Russian Oil Company TNK-BP 'BBB-' Rating Put On CreditWatch Positive On Potential Acquisition By Rosneft Oct 12
- Language: English
- Published: October 2012
- Region: Russia
BP has been actively involved in the Russian energy market via its joint venture TNK-BP since 2003. The company sold its 50% stake to Rosneft in exchange for $17.1bn and 12.84% equity in the buyer. Additionally, BP plans to use the cash to buy a further 5.7% in Rosneft, bringing BP’s stake to 19.75%. Rosneft has also bid for the Alfa-Access-Renova consortium’s stake in TNK-BP, offering $28bn.
Features and benefits
- MarketLine Case Studies describe topics such as innovative products, business models, and significant company acquisitions.
- Fact-based and presented in an accessible style, they explain the rationale of commercial decisions and illustrate wider market and economic trends.
TNK-BP was created in 2003, when BP and AAR merged their oil assets in Russia and Ukraine, with a 50% share each. The initial investment cost BP approximately $8bn. Since then, TNK-BP has paid out $19bn in dividends, worth approximately $2bn a year to BP. Furthermore, TNK provided 27% of BP's reserves and 29% of BP’s production in 2011.
The Russian oil and gas market accounted for 25.6% of the European market’s value in 2011, worth $208.9bn.
Your key questions answered
- Why has BP agreed to sell TNK-BP?
- What will BP and Rosneft gain from the acquisition?
- What are the risks of the acquisition? SHOW LESS READ MORE >
WHY BP IS LOOKING TO SELL TNK
- TNK has served BP well
-- The venture has provided abundant returns
-- TNK provided access to one of the largest energy markets
-- TNK helped BP to divest following the Gulf of Mexico oil spill
- AAR and BP had different visions for TNK
- BP and AAR clashed repeatedly
-- BP tried to replace AAR with Gazprom
-- Disagreements over corporate structure
-- AAR blocked an Arctic exploration venture with Rosneft
WHAT BP AND ROSNEFT GAIN FROM THE MERGER
- Clear exit from AAR partnership and disruption to business
-- Clear exit from AAR
-- The deal solves one major business disruption
- BP gains a stake in Rosneft
-- BP will benefit from Rosneft’s premier position in Russia
-- Rosneft gains from BP’s experience
-- Rosneft should be a more accommodating partner
- Rosneft gains synergies from merging TNK assets
THE RISKS OF THE MERGER
- Russian state intervention
-- Resource nationalism is not practical
-- Shell in Sakhalin
-- Foreign ventures remain
- BP as a minority stakeholder of Rosneft
-- The loss of TNK profits
-- Rosneft heavily leveraged to fund the acquisition
- BP moves to settle uncertainty in a key market
- Further reading
- Ask the analyst
- About MarketLine