UK oil giant
) has shown interest in increasing its stake in the Russian state
controlled group Rosneft from the existing 1.3%. However, BP's
purchase is dependent on the sale of its stake in a private Russian
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The London-based group intends to increase its investment in Russia
with the proceeds raised from the potential sale of its 50% stake
in the $60 billion joint venture with Russian oligarchs. BP will
move ahead with its efforts of gaining a larger share in Russia's
oil production regardless of whoever buys its stake.
BP's investment would form a part of a complex pact, which would
involve Rosneft's purchase of BP's interest in the TNK-BP venture.
At the same time, BP has promised the Russian government that it
would reinvest any proceeds received from the TNK-BP sale in
Russian projects, including Rosneft itself.
BP had entered into the TNK-BP venture nearly a decade ago to
utilize the country's resources. In July 2012, BP entered a 90-day
period to discuss the sale with prospective buyers, which comprised
the AAR consortium - a group representing the tycoons and with
Rosneft. The structure of the deal has not yet been finalized.
Per the deal under discussions, Rosneft would acquire 25% shares of
TNK-BP for $10-$15 billion cash, while the remaining 25% will be
paid via shares of Rosneft. This would take BP's stake in Rosneft
to about 12.5%. Currently, Rosneft is in talks with banks about
raising $15-$20 billion to fund the deal. However, Rosneft has no
intentions of purchasing shares of BP.
BP, which recently disposed the Carson refinery in California to
), carries a Zacks #3 Rank, which is equivalent to a Hold rating
for a period of one to three months. We also maintain our long-term
Neutral recommendation on the company.