Desperate Times? BP Sells Assets to Russian Frenemy TNK-BP
BP will sell $1.8 billion worth of oil and gas assets in Vietnam and Venezuela to the one company it never wanted to see expand internationally -- a deal that is at the very least ironic, quite possibly a sign of desperation... or both.
TNK-BP oil company, the 50-50 joint venture formed in 2003 between BP and Russian oligarchs, has had international aspirations for years. That subject was long a serious bone of contention between the two equal partners of TNK-BP.
TNK-BP is equally owned by UK-based BP and AAR Consortium, a group of Russian billion shareholders that include Alfa Group, Access Industries and Renova. American and BP veteran Bob Dudley was the president and CEO of TNK-BP until he famously had to leave Russia in July 2008 when arguments over the company's direction led to the non-renewal of his visa. One of the main disagreements? The Russian partners wanted TNK-BP to expand its operations internationally, even if that brought it into direct competition with BP. BP, unsurprisingly, didn't want that.
After trying to run TNK-BP from outside Russia, Dudley stepped down. TNK-BP would later revise its ownership agreement and set up a succession plan for a Russian-speaking CEO with extensive business ties to the country. Russian billionaire Mikhail Fridman is the interim CEO and executive chairman of the board of directors.
Of course, we now know Dudley as the new CEO of BP. The guy who is supposed to help BP survive the Gulf of Mexico tragedy and put the oil company back on course. Dudley has a lot of history with TNK-BP, so his statement regarding the asset sale to his frenemy had to leave a bitter taste in his mouth.
These are robust businesses which offer both existing production and potential opportunities for future growth. We believe they will offer TNK-BP a solid foundation as it builds its business outside Russia.So, why TNK-BP? We all know BP needs the cash to pay for the Gulf oil spill. And TNK-BP has been circling BP ever since the company announced plans earlier this summer to sell $10 billion (which was later increased to $30 billion) in non-core assets. But the properties and leases themselves -- specifically, in politically problematic Venezuela -- likely left BP with few suitors to choose from. Certainly, U.S. oil majors were going to steer clear, leaving state-owned companies from China, most likely, and Russia to duke it out. TNK-BP is ideally suited to take over assets in Venezuela and Vietnam given Russia's established relationships with the two countries.
Other assets BP has sold since July 2010 to help the company meet its financial obligations from the Gulf of Mexico oil spill include:
- Independent U.S. oil and gas company Apache agreed in July to pay $7 billion for assets in Texas, western Canada and Egypt. BP received a $5 billion cash deposit July 30 as part of the deal.
- In August, BP agreed to sell its oil and gas exploration, production and transportation business in Colombia to Ecopetrol, Colombia's national oil company, and Talisman Canada for $1.9 billion in cash.
- BP announced in September it would sell stakes in its Malaysian chemical assets to Petroliam Nasional for $363 million.
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