BP, which owns the TNK-BP venture 50-50 with a group of Russian billionaires, will book the cash in full, London-based spokesman Mark Salt said. TNK-BP will make a $1 billion deposit by Oct. 29 and pay the remainder on completion of the deal, which is expected in the first half of 2011, the companies said in statements today.
BP plans to sell $30 billion in assets to cover costs linked to the Gulf of Mexico oil spill, the worst in U.S. history. TNK-BP, which accounts for about a quarter of BP’s output and a fifth of reserves, is seeking to increase value by expanding outside Russia.
“It sounds like a good deal,” said Jason Kenney, head of oil and gas research at ING Commercial Banking in Edinburgh. “There’s obviously a lot of value inherent in these assets, so by selling them to a company they half own they’ll continue to reap value from them.”
Today’s announcement brings the amount of assets BP has sold this year to more than $11 billion. It sold $7 billion of fields in the U.S., Canada and Egypt to Apache Corp. In Colombia, it divested $1.9 billion assets to Ecopetrol SA and Talisman Energy Inc.
Russia, Venezuela Support
BP shares rose 1.6 percent to close at 432.15 pence today in London. While the stock has recovered since falling as low as 302.9 pence on June 29, it is still down about 34 percent since the Gulf of Mexico accident.
In Venezuela, TNK-BP will gain a 16.7 percent stake in PetroMonagas SA, a heavy oil producer; a 40 percent stake in Petroperija SA; and 26.7 percent stake in Boqueron SA. The joint ventures with state-run Petroleos de Venezuela SA have a combined capacity of 25,000 barrels of oil equivalent a day, the Moscow-based company said.
Russia and Venezuela signed an accord supporting the deal on Oct. 14, during President Hugo Chavez's visit to the Kremlin.
“Given Russia’s strong relationships with Vietnam and Venezuela we are sure that this transaction will create significant value both for TNK-BP and our local partners,” TNK- BP Chief Executive and billionaire shareholder Mikhail Fridman said in the statements.
Low Russian Returns
In Vietnam, TNK-BP will buy BP’s 35 percent stake in an offshore gas block containing the Lan Tay and Lan Do fields, a 32.7 percent stake in the Nam Con Son pipeline and terminal and a 33 percent stake in the Phu My 3 power plant, TNK-BP said.
TNK-BP’s working interest in the Vietnamese assets comes with a production capacity of 30,000 barrels of oil equivalent a day, TNK-BP said.
“The move is quite logical for TNK-BP because at home returns are low,” Oleg Maximov, an oil and gas analyst at Troika Dialog in Moscow, said by telephone. Looming tax increases as Russia tries to narrow its budget deficit will probably lower oil companies’ exploration and production profit, Maximov said.
The acquisitions may be reflected in TNK-BP dividends, although the total payout this year will probably be about $3 billion, Stan Polovets, chief executive officer of the billionaires’ holding company AAR, said earlier this month. The dividend payout may be lower than 60 percent of net income, although probably not less than 40 percent, he said.
BP will consider resuming dividend payments early next year after the company canceled them for the first three quarters of 2010, Robert Dudley, the American who became BP CEO on Oct. 1, said last month. Dudley was head of TNK-BP for five years before being forced out during a management dispute between BP and the billionaire shareholders in 2008.
Together the Venezuela and Vietnam acquisitions will add proved and probable reserves of about 260 million barrels of oil equivalent to the venture on an entitlement basis, TNK-BP said.