Five questions answered on the BP-Rosneft deal.
What is the deal with this deal?
After lengthy negotiations BP has sold its half share in TNK-BP to the Kremlin controlled Rosneft. We answer five questions on the deal.
What has BP and Rosneft exchanged in the deal?
BP has sold half of its jointly owned TNK-BP for $26.8 bn to Russian state run Rosneft. The Kremlin controlled company has also agreed a preliminary deal to buy the other half of TNK-BP for $28 bn from BP’s oligarch partners, AAR.
Why is it a landmark deal?
Because Rosneft is now the largest publically traded oil company in the world and BP is now its second largest shareholder after the Russian government.
What is the actual breakdown of shares and assets sold in the deal?
BP will trade its 50 per cent stake in TNK-BP for $17 bn and shares representing 12.84 per cent of Rosneft (worth $49.7 bn). BP will then reinvest $4.8 bn from the cash payout to purchase a further 5.66 percent of Rosneft shares, meaning it will own a total of 19.75 per cent shares in Rosneft as it already owns 1.15 per cent. British owned BP will buy the shares from the Russian government at a 12pc premium to the Rosneft closing share price on the bid date.
What will BP do with the payout money?
BP will receive $12.3 bn in net cash, which it is under pressure to return to shareholders.
A BP spokesman told The Telegraph: "The board has made no decision on the return of cash to shareholders following this transaction. Those decisions will be made once the deal is completed early next year."
What does this mean for the future influence of BP?
BP will have two seats on the 9 seat Rosneft board and a near 20 percent stake, which it will no doubt hope will allow BP some significant influence.
However, one top-10 investor told The Telegraph: "The truth is that BP is only ever going to be as influential as Rosneft allows it to be - and claiming anything different is delusional. While relations are rosy, everything will work well. But what hope does BP have if it has a disagreement with the Kremlin?"