Rosneft takeover of TNK-BP set to create biggest oil firm

Rosneft was on course to buy both halves of the TNK-BP Russian joint venture for estimated $56bn (£35bn) last night after holding audacious overlapping takeover talks with the owners, BP and AAR consortium. The Kremlin-controlled hydrocarbon giant was negotiating with both sides of 50/50 joint venture over two separate deals that would give it complete control of TNK-BP and transform it into the world’s biggest oil company. In its first deal, Rosneft is understood to have agreed to pay $28bn in cash to AAR, a quartet of Russian billionaires led by Viktor Vekselberg, to secure its half of TNK-BP. For second deal, Igor Sechin, Rosneft’s chief executive and a close associate of President Vladimir Putin, flew into London yesterday afternoon as he sought to finalise the purchase of BP’s stake. That transaction, which sources warned last night was still not done deal, would also be worth $28bn. However, this time Rosneft would pay with mixture of cash and shares in Rosneft. This would provide BP with billions of dollars of cash, which it needs to help pay off compensation claims relating to the 2010 Gulf of Mexico oil spill. It would also give the FTSE 100 company a substantial stake in an enlarged Rosneft and, in turn, access to Russia’s vast reserves of oil and gas. BP, Rosneft and AAR all declined to comment last night. To complicate matters further, AAR had been involved in parallel negotiations to buy BP’s stake in TNK-BP as it considered taking complete control of the joint venture. However, following its deal with Rosneft, it is understood that AAR has decided not to make an offer for BP’s stake in the venture. BP has set a deadline of 9am this morning to receive offers for its stake in TNK-BP and Rosneft was last night set to be the sole bidder. BP could make an announcement about a deal with Rosneft as soon as today. An exit from joint venture would come as a welcome relief to BP, which has had a fraught 9-year relationship with AAR. This has included court cases and harassment claims by Bob Dudley, then head of TNK-BP, now BP’s chief executive, which forced his exit from Russia in 2008. Relations between BP and the Soviet-born quartet soured last year when AAR, which includes Mikhail Fridman, German Khan, Len Blavatnik, blocked proposed deal between BP and Rosneft to explore Russian Arctic. The consortium argued that it violated the terms of the joint venture, which gave it first option on any dealings BP had in Russia. Relations deteriorated further in May when Mr Fridman quit as TNK-BP’s chief executive “for personal reasons” (…..)



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2 Responses to Rosneft takeover of TNK-BP set to create biggest oil firm

  1. Exxon Mobil Corp., the world’s largest energy company by market value, agreed to buy Celtic Exploration Ltd. for $2.91 billion in cash and stock, adding oil and gas production in Canada’s Montney and Duvernay shale. Celtic’s shareholders will receive C$24.50 ($24.89) a share and half a share of a new company that will hold assets not included in the agreement, Calgary-based Celtic said today in a statement. The cash value per-share represents a 35 percent premium to Celtic’s closing price yesterday. The purchase is the largest by Exxon Mobil since its $35 billion takeover of XTO Energy in June 2010. It includes 545,000 net acres in the Montney shale and 104,000 acres in the Duvernay, fields where oil and natural gas are extracted by horizontal drilling and hydraulic fracturing, so-called unconventional operations that were XTO’s specialty.“This acquisition will add significant liquids-rich resources to our existing North American unconventional portfolio,” Andrew Barry, president of Exxon Mobil Canada, said in a separate statement. “Our financial and technical strength will enable us to maximize resource value by leveraging the experience of Exxon Mobil subsidiary XTO Energy.” Current production on the acreage is 72 million cubic feet of gas a day and 4,000 barrels a day of oil and natural gas liquids (…..)

  2. Russia appears poised to approve deals that would all but double the size of the state oil company Rosneft, bringing more than half of the country’s oil industry under government control for the first time since the early 1990s and creating a new player on the world stage. At the heart of the maneuvering is the country’s third-largest oil company, TNK-BP, which is a joint venture between the British oil giant BP and four Russian billionaires. Rosneft is negotiating to buy out one or both partners. If either or both of the sales are concluded, Rosneft, whose headquarters is a mansion across the Moscow River from the Kremlin, is sure to expand its power on global oil markets. If both deals get done, Rosneft would become the world’s largest publicly traded oil company in terms of crude oil production, with the Russian government as the majority owner. The transactions would also lift the fortunes of Igor I. Sechin, a former spy and close aide to President Vladimir V. Putin, who has championed them as Rosneft’s chief executive. The company has been trying to play down negative associations with state ownership. Rosneft is like a teddy bear, Mr. Sechin told a group of investors in London this month, in a video posted on the company’s Web site. “We love our teddy bear. We clean it, look after it and take care of it.” The shift of BP’s Russian operations from private to state hands is fraught with risks, both for the company and the Russian industry more broadly. BP’s partnership with private sector billionaires has yielded a return of 34 percent annually since it began in 2003. BP has earned $19 billion in dividends on an $8 billion investment and is now poised to sell its stake for a reported $25 billion to $28 billion. BP’s investment in Rosneft stock from 2006, when the state company held an initial public offering, brought BP a loss. “The state is tempted to milk the oil industry as a cash cow,” Peter Westin, the chief equity analyst at Aton, an investment bank in Moscow, said by telephone, referring to both high taxes and expanding government control. The Kremlin, eager for investment to maintain the flow of oil that props up Mr. Putin’s popularity and the improved living standards of ordinary Russians, has sought both control and market-oriented policy changes under Mr. Putin. Rosneft is listed on the London Stock Exchange and is among a group of oil companies that are owned or closely affiliated with governments that control access to oil reserves but are also open to private sector investment, like Petrobras in Brazil and Statoil in Norway. The company has taken pains to emphasize that it will be run efficiently, hiring former executives from Exxon Mobil and TNK-BP in anticipation of the deal with BP. It has also reaffirmed its privileged access to new exploration sites in the Arctic Ocean after Mr. Sechin blocked a proposal by a liberal wing of the Russian government to open offshore drilling to competition. Cliff Kupchan, an analyst at the Eurasia Group, which conducts risk analysis on Russian politics and economic policy for large investors including oil companies, wrote in a research note that Rosneft’s expansion could tempt the Russian government to use it strategically, just as Aramco, the Saudi Arabian company, is used to influence oil prices. This would come with a distinction: unlike Saudi Arabia, Russia would be unlikely to coordinate such moves with the United States. Rosneft, if the acquisitions are completed, would pump about four million barrels of oil a day, or about 40 percent of the output of Saudi Arabia (…..)


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