This is a follow up to Thursday’s post about Rosneft’s 500 million barrel collateralised financing (to raise money for its purchase of BNP-TNK) and how the market managed to absorb it almost without any price impact.
Most of the previous post was based on the observations of Philip. K. Verleger, who believed the latter point represented a triumph for the futures markets, which had reached a whole new level of maturity.
And yet, as we have been reporting, it’s always more important to look to the curve. Spot price, or “flat price” as traders like to call it, is almost irrelevant. What’s happening in so-called time-spreads is usually much more critical. (And yes, nobody usually takes unhedged positions on flat price.) Read more
Because the deal has been exclusively revealed repeatedly and over a number of weeks, few seemed too excited by news on Monday that BP and its oligarch ‘partners,’ Alfa, Access/Renova, have finally agreed the terms on which they will sell TNK-BP to Rosneft.
In return for making Rosneft the world’s largest oil company by reserves, AAR get $28bn in cash for their 50 per cent stake, while BP come away with $25.9bn for their 50 per cent. Read more
TNK-BP’s management has recommended that its main board discuss filing suit for billions of dollars in damages against BP over its failed alliance with Rosneft after advice from two law firms, writes the FT. The move would raise pressure on BP as it battles a number of lawsuits over the proposed Rosneft deal, including one from its Russian billionaire partners in TNK-BP, which is under Stockholm arbitration proceedings, and another from minority shareholders in TNK-BP seeking $13bn (£8.1bn) in compensation through Siberian courts. Lawyers from two international law firms, Fried, Frank, Harris, Shriver and Jacobson, and Shearman & Sterling, have told the senior management of TNK-BP that “there are strong grounds for the company pursuing legal claims arising out of the events involving BP and Rosneft”. The lawyers recommend filing suits against BP and the BP-nominated directors on TNK-BP’s main board in the UK and the British Virgin Islands over claims that the UK group breached a shareholder pact that grants TNK-BP the right of first refusal over any new venture in Russia or Ukraine, according to a copy of a letter to TNK-BP’s general counsel, seen by the FT. Both TNK-BP and BP declined to comment.
ExxonMobil has traded Rosneft minority stakes in its Gulf of Mexico operations for joint exploration of the Russian Arctic, one of the last largely untapped oil reserves in the world, the FT reports. The tie-up strikes a decisive blow against BP’s hopes of restoring its own Arctic venture with Rosneft, which collapsed earlier this year, Reuters says. Rosneft needs Exxon’s technical skills to develop the Kara Sea region, which will see $3.2bn of joint investment although the Russian prime minister Vladimir Putin said the deal could lead to $500bn of foreign investment, according to the Moscow Times. Perhaps 108bn barrels lie below the Kara Sea, the WSJ says, making Exxon’s move part of a long game. Although unlike BP, Exxon shareholders will not be diluted, Lex observes.
Alternative headline: “Roxxon! You don’t have to put on the red light.”
Reported by Reuters a few minutes ago: Read more
BP has accused one of its Russian joint venture partners of breaching a shareholder agreement, just three months after they thwarted the UK group’s plans to strike an alliance with state-energy company Rosneft, the FT reports. Renova, owned by Russian billionaire Viktor Vekselberg, said it had received notice that BP intended to sue it in a Stockholm arbitration court for allegedly operating independent gas and fuel companies in Russia and Ukraine in breach of the shareholder agreement governing the Russia joint venture, TNK-BP. Renova denied any wrongdoing. BP declined to comment.
Minority shareholders of TNK-BP, the Anglo-Russian oil group, are preparing legal action to claim billions of dollars of damages over BP’s failed bid to form a strategic partnership with Rosneft, the Russian state oil company, the FT reports. A court in Tyumen in Siberia upheld a claim by a group of minority shareholders in TNK-BP Holding to secure evidence paving the way for them to claim damages incurred as a result of the failure of the deal. BP said the minority shareholders were pursuing a “groundless action” that it would vigorously contest. BP’s plan to partner Rosneft in an equity swap and Arctic exploration venture collapsed after AAR, the Russian shareholders in TNK-BP, successfully challenged the deal at a tribunal in Stockholm claiming it breached their shareholders agreement with the UK oil group.
Dmitry Medvedev, the Russian president, has criticised BP and government officials preparing Rosneft’s proposed alliance with the UK oil group for failing to take legal details into account, writes the FT. “Those who prepared the deal should have paid closer attention to the nuances of the shareholder agreement,” the president said. “It would have been necessary to conduct more careful due diligence inside the government.”
BP‘s bid for a strategic alliance with Rosneft, the Russian state oil champion, collapsed on Tuesday after the UK oil group failed to reach agreement to salvage its $16bn share swap before a midnight deadline expired, the FT reports. Rosneft was not willing to extend the deadline further, a person close to the state company said, after talks failed over a deal to buy out BP’s partners in TNK-BP, its existing Russian joint venture. A person familiar with the matter said Rosneft would now seek new partners for the Arctic exploration deal it had proposed for the alliance with BP. The lapsing of the Rosneft agreement will be seen as a blow to the UK oil group’s ambitions to find new areas of growth in the Russian Arctic after last year’s Gulf of Mexico spill.
Breaking pre-market news on Tuesday,
- Talks between BP, Rosneft and AAR shareholders fail to reach agreement – Reuters. Read more
Talks to salvage BP’s proposed $16bn share swap with Rosneft, the Russian state oil champion, appeared close to collapse after a midnight deadline UK time to complete the deal expired, writes the FT. Rosneft was not willing to extend the deadline further, a person close to the company said, after talks failed earlier in the day over a deal to buy out BP’s partners in TNK-BP, its existing Russian joint venture. A sticking point was Rosneft’s refusal to allow four Russian oligarchs, operating as Alfa-Access-Renova (AAR), to join the deal, says the Telegraph.
BP was on Sunday night locked in last-ditch talks to keep its Arctic ambitions alive before a proposed $16bn (£9.9bn) share swap with Rosneft, the Russian state oil champion, lapses at midnight on Monday, the FT reports. The UK oil group held talks with Rosneft, as well as its Russian billionaire partners in TNK-BP, its existing joint venture in the country, on Sunday to work out a compromise suitable to all three parties. A potential buy-out of Alfa-Access-Renova (AAR), the vehicle through which BP’s partners in TNK-BP hold their share, was one of the solutions under discussion, according to people familiar with the negotiations. According to the WSJ, the deal could be worth $30bn or more, giving Rosneft the 50 per cent stake in TNK-BP now owned by the billionaire partners. In turn, those partners would get cash and substantial stakes in both BP and Rosneft, according to these people.
BP was on Sunday night in last-ditch talks to salvage its Arctic ambitions before a proposed $16bn share swap with Rosneft, the Russian state oil champion, lapses at midnight on Monday, reports the FT. The UK oil group held talks with Rosneft, as well as its Russian partners in TNK-BP, its existing Russian joint venture, to try to reach a deal acceptable to all three parties. A potential buy-out of Alfa-Access-Renova, the vehicle through which BP’s partners in TNK-BP hold their share, was one idea under discussion. An arbitration tribunal in early May ruled that BP’s proposed $16bn share swap with Rosneft could proceed but only if BP allowed TNK-BP to take its place in any alliance to explore the Arctic with Rosneft. The share swap also needed to be restructured, with shares of both companies held in a trust. The ruling was a victory for AAR. Rosneft has said it did not want TNK-BP to be its partner in any Arctic exploration.
BP is bending over backwards to save its controversial deal with Rosneft, the Russian state-controlled oil group, and try to square its interests with those of the Russian authorities and of the oligarch partners in its current Russian joint venture, TNK-BP, reports the FT’s BeyondBrics. Rosneft has given the UK company until May 16 to negotiate an acceptable alternative to their original January agreement, that envisaged a $16bn share swap and an ambitious exploration and development joint venture for the Russian Arctic. But shareholders, the blog warns, “should be wondering whether all the contortions involved are worth the effort”.
BP has agreed a one-month extension to a $16bn share swap with Russian state oil champion Rosneft, just hours before what is expected to be a difficult annual meeting for the UK energy group on Thursday in London, the FT reports. The swap, which has been blocked under an interim injunction by an arbitration tribunal, was to have expired on Thursday. BP said the deadline had been extended to May 16 and that it intended to continue with the arbitration process. Bloomberg says Rosneft may pick another company to help explore the Kara Sea given BP’s failure to win over its partners in the TNK-BP venture before Thursday’s deadline.
Breaking pre-market news on Thursday,
- Glencore to raise $9bn-$11bn in London IPO — statement. Read more
BP’s efforts to buy out its Russian billionaire partners in TNK-BP were foundering on Wednesday night, ahead of a deadline to complete the UK energy group’s proposed $16bn share swap with Rosneft, the FT reports. According to people close to the discussions, BP and Rosneft, the state-controlled oil group, had decided to end talks with Alfa-Access-Renova, the Russian partners’ vehicle. They said the billionaires had made “unrealistic” demands for a buy-out of their 50 per cent stake in TNK-BP, BP’s existing Russian oil venture. “It looks like there will be no progress and both Rosneft and BP have essentially stopped discussions with AAR,” one person said. AAR demanded that TNK-BP be valued at more than $70bn before agreeing to a buy-out of its stake, and also asked for “significant” stakes in BP and Rosneft of about 10 per cent.
BP’s efforts to buy out its Russian billionaire partners in TNK-BP were foundering on Wednesday night, ahead of a deadline to complete the UK energy group’s proposed $16bn share swap with Rosneft, reports the FT. According to people close to the discussions, BP and Rosneft, the state-controlled oil group, had decided to end talks with Alfa-Access-Renova, the Russian partners’ vehicle. They said the billionaires had made “unrealistic” demands for a buy-out of their 50 per cent stake in TNK-BP, BP’s existing Russian oil venture.
BP is scrambling to reach a deal on a buy-out of its Russian billionaire partners in TNK-BP and save its alliance with Rosneft before an April 14 deadline, the FT reports. Pressure on BP is mounting ahead of its annual meeting on Thursday amid increasing investor concerns over its handling of the Rosneft alliance. Calpers, the biggest US pension fund, and its Florida equivalent, which between them own 0.4 per cent of BP shares, added to the pressure. The funds said they will oppose the approval of the company’s annual report and accounts as a sign of protest at the Gulf of Mexico spill. Talks between the UK oil group, the Russian billionaire shareholders and the Russian state-controlled company entered a second day on Tuesday, people familiar with the situation said, as pressure mounted on BP to reach a deal.
Comment, analysis and other offerings in Wednesday’s FT,
Martin Wolf: the radical right and the US state
What does the rise of libertarianism portend for the future of the US?, asks the FT columnist. This is not a question of interest to Americans alone. It matters almost as much to the rest of the world. A part of the answer came with the publication of a fiscal plan, entitled “Path to Prosperity”, by Paul Ryan, Republican chairman of the house budget committee. The conclusion I draw is the opposite of its author’s: a higher tax burden is coming. But that leads to another conclusion: much conflict lies ahead, with huge implications for politics, federal finance and the US ability to play its historic role. Read more
Igor Sechin, the deputy prime minister of Russia, stepped down as chairman of the board of Rosneft just nine days after an order from the Russian president that ministers should leave the boards of state companies, the FT says. Sechin had been a key architect of BP’s landmark alliance with the Russian state oil champion. Rosneft said Mr Sechin had “decided to set a good example” by following through so quickly on the president’s orders as part of overall “reform of the state monopolies”. Reuters adds that president Medvedev’s board purge is viewed as part of a wider bid to assert his authority and gain support within the elite to run for a second term as president in the March 2012 election.
BP will launch a final attempt this week to salvage a proposed alliance with Rosneft, the Russian state oil group, and intends to seek Moscow’s approval to buy out its billionaire partners in TNK-BP or do so in tandem with Rosneft, reports the FT. BP has just four days to secure an agreement with the partners to lift the legal block on its proposed $16bn share swap with Rosneft, which expires on Thursday. Failure to secure agreement by April 14 will endanger the landmark deal, which Bob Dudley, BP chief executive, hoped would help BP move on from last year’s Gulf of Mexico oil spill. A source close to Alfa-Access-Renova, the Russian partners, said the group was focused only on its arbitration with BP and on managing the company. AAR has repeatedly denied interest in selling. Rosneft said it had not yet received any buy-out offers but would consider exit proposals before April 14.
BP’s plans for a historic $16bn share swap and Arctic alliance with Russia’s state-oil champion Rosneft are in the balance after an arbitration tribunal extended an injunction on the deal, reports the FT. The ruling is a setback for the UK oil group and Bob Dudley, its new chief executive, who had argued that the alliance, unveiled in January, was an important growth opportunity for the company as it tries to recover from the Gulf of Mexico disaster last year. Reuters adds that Dudley is under fire due to the role of the British oil company’s partners in joint venture TNK-BP in blocking the deal. ”Given his (Dudley’s) past relationship in Russia, how difficult it has been, he should have been a bit more appreciative of how tricky it can be operating in Russia,” Arbuthnot Securities analyst Dougie Youngson told Reuters. Dudley was in charge of TNK-BP before being forced to leave Russia in 2008 due to what he said was a campaign of harassment by the joint venture’s co-owners.
Breaking pre-market news on Friday,
- Standard & Poor’s cuts Portugal by two notches to BBB; warns of further downgrade — report. Read more
Management of Anglo-Russian oil firm TNK-BP has proposed buying a $7.6bn stake in shareholder BP, in a bid to join an offshore partnership with Rosneft, reports Reuters, citing sources close to management. Whether such a deal would work out is questionable, however, after state-controlled Rosneft, Russia’s largest oil firm, said it saw no role for TNK-BP joining the Arctic exploration pact it announced in January with BP. That deal involves a $16bn share swap, under which BP would acquire a 10% stake in Rosneft in exchange for 5% of its own equity. The Russian tycoons who own half of TNK-BP have claimed the deal violates their shareholder agreement with BP, and have won a UK court injunction pending arbitration proceedings set for Stockholm next week. Attempts to resolve the disagreement have so far failed.
BP is making a $7.2bn thrust into India by taking a 30% stake in the vast but difficult-to-access natural gas blocks controlled by tycoon Mukesh Ambani, reports the FT. The deal with Reliance Industries, potentially worth up to $20bn and subject to government approval, follows BP’s $16bn share swap with Rosneft, the Russian state oil company, and marks the latest stage of the oil major’s recovery since last year’s Gulf of Mexico disaster. Bloomberg notes the deals signal BP’s shift towards the world’s fastest growing economies, with US exploration drilling still closed after the spill. But, warns the NYT, Indian approval for the Reliance deal “could take some time”.
BP is to make a $7.2bn thrust into India by taking 30 per cent stakes in vast but difficult natural gas blocks controlled by Mukesh Ambani, the country’s richest tycoon, reports the FT. The deal with Reliance Industries, potentially worth up to $20bn and subject to government approval, comes on the heels of a $16bn share swap with Rosneft, the Russian state oil company, and marks the latest stage of BP’s recovery since last year’s Gulf of Mexico disaster.
BP’s new chief executive Bob Dudley on Tuesday surprised investors with plans to sell off half the company’s US refining capacity, including its Texas City refinery, reports the FT. The UK oil major on Tuesday also announced its first dividend payment since last year’s Gulf of Mexico spill but the news was overshadowed by a UK court decision to suspend BP’s proposed $16bn alliance with Russia’s Rosneft. The High Court in London granted an injunction to BP’s billionaire partners in its existing Russian venture, TNK-BP, until Feb 25. AAR, the holding company for the Russian partners, had argued BP’s alliance with Rosneft breached their shareholder agreement. Meanwhile, says TheSource, BP’s US disposals “make business sense” but in the short term are “surprisingly risky… for a company that is supposed to be on its best behaviour” in the US.
BP’s hopes of winning back investors by resuming dividend payments were marred on Tuesday by confirmation that the group’s Russian partners in TNK-BP would block last year’s final dividend from the joint venture, reports the FT. Bob Dudley, chief executive, is expected to use his first results presentation on Tuesday to outline growth plans for BP and announce a resumption of dividends, suspended after last year’s Gulf of Mexico oil spill. But BP’s Russian partners, represented by Alfa-Access-Renova, confirmed on Monday they would block TNK-BP’s fourth-quarter dividend of $1.8bn as part of a dispute over BP’s recently announced share swap and Arctic exploration alliance with Rosneft, Russia’s state oil group. BP’s partners, says TheSource, are behaving like a “cuckolded spouse”, but, adds DealBook, their move is “no trivial matter”.