BP deal gets a muted thumbs-up from the City
Tuesday 18 January 2011
The markets gave a cautious welcome to BP's $7.8bn (£4.9bn) share-swap and Arctic exploration deal with Russia's Rosneft last night.
The oil giant's shares rose by as much 3 per cent in early trading yesterday before closing only marginally higher by 1.2p to 500.7p, as investors digested the details that were unveiled late on Friday.
Over the weekend, the share-swap – which will see the Russian government, through its ownership of Rosneft, become the single largest shareholder in the British oil giant – was criticised by some US lawmakers who called for official scrutiny owing to BP's status as a major supplier to the country's armed forces.
The agreement will enable BP to carry out exploration activity in areas of the Arctic that have previously been restricted to Russian oil companies. But yesterday, BP's chief executive, Bob Dudley, said the US government had been informed before the tie-up was unveiled, and that the company would not need official clearance to proceed with the deal.
Analysts said that while the agreement gave BP access to potentially lucrative reserves in the South Kara Sea on Russia's northern frontier, investors were unlikely to see returns for many years.
Gordon Gray, an analyst at Collins Stewart, said: "The South Kara Seas is a frontier area with little infrastructure, and any discoveries would take many years to bring to production."
Mr Gray's counterparts at Jefferies said the share-swap suggested that, following the bruising oil spill disaster in the Gulf of Mexico, BP was now starting to refocus on its long-term future. Russia, they said, remained a key region, despite past problems stemming from its TNK-BP venture.
Iain Reid, at Jefferies, said: "There may also be further potential co-operation when further licences in the region are awarded in the future."
Meanwhile, analysts at UBS stressed the deal demonstrated that BP's ability to take risks with its strategy had emerged intact following the oil spill in the Gulf of Mexico. In a research note, they said: "One of the key dangers for BP is that, in the aftermath of the spill, it would either be nervous about doing deals, or that it would simply be blocked because of reputational issues. Neither appears to be the case."
Rosneft produces some 2.4 million barrels of oil equivalent (boe) per day, and has reserves of 15.15 billion boe. Russia's Rosneft delivered pre-tax of $8.52bn for the year to 31 December.
Energy analysts at VTB Capital said: "Rosneft would clearly benefit from BP's deep-water experience. The important condition of the agreement is BP's exploration commitments, which could imply material savings for Rosneft."
Oscar Pistorius trial: Paralympian sick again after photographs of Reeva Steenkamp's body are shown in court
Missing Malaysia Airlines Flight MH370: US pushes search towards vast expanse of the Indian Ocean
Seth Rogen compiles list of all the celebrities he’s got high with
Oscar Pistorius trial: Photographs of Paralympian splattered in blood shown in court
Missing Malaysia Airlines Flight MH370: Focus shifts west as Indian Ocean becomes latest search area for the aircraft and its passengers
Katie Hopkins continues campaign to become Britain's most hated talking head with poorly timed Bob Crow tweet
No EU referendum under Labour: Ed Miliband to reveal that vote on membership is ‘unlikely’ in next Parliament if party wins power
Grace Dent: Who cares if she spells it Barraco Barner? Gemma Worrall is more employable than some bookish arts graduate
Europeans have ‘got whiter’ due to natural selection in past 5,000 years, scientists say
Fracking is turning the US into a bigger oil producer than Saudi Arabia
How climate change helped Genghis Khan: Scientists believe a sudden period of warmer weather allowed the Mongols to invade with such success
- 1 Tony Benn meets Ali G: Watch Labour veteran burn Sacha Baron Cohen
- 2 Women do experience two different types of orgasm, study reveals
- 3 Tony Benn dead: Veteran Labour politician passes away at 88
- 4 Istanbul protesters take 'Ellen selfie' from the back of a police van
- 5 Gauthier Soho has ranted against 'food blaggers' - so can we really trust online reviews?
iJobs Money & Business
£35000 - £43000 per annum + Bonus and Benefits: Harrington Starr: A global lea...
£50000 - £60000 per annum: Harrington Starr: Linux Systems Administrator - UNI...
£32000 - £36000 per annum + generous benefits: Pro-Recruitment Group: * TAX * ...
£37000 - £40000 per annum + £20000 benefits package: Pro-Recruitment Group: **...