The City cheered yesterday as BP finally resolved its troubled relationship with TNK-BP by agreeing to sell its half of the Russian joint venture to Rosneft for a "good price" of $27bn (£17bn) in cash and shares.
But while analysts and investors were broadly satisfied with the price, they were unhappy with the make-up of the deal, in which Rosneft will pay BP only $12.3bn of cash, with the remainder of the proceeds coming from an 18.5 per cent stake in the Kremlin-controlled giant and two seats on the board.
Andrew Whittock, an analyst at Liberum Capital, said: "The headline number is good. But the cash component is a bit less than I would have hoped for and the shares are a bit more."
"It's not as good as an all-cash deal, but it's better than no-cash deal," added Stuart Joyner, an analyst at Investec.
The deal allows BP to sever its ties with the AAR quartet of billionaires which own the other half of the venture in what has amounted to a highly fraught nine-year relationship. This has included court cases and harassment claims by Bob Dudley, formerly the head of TNK-BP and now BP's chief executive.
Ildar Davletshin, an oil and gas analyst at Renaissance Capital, said the deal "strategically looks very positive for BP" which has replaced "a private partner for a strategic national company which has much bigger access to resources in Russia and has much bigger political support".
Rosneft's deal with BP is one of two the Russian giant announced yesterday. In the other deal, Rosneft agreed to buy AAR's stake in TNK-BP for $28bn in cash. This will leave Rosneft with full control of the venture, increasing its daily production from 2.6 million barrels of oil equivalent a day to 4.6 million and transforming it into the world's biggest public oil company.
Mr Dudley, pictured, said: "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."
He added that BP intends to use some of the cash proceeds to "continue with its progressive dividend policy" as the company seeks to return its shareholder payouts to their level before the Gulf of Mexico oil spill.
The agreement to sell BP's 50 per cent stake to Rosneft, which still has to be signed off by the Russian government, is expected to be finalised during the first half of next year.
The deal will be conducted in two stages. In the first, the Russian company will pay BP $17.1bn in cash plus shares in Rosneft representing 12.84 per cent of the company. Second, BP will use $4.8bn of that cash to buy a further 5.66 per cent stake in Rosneft from the Russian government. The second deal values Rosneft shares, which were trading at $7.13 at the end of last week, at $8 a share and, added to BP's existing 1.25 per cent stake in the Russian company, will take its total holding to 19.75 per cent, making it the second-biggest investor.
BP will use at least some of the cash it receives from Rosneft to help finance compensation claims arising from the Gulf of Mexico oil spill in April 2010, which caused 11 deaths and a large amount of environmental damage. Shares in BP fell by 6.95p to 443.45p. Analysts put the slip down to yesterday's falling oil price and disappointment about the cash component of the sale.