Date: Friday 01 Jun 2012
Jefferies has welcomed BP's decision to sell its 50 per cent share in TNK-BP, reiterating its buy rating and 525p target price for the stock on Friday morning.
The British oil giant released a statement saying that it has received "unsolicited indications of interest" regarding its stake in TNK-BP. Jefferies value's 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.
"We would welcome this deal if done at our NAV estimate, as long as the proceeds were reinvested in growth projects which were much more visible to the market. BP needs to acquire assets with growth potential in regions where it is currently not represented, which the market would recognise and value. This is certainly not the case in Russia at present," the broker said.
Jefferies says that TNK-BP, BP's joint venture with Russian investors AAR, has been "dogged by political controversy" since its inception in 2003 and believes that there is now very little, if any, value in BP's share price for the business.
"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."
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