BP has informed its Russian partners in the TNK-BP oil venture that it has begun preparations to cut its stake in the company in an attempt to salvage its planned strategic alliance with state-run Rosneft, a source familiar with the matter said Tuesday.
On Monday BP informed the AAR (Alfa-Access-Renova) consortium of Russian shareholders in the 50:50 TNK-BP joint venture that it was preparing to send official notification formally announcing the plans to sell a stake, the source said.
BP did not identify the size of the stake in TNK-BP it would like to sell or when exactly it is to send the formal letter on the issue, the source said. But, the source said, BP is likely to sell a stake to Rosneft, then the two companies may operate the stake through a specially set-up joint venture.
Meanwhile, the Wall Street Journal cited its sources as saying that BP was preparing to sell half of its 50% stake in TNK-BP to Rosneft, which would give a blocking stake to Rosneft and is unlikely to be found acceptable by AAR.
BP was not immediately available for comment, while sources close to the UK-based company said no decision has been taken to sell any of BP's shares in TNK-BP.
A Rosneft spokesman denied the report. "We're not conducting any talks on the issue," he said.
The planned mega alliance with Rosneft, which included a $16 billion share swap and joint exploration in the Arctic, was effectively blocked by the consortium of Russian partners, after AAR won an international court case blocking the planned partnership on the grounds that it would contravene a shareholder agreement under which BP must seek new opportunities in Russia exclusively through TNK-BP.
The sale of a part of BP's stake would lift the "exclusive clause," the source said.
The current agreement between BP and AAR does not give a pre-emptive right to the parties, the source said.
The procedure stipulates that a non-selling party must decide if it is interested in buying the stake on sale within 45 days after an official notification. Then the parties are to conduct good-faith negotiations for 90 days. After that the selling party is free to sell the stake to a third party, the source said.
BP first informed AAR in writing on May 2 that it was considering issuing a formal notification to its partners of its intention to sell on May 6, during the dispute between the partners over the planned BP-Rosneft deal, the Financial Times reported.
That notification, however, was never issued, as by May 6 the two sides had begun negotiations about a possible exit by AAR from the joint venture.
The parties were said to have come close to agreement but failed to finalize it until May 16, the deadline set for BP-Rosneft deal.
At the time, Russia media reported that BP and Rosneft had agreed to purchase jointly the 50% stake in TNK-BP from AAR for $32.5 billion, of which $6 billion was to be paid in BP shares.
After the deadline for the BP-Rosneft deal expired, Rosneft said BP had made it a new offer on the possible joint development of hydrocarbons reserves in Russia, which is "more global" and not limited to the three blocks in the Arctic the two companies discussed previously.
MORE REASONABLE TERMS?
The news may signal that negotiations about the buyout of AAR's stake by TNK-BP/Rosneft are resuming, but this time on more reasonable valuations, Troika-Dialog bank said in a research note.
The value of the offer for TNK-BP's shares could potentially be below the previously rumored price tag as the initial offer by BP and Rosneft to AAR included a significant premium to the company's market value, agreed analysts with Alfa-Bank.
"If Rosneft manages to obtain a sizable stake in TNK-BP at a reasonable price, then we believe this move is likely to be received positively by the market," Alfa-Bank said in a research note, adding that it was difficult to estimate the potential impact of the deal at this point, as it would largely depend on the final pricing and the size of the stake.
By 1220 GMT, Rosneft's stock was trading at $8.74/share on the London Stock Exchange, up 2.22% on the close Monday.
BP shares were down 0.3% at 449.55 pence/share, while TNK-BP shares gained 0.35% from Monday close to Rb85.78/share.
In Moscow, Rosneft shares also gained 2% above Monday close being traded at Rb242.6/share, while TNK-BP's shares were 0.35% higher at Rb85.78/share.
