British oil firm BP said on October 22, 2012 has agreed to sell its half of Russian venture TNK-BP to Rosneft for $17.1 billion (13.1 billion euros) and another 12.84 percent share in the state oil giant. –AFP Photo
LONDON: British oil firm BP said Monday that it has agreed to sell its half of Russian venture TNK-BP to Rosneft for $17.1 billion (13.1 billion euros) and another 12.84 percent share in the state energy giant.
The deal creates a top player in the global oil sector with big implications for Arctic exploration and effectively ends the often tumultuous TNK-BP joint venture.
In Moscow, Rosneft announced it had also bought the other half-stake in TNK-BP from Russian investors.
BP added in a statement that it would spend $4.8 billion of the proceeds to buy another 5.66 percent of Rosneft from the Russian government, bringing its total stake in the Russian company to 19.75 percent. BP currently owns 1.25 percent of Rosneft.
Under the terms of the deal, BP would have two seats on Rosneft's nine-person board.
“BP today announced that it has signed heads of terms to sell its 50 percent share in TNK-BP to Rosneft, the major Russian integrated oil and gas company,” the statement added.
“Signing of the definitive agreements is conditional on the Russian government agreeing to the sale of the 5.66 percent stake in Rosneft and it is intended that the TNK-BP sale and this further investment in Rosneft would complete on the same day.
“Therefore, on completion of the proposed transaction, BP would acquire a total 18.5 percent stake in Rosneft and net $12.3 billion in cash.
“This would result in BP holding 19.75 percent of Rosneft stock, when aggregated with BP's 1.25 percent current holding in Rosneft.”BP chief executive Bob Dudley said the deal “builds on BP's track record of value creation in Russia. It is consistent with our strategy of deepening our positions in the world's most prolific oil and gas regions.
“BP intends to be a long term investor in Rosneft -- an investment which I believe will deliver value for our shareholders over the next decade and beyond.”
Putin hails Rosneft-BP deal
Russian President Vladimir Putin on Monday hailed state oil company Rosneft's new tie-up with Britain's energy group BP as beneficial for the economy and a “very good” signal to the markets.
“This is a good, large deal that is necessary not only for the Russian energy sector but also the entire economy,” news agencies quoted Putin as saying during a meeting with Rosneft chief executive Igor Sechin.
“This is a very good signal to the Russian and international energy markets,” said Putin. “I am certain that it will be beneficial.”Putin's comments strongly signal the Russian government's intention to approve the state company's acquisition of the two 50 percent stakes held in the Anglo-Russian TNK-BP joint venture by BP and four Soviet-born oligarchs.
The deal -- both parts of the buyout estimated to be worth $61 billion by Sechin on Monday -- has to be approved by the cabinet because the government still owns a majority Rosneft stake.
The deal will see Rosneft pay $17 billion in cash and give up nearly 12.84 percent of its shares for BP's half interest in TNK-BP.
BP's holding in Rosneft may eventually grow to nearly 20 percent thanks to the negotiation of the handover of another stake worth slightly more than five percent of the Russian firm's shares.
Rosneft said in a statement that it had also agreed the main outlines of a $28 billion cash only deal to buy out the Russian tycoons who comprise the Alfa-Access-Renova (AAR) alliance that own the other half of TNK-BP.
The statement also stressed that a final deal was “subject to the negotiation of definitive agreements, corporate and regulatory approvals and certain other conditions.”