BP confirmed Monday in a statement to the London Stock Exchange that it has agreed 'heads of terms' to sell its 50-percent stake in Russian subsidiary TNK-BP to Rosneft for $28 billion. The announcement came after BP stated earlier Monday that it was "in advanced discussions" with the Russian state oil company.
The payment - a mixture of $17.1 billion cash and shares representing 12.84 percent of Rosneft - is in line with what oil sector analysts were expecting. BP said that it intends to use $4.8 billion of the cash payment to purchase a further 5.66 percent of Rosneft from the Russian government.
BP's statement quoted its Chairman Carl-Henric Svanberg as commenting:
"This is an important day for BP. Russia is vital to world energy security and will be increasingly significant in years to come. Russia has also been an important country for us over the past 20 years. Our involvement has moved with the times. TNK-BP has been a good investment and we are now laying a new foundation for our work in Russia.
"Rosneft is set to be a major player in the global oil industry. This material holding in Rosneft will, we believe, give BP solid returns. We consider that this is a deal which will deliver both cash and long term value for BP and its shareholders. It provides us with a sustainable stake in Russia's energy future and is consistent with our group strategy."
TNK-BP currently contributes almost 30 percent of BP's total production while also making up around 30 percent of the company's reserves.
There is the possibility that a bidding war could emerge for TNK-BP. The Russian joint venture's other shareholder – a consortium of investors called Alfa Access Renova – announced at the start of October that it was seeking to raise at least $20 billion to buy out BP's share.
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