A combination of high dividends and a profitable existing business and a lack of alternative suitors may prevent British oil major BP and its Russian partners AAR from selling their respective stakes in Russia’s TNK-BP oil joint venture, despite BP's recent statements that it was ready to get out of the partnership, analysts polled by RIA Novosti said on Tuesday.
BP and AAR have been locked in a long-running dispute over management of their Russian joint venture, which resulted in the replacement of the former TNK-BP CEO Robert Dudley in 2008.
Russian billionaire Mikhail Fridman, a member of AAR, which represents the four billionaires of Russian origin who own 50 percent of TNK-BP, resigned as TNK-BP's CEO in late May due to what he called a collapse of corporate management.
The Guardian suggested in an article on Sunday the UK oil firm could net a $30 billion windfall from its 50 percent stake, as it plans to open talks with other potential buyers besides the AAR consortium, to resolve the long-standing shareholder conflict in Russia’s third largest oil company.
“BP, which has been in conflict with its Russian shareholders for a long time, will on Saturday be allowed to widen purchase talks to some of other companies that have expressed an interest in the 50 percent holding as a 45-day notice period runs out,” the Guardian said last weekend.
Russian market analysts think, however, the two sides could be locked in to the status quo in their partnership.
“The status quo means that nothing will change," Troika Dialog brokerage analyst Valery Nesterov said. "The company has been operating in the midst of a shareholder conflict for many years and it is operating successfully from the viewpoint of operational and financial indicators, high dividend payments and business development,” he said.
The Russian shareholders have indicated they will only offer $7 billion for BP's stake, although acknowledging it is worth around $20 billion, claiming a $13 billion discount would compensate AAR for the failure of a previous attempt by BP to tie up a separate deal with state-owned Rosneft earlier this year against AAR's wishes, the Guardian said.
If BP succeeds in gaining interest in its TNK-BP stake beyond the Russian oligarchs, Russia’s state-owned oil companies are the most likely bidders, Investcafe analyst Grigory Birg said.
“It is hardly likely some other foreign company would venture to join TNK-BP, given that the Russian shareholders hold 50 percent,” he said.
As for Russian companies, state-owned oil major Rosneft is unlikely to buy the stake, considering its existing financial commitment to huge investment projects, in particular construction of refineries, and its decision to double dividend payments to 25 percent of net profit, Birg said. He thinks it would be advisable for one of the shareholders to reduce its stake by 10-12 percent to resolve the conflict.
Nesterov shared this view.
“The participation of state companies is possible if the shareholder conflict develops further, because the vector of state policy is so far aimed at the development of state property.”
Metropol investment company analyst Sergei Vakhrameyev also thinks the most likely option is for a Russian state-controlled company to buy BP’s stake.
“Rosneft could offer much more money than the Russian shareholders [of TNK-BP]. The latest proposal Fridman made public, i.e. $20 billion for the stake, is quite a low price and does not even imply a premium for control. …Therefore, BP is unlikely to agree,” he said, adding foreign bidders are unlikely to be allowed into the deal.