May 27, 2024

DealBook: BP-Rosneft Deal Faces Another Setback

LONDON – An injunction prohibiting BP’s share-swap agreement with Rosneft was extended indefinitely on Friday, adding pressure on the British energy giant to salvage the deal by bowing to demands from its current partners in Russia.

BP is allowed to negotiate an extension of its agreement with Rosneft, which expires April 14. But a tribunal ruled an injunction blocking the $7.8 billion deal would stay in place “until further notice,” BP said in a statement. A group of Russian billionaires, who are BP’s partners in its current Russian joint venture TNK-BP, had asked the tribunal to block the deal with Rosneft, arguing it breaches their shareholder agreement.

A spokesman for BP said the company was “considering its options.” Some analysts said the possibilities for BP range from a settlement with TNK-BP’s shareholders to abandoning the deal with Rosneft. A TNK-BP board meeting is scheduled for early next week.

The Russian partners said Friday they “welcome the decision of the tribunal, which we consider fair, balanced, and thoughtful.”

The tribunal had asked for more evidence from both parties to decide on the share-swap component of the deal, which was announced in January and also includes an arctic exploration agreement. The tribunal plans to hold another round of hearings “at a later date,” the Russian partners said.

Friday’s ruling prolongs an already complex dispute over a deal that was supposed to be the first major effort by Robert Dudley, the BP chief executive, to push the company in a new direction after the oil rig explosion in the Gulf of Mexico last year. The deal with Rosneft would give BP access to a vast unexplored area at a time of heightened competition among oil companies for new reserves.

“They’re still desperately trying to do something and to sweeten the TNK-BP shareholders,” Christine Tiscareno, an analyst at Standard Poor’s in London, said. “The problem is that BP is starting to lose face. These guys are now whipping BP.”

Ms. Tiscareno also said that the setback in Russia could leave BP vulnerable to potential takeover bids from larger rivals. BP’s shares rose 0.7 percent in midafternoon trading Friday in London. They have gained 2.6 percent so far this year but still trade well below their value of before the oil spill in the Gulf of Mexico.

BP’s Russian partners had previously suggested that TNK-BP replace BP in the deal with Rosneft. But BP’s representatives on the TNK-BP board voted against the proposal. Some analysts said any compromise would probably involve some role for TNK-BP in the Rosneft agreement, meaning BP would have to share future profits.

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