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BP to cut ties with TNK-BP

By Benjamin Chiou

Date: Friday 01 Jun 2012

BP to cut ties with TNK-BP

BP has revealed that it wants to sell-up at TNK-BP, the joint venture it set up with a consortium of Russian investors, as speculation has run rampant in recent days of a breakdown in the relationship between the British oil firm and its partners.

The group said on Friday morning that it has received "unsolicited indications of interest" regarding its stake in TNK-BP.

BP's statement read: "In light of these unsolicited approaches and consistent with its commitment to maximising shareholder value, and its obligations under the Shareholder Agreement, BP has notified Alfa Access Renova of its intention to pursue a potential sale." As always, the firm confirmed that there can be no guarantee of a transaction.

In a research report, US broker Jefferies said it estimates BP's share of TNK-BP at $30bn, which is 11% of its BP group net asset value (NAV) estimate, although 26% of its current market capitalisation.

Just a few days ago, TNK-BP, Russia's third-largest oil producer, announced that its Chief Executive Officer Mikhail Fridman would step down in a month's time, with sources citing rising tensions between BP and Alfa-Access-Renova (AAR).

AAR and BP, which both own a 50% interest in TNK-BP, set up the joint venture in 2003. However, over its near 10-year history, tensions have arisen between the two sides, notably when the Russian partners blocked BP's proposed tie-up with Rosneft in 2011.

Fridman's resignation on Monday "represents a further breakdown in the relationship between TNK-BP's shareholders," one source close to AAR was reported to have said earlier this week, adding that AAR has lost trust in the British firm.

People close with the company said that Fridman's move could be a possible attempt to distance himself from TNK-BP in anticipation of a new round of conflict, according to the Wall Street Journal.

"Given the collapse of trust and corporate governance at the company we believe BP should exit and reinvest in more profitable areas with less political risk, if it can achieve something close to fair value for the stake," said analysts at Jefferies.

Investors seemed to celebrate the decision on Friday, with shares trading 2.73% higher at 405.7p by midday.

BC

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