MOSCOW – British oil giant BP said Friday it is considering selling its 50 percent stake in its Russian joint venture TNK-BP, in a deal that could fetch at least $15 billion.
TNK-BP, Russia’s third-largest oil producer, is a joint venture between BP and AAR, a consortium of Russian billionaire shareholders. The company has been mired in a corporate dispute after AAR blocked BP’s deal with another Russian oil company, Rosneft.
BP said in a statement Friday that it has received “unsolicited indications of interest” for its share in TNK-BP and is looking to pursue a potential sale which is “consistent with BP’s commitment to maximizing shareholder value.”
TNK-BP represents 27 of BP’s reserves and 29 percent of its production, according to the British company’s latest annual report.
BP’s spokesman in Russia, Vladimir Buyanov, told The Associated Press that the information about the potential buyer is confidential. He declined to specify whether the offer might have come from the Russian shareholders. Buyanov said the shareholders’ agreement between BP and AAR requires both parties to notify the other of offers to acquire their holdings.
BP’s 50 percent stake in the Russian oil producer could fetch more than $15 billion as TNK-BP’s market capitalization, based on its share prices at the Russian MICEX stock exchange, hovered around $31.5 billion Friday afternoon. But in Moscow TNK-BP’s shares at the MICEX slumped by 6 percent in afternoon trading.
BP, however, stressed that “there can be no guarantee that any transaction will take place.”
BP’s announcement was welcomed by investors in London, who bid up the shares in the company by 1.57 percent to 401.1 pence in morning trading. AAR has previously indicated that it could be interested in raising its stake in TNK-BP. AAR’s spokesman in Moscow declined to comment any aspect of BP’s announcement.
TNK-BP’s CEO Mikhail Fridman, one of the members of AAR, unexpectedly stepped down on Monday.
In an interview with the Russian daily Kommersant he cited tensions between the shareholders as a reason for his departure and said the parity ownership of TNK-BP no longer works.
Fridman said in the interview that AAR could be interested in increasing its stake, but it would also consider selling some of its stake in exchange for BP shares.
Although one of Russia’s most lucrative oil assets, TNK-BP has been mired in boardroom disputes for most of its nine-year history.. At the height of the previous shareholder conflict in 2008, TNK-BP’s CEO Robert Dudley left Russia complaining of what he described as a campaign of “harassment.” Fridman’s appointment as interim CEO in 2009 and a new shareholder agreement helped reconcile the two rival groups of shareholders.
But tensions resurfaced last year when AAR blocked a potentially huge agreement between BP and Russian state-owned oil company Rosneft. TNK-BP’s Russian shareholders claimed that such a deal should be pursued through the joint venture. Jonathan Jackson, head of equities at London-based Killik & Co., said it was difficult to put a price on BP’s stake.
“At the time of the Rosneft/Arctic deal, BP is believed to have made a cash and joint offer (with Rosneft) of $27 billion for its 50 percent stake. However, AAR appears to have demanded $35 billion, and also asked for a 10 percent stake in BP and Rosneft, as well as cash,” he said. “As for potential buyers, clearly Rosneft stands out, although Gazprom, Russia’s largest gas producer, may also have an interest.”
Rosneft’s chairman, and Russia’s former deputy prime minister, Igor Sechin said on Friday that the state-owned company hasn’t considered this investment.
“We have never thought about it,” he said in comments carried by Russian news agencies on the sidelines of a summit in Berlin.
The venture has provided lofty dividends for both parties. Over the past years, TNK-BP’s output has accounted for more than a quarter of BP’s total global production. The British oil company drew some $3.7 billion in dividends from the venture last year alone, receiving a total of $19 billion since the company’s formation in 2003.In the company’s annual report filed in March, BP chairman Carl-Henric Svanberg was bullish about Russian and the TNK-BP partnership.
“Russia is particularly important for BP,” Svanberg wrote in the report. “This region still has excellent potential for BP and we remain committed to it.”
When a shareholder questioned the Russian investment at BP’s annual general meeting in April, BP CEO Bob Dudley said that the thwarted Rosneft deal had created “a lot of noise.” But he contended that the Russian links were good business and urged shareholders to “look through the noise and look at the numbers.