BP Wins Russian Case, TNK-BP to Enter Gas Production

November 14th, 2011 by Trefis Team
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Oil major BP (NYSE:BP) scored a significant victory over its minority partners in the TNK BP joint venture last week as a Siberian court dismissed the case by minority stakeholders who were claiming billions of dollars of damages over the failure of TNK-BP to close a deal with Rosneft related to exploration in the Arctic circle. [1] BP’s relationship with other stakeholders in the Russian venture has been enshrouded with trouble but analysts say that the problems are worth it as TNK-BP now accounts for a substantial part of BP’s oil production, which has been hit by the Gulf of Mexico moratorium. Slowed production in the Gulf of Mexico also impacted the production of competitors such as Chevron (NYSE:CVX).

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In a significant development on the Russian front, a top executive involved with the functioning of TNK-BP revealed that the company was also planning to enter gas production in the country.  [2] The Russian gas market is tightly regulated by the government but the BP subsidiary sees a significant opportunity as the market is expected to be opened to private players over time. The company’s performance is also expected to improve as the government eases the tax burden placed on oil companies and opens more reserves in the Arctic for exploration.

In other significant developments, BP’s 253,000 barrel a day Carson refinery in the Los Angeles area is expected to open after scheduled maintenance activity. [3] In the international territory, BP faced a minor setback in Argentina as a deal to sell its stake in Pan-American Energy collapses earlier last week. [1]

We have a $55 price estimate for BP which is at a 25% premium over its present stock price.

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Notes:
  1. BP’s Troubles Far From Over, WSJ [↩] [↩]
  2. TNK-BP Russian Partner Relishes Conflict, WSJ [↩]
  3. BP Carson refinery restarting unit after maintenance, Reuters [↩]