNEFTEGAZ. Therefore, BP received a
net amount of $12.48 billion after adjusting for a dividend of
$0.71 billion received for TNK-BP as well as an 18.5% share in
As a result of these transactions, BP has raised its ownership in
Rosneft to 19.75% taking into consideration its existing minority
stake of 1.25% in the Russian company.
This deal makes Rosneft the world's biggest listed oil company in
terms of market capitalization. BP, for its part, stands to gain
essential access to hydrocarbon reserves in the remote Arctic
belt of Russia. BP's sale of TNK-BP's stake has helped it in
simplifying its operations in Russia via a major strategic shift.
We note that BP is also busy in reshaping its portfolio through
the divestiture of smaller non-core properties to help pay
spill-related costs while holding onto potential big resources.
Since 1998, BP and Rosneft have worked together in the
exploration of the offshore Sakhalin Island. The pair also shares
50:50 ownership in the joint venture entity - Ruhr Oel GMBH −
that owns stakes in 530,000 barrels per day of refining capacity
BP carries a Zacks Rank #3 (short-term Hold rating). However,
there are other stocks in the energy sector, namely,
Range Resources Corporation
EPL Oil & Gas, Inc.
) , which carry a Zacks Rank #1 (Strong Buy) and are expected to
perform impressively over the next few months.