22-10-2012

BP agrees heads of terms to sell its TNK-BP shareholding to Rosneft

BP today announced that it has signed heads of terms to sell its 50 per cent share in TNK-BP to Rosneft, the major Russian integrated oil and gas company. Under the heads of terms Rosneft has agreed in principle to buy BP’s share in TNK-BP.

The proposed transaction consists of two tranches:
(i) BP would sell its 50 per cent shareholding in TNK-BP to Rosneft for $17.1 billion in cash and Rosneft shares representing a 12.84 per cent stake in Rosneft;

(ii) BP intends to use $4.8 billion of the cash consideration to acquire a further 5.66 per cent stake in Rosneft from the Russian government. BP would acquire the Rosneft shares from the Russian Government at a price of $8 per share (representing a premium of 12 per cent to the Rosneft share closing price on the bid date: 18 October 2012).   
  
Signing of the definitive agreements is conditional on the Russian government agreeing to the sale of the 5.66 per cent stake in Rosneft and it is intended that the TNK-BP sale and this further investment in Rosneft would complete on the same day. Therefore, on completion of the proposed transaction, BP would acquire a total 18.5 per cent stake in Rosneft and net $12.3 billion in cash. This would result in BP holding 19.75 per cent of Rosneft stock, when aggregated with BP’s 1.25 per cent current holding in Rosneft. At this level of ownership, BP expects to be able to account for its share of Rosneft’s earnings, production and reserves on an equity basis. In addition BP expects to have two seats on Rosneft’s nine person main board.

In accordance with the heads of terms, BP and Rosneft have an exclusivity period of 90 days to negotiate fully-termed sale and purchase agreements. After signing definitive agreements, completion would be subject to certain customary closing conditions, including governmental, regulatory and anti-trust approvals, and is currently anticipated to occur during the first half of 2013. In addition, BP will agree not to dispose of any of the Rosneft shares acquired in the transaction for at least 360 days following the completion of the transaction. 

BP's chairman Carl-Henric Svanberg said: "This is an important day for BP. Russia is vital to world energy security and will be increasingly significant in years to come. Russia has also been an important country for us over the past 20 years. Our involvement has moved with the times. TNK-BP has been a good investment and we are now laying a new foundation for our work in Russia.   
  
"Rosneft is set to be a major player in the global oil industry. This material holding in Rosneft will, we believe, give BP solid returns. We consider that this is a deal which will deliver both cash and long term value for BP and its shareholders. It provides us with a sustainable stake in Russia’s energy future and is consistent with our Group strategy.

"Over the coming months we will work hard to complete the transaction and we look forward to the next step of deepening our already strong relationship with Russia.”

BP's group chief executive Bob Dudley said: "This investment builds on BP’s track record of value creation in Russia. It is consistent with our strategy of deepening our positions in the world’s most prolific oil and gas regions.

"BP intends to be a long term investor in Rosneft – an investment which I believe will deliver value for our shareholders over the next decade and beyond.

"Rosneft is a company working to become a global leader in the sector. It is developing its substantial asset base with new technologies and improving its management processes and corporate governance. As a major investor BP looks forward to being able to contribute to Rosneft's success and add value through our participation on the Board. In this regard BP is supportive of Rosneft's intention to pursue further equity in TNK-BP in due course."