Oil major BP‘s (NYSE:BP) less than cordial relationship with its Russian partners took a new turn as doubts were raised on the veracity of the claims that the company had received an offer for its stake in TNK-BP.  BP said that it had received an offer for the 50% stake it holds in its Russian subsidiary, which estimates say could fetch the company between $25 billion and$30 billion. The company’s Russian partners (collectively known as AAR) doubted the claims and said that BP could just be buying time to reassure its investors over its options with TNK-BP. The Russian subsidiary accounts for as much as a third of the company’s overall output and a larger portion of its crude production.
We are revising our $60 price estimate for BP, which is at a 45% premium to its current market price.
Earlier last month, BP announced that it was considering offers it had received for its stake in TNK-BP after governance issues with the subsidiary deepened with the resignation of its CEO Mikhail Fridman. (See: BP May Sell Stake in Russian Subsidiary After Latest Round of Trouble) According to some sources, BP was approached by its Russian partners as well as state oil players Rozneftgaz for its holding. However, experts doubt BP’s willingness to part ways with TNK-BP, which is the third largest producer of oil in Russia and is also major cash source for BP at a time when its production has declined because of asset sales forced by costs associated with the Gulf of Mexico spill.
Former TNK-BP CEO Mikhail Fridman said that BP hopes that AAR would purchase its stake, according to an offer extended last year to buy 25% of BP’s stake in the company and then offer the rest of its stake at a later stage to AAR or sell them through an IPO.  According to Fridman, AAR is no longer offering the deal. He also said that AAR was open to selling its stake to BP over a 5-7 years time horizon in return for a 10-15% stake in BP.
BP is opposed to the idea as it would make AAR the largest shareholder in the company. Analysts are also considering other possibilities, where state oil players may buy out AAR’s stake in TNK-BP. Any future deal would have a significant impact on BP’s operational and financial position.
- BP’s Russian Sale May Mark A Strategic Shift (trefis.com)
- BP’s Russian Troubles Take a New Turn As TNK-BP CEO Resigns (trefis.com)