BP plc on Thursday completed a landmark transaction with Russian oil giant OAO Rosneft, which gives the London-based major a 20% stake in what now is the world’s largest publicly traded oil company.
BP last October agreed to sell its troubled half-stake in Russian explorer TNK-BP to Rosneft for $17.1 billion in a cash-and-stock transaction (see Daily GPI, Oct. 23, 2012). In return for selling its interest in TNK-BP, BP received the cash and a 12.84% stake in Rosneft; BP already held 1.25%. BP used $4.8 billion of the cash it received to buy another 5.66% stake in Rosneft from the Russian government, which controls the company. Rosneft bought the other half of TNK-BP from Alpha Group Consortium, or AAR, a group of Russian billionaires.
In total, Rosneft’s transactions are worth an estimated $55 billion.
“This is a historic day for BP in Russia,” said Group CEO Bob Dudley. “BP has invested in Russia for more than 20 years and for a decade we have been Russia’s largest foreign investor through our involvement with TNK-BP…We hope to help Rosneft to deliver synergies through its acquisition of TNK-BP and to grow production and reserves through brownfield, greenfield and unconventional opportunities as Rosneft strengthens its position among the world’s leading global energy companies.”
Dudley has been nominated to join Rosneft’s board. Eventually, BP expects to have two seats on the nine-member board. Dudley also is to sit on the newly formed integration steering committee alongside Rosneft chief Igor Sechin. Other members include Rosneft Deputy Chairman Eduard Khudainatov, as well as IHS Inc. Vice Chairman Dan Yergin, who founded Cambridge Energy Research Associates.
“BP also expects this transaction will bring value to BP shareholders in different ways: through growth of reserves, production and earnings; cash returns through Rosneft’s dividend growth; and potentially access to new opportunities, both in Russia and elsewhere,” the company said.
Russia is the world’s largest producer and the biggest holder of oil and gas reserves combined. However, Rosneft and BP officials said they see potential to increase output and reserves through new technology.
Sechin said Rosneft was “convinced” his company would “benefit from BP’s significant experience and successful track-record of applying best international practices in Russia.”
BP has invested in Russia for more than 20 years, and through its investment in TNK-BP, it has been the country’s largest foreign investor. During BP’s involvement, TNK-BP output rose by more than 40% over nine years and proved reserves increased by more than 50%, according to BP.
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