The state-owned Russian oil giant Rosneft’ NK OAO (MCX:ROSN) has now decided to tighten its grip on the country’s oil industry, by acquiring the country’s third biggest oil producer TNK-BP, a joint-venture between British Petroleum and AAR, a consortium of four Russian oligarchs. Sources familiar with the matter told Reuters that Rosneft has submitted its cash and shares bid to BP Plc (NYSE:BP), which values entire TNK-BP at approximately $50 billion.
“We are reviewing our options including any offers that we have received,” said a BP spokesperson. The board of the British oil company will meet on Friday. Rosneft has already announced plans to acquire AAR’s stake in TNK-BP for about $28 billion. The sources said that BP plc (NYSE:BP) and the four Russian billionaires will end up owning minority stakes in the enlarged Rosneft, and they will also get billions of dollars in cash.
TNK-BP has suffered a lot, due to a strained relationship between the partners BP and AAR. In 2008, AAR had forced Bob Dudley, the then CEO of TNK-BP and now chief executive of BP, to leave Russia. AAR billionaires were also against BP’s exploration agreement and share swap with Rosneft.
Right after the relationship with its partners turned sour, BP had announced plans to sell off its stake in TNK-BP. In July, Rosneft Chief Executive Igor Sechin said, “Rosneft has an established expertise and track record in managing large assets, and considers the potential acquisition of BP’s participation in TNK-BP to be an attractive commercial proposition.”
If the deal happens, it will make Rosneft the world’s largest oil company, ahead of Exxon Mobil and PetroChina. The newly formed company would be producing 4.5 million barrels of oil and gas a day.
Rosneft’ NK OAO (MCX:ROSN) is in talks with international banks to raise $15 billion to finance the deal. It can further raise $3 billion from Russian banks. However, raising too much debt can put Rosneft’s credit rating at risk. A banker said borrowing over $15 billion may put a risk on Rosneft’s ability to refinance later.