BP PLC is selling its half-interest in TNK-BP to Rosneft in a transaction that will expand its stake in the buyer, an ill-fated deal with which has soured the UK company’s relations with its TNK-BP partner since early last year.
Under heads of terms announced Oct. 22, Rosneft will pay $17.1 billion in cash and shares representing a 12.84% interest for BP’s 50% interest in TNK-BP. BP said it will buy a 5.66% stake in Rosneft for $4.8 billion cash from the Russian government, raising its ownership of the Russian company, including a small existing interest, to 19.75%.
BP said it expects its net cash receipt from the deals to be $12.3 billion. If the transaction is completed, BP expects to have two seats on Rosneft’s nine-member board.
It had informed Alfa Access Renova (AAR), its 50% partner in TNK-BP, in June that it was considering a sale of part or all of its interest. AAR responded by saying the parity ownership structure in TNK-BP was “inoperable” (OGJ Online, July 19, 2012).
AAR had blocked an $8 billion deal between BP and Rosneft announced in January 2011 for joint exploration in the Arctic and other collaboration, calling it a breach of the TNK-BP shareholders’ agreement (OGJ Online, Mar. 25, 2011).
TNK-BP, which produced an average 1.987 million boe/d of oil and gas in 2011, earned $4.1 billion for BP last year. BP’s consolidated balance sheet in June valued the TNK-BP share at $10.715 billion.
Rosneft’s average production last year was 2.45 million b/d of oil. The company’s proved developed reserves totaled 9.96 billion boe of oil and gas, and its proved undeveloped reserves totaled 8.39 billion boe.
Rosneft reported 2011 net income of $10.8 billion.
BP and Rosneft have worked together since 1998 to explore offshore Sakhalin Island and are 50-50 owners of the joint venture Ruhr Oel GMBH, which holds interests in 530,000 b/d of refining capacity in Germany.