DBRS Comments on Completion of BP’s Sale of Stake in TNK-BP

DBRS notes today that BP p.l.c. (BP or the Company; rated “A,” Stable trend) announced the completion of the TNK-BP Sale and Purchase transaction (the Transaction), originally announced on October 22, 2012. At the time, BP announced that it had an agreement in place to sell its 50% share in its Russian joint venture (TNK-BP) to OAO Rosneft (Rosneft), a major Russian integrated oil and gas company.

In return for its stake in TNK-BP, BP has received a mix of cash, in the amount of $16.65 billion (which excludes a $0.71 billion dividend paid by TNK-BP to BP in December 2012), as well as shares representing 12.84% ownership in Rosneft. In addition, BP has used $4.87 billion from the cash consideration to purchase a further 5.66% stake in Rosneft from OFSC ROSNEFTEGAZ. This brings BP’s total holdings in Rosneft, Russia’s largest oil company, to 19.75%.

BP is expected to account for its investment in Rosneft on an equity basis, and also expects to have two seats on the nine-person board of directors.

DBRS continues to view the Transaction as having no impact on the credit rating. A portion of the $11.78 billion of remaining cash proceeds is expected to be used for share repurchases to offset any dilution to earnings per share as a result of the sale of its interest in TNK-BP, as well as reinvestment. DBRS would expect that remaining proceeds be used to further strengthen BP’s financial and liquidity profiles.

The Transaction brings an end to the somewhat tumultuous relationship BP has had with its joint venture partners in TNK-BP; however, it will result in BP having less control over its Russian production volumes. In addition, production from Russia will continue to remain a significant portion of BP’s worldwide volumes.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Oil and Gas Companies (April 2011), which can be found on our website under Methodologies.