British oil giant
), Russia's state-operated oil company, OAO Rosneft, and the
parent company Rosneftegaz have entered into an agreement that
enables BP to sell off its half-interest in the joint venture
TNK-BP to Rosneft.
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This deal mirrors the one announced on October 22 that entailed
BP and a consortium of Russian billionaires - Alfa-Access-Renova
or AAR − to sell their 50% holdings in TNK-BP to Rosneft.
The terms of the present deal come in two parts. First, BP will
get $17.1 billion in cash and shares giving it a 12.84% equity
stake in Rosneft. Second, the UK giant plans to buy an additional
5.66% share in Rosneft from the Russian state with approval
already granted. For this BP will have to siphon $4.8 billion
from the cash proceeds.
On completion of the transaction, BP is expected to raise its
ownership in the Russian company to 19.75% taking into
consideration its existing minority stake of 1.25% in Rosneft.
The deal is yet to be approved by the regulatory authorities and
should be completed in the first half of 2013.
This deal will make Rosneft one of the world's biggest oil
companies in terms of market capitalization. BP, for its part,
stands to gain essential access to hydrocarbon reserves in the
remote Arctic belt of Russia.
Since 1998, BP and Rosneft have worked together for the
exploration in 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
Completing the sale of TNK-BP will simplify BP's 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.
The news of the BP-Rosneft settlement comes on the heels of the
London-based oil major's largest ever criminal settlement with
the federal authorities regarding the catastrophic 2010 Macondo
well oil spill. The agreement with the U.S. government calls for
the payment of $4.5 billion by the British oil giant to resolve
all criminal charges leveled by the Department of Justice and all
claims by the Securities and Exchange Commission. The company can
now focus on the remaining civil claims as well as on more
The Zacks Consensus Estimates for BP's fourth quarter and full
year 2012 currently stand at $1.35 per share and $5.62 per
American Depositary Share (ADS), respectively.
BP, the second largest oil company in the UK by market value
Royal Dutch Shell Plc
), 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.