Russia’s Energy minister, Alexander Novak, revealed that the government will sell a 5.66 percent, in the state owned oil company ROSNEFT OIL CO (PINK:RNFTF) to BP Plc (NYSE:BP) (LON:BP) next year. However, the minister also expressed that the government will refrain from a wider privatization of the country’s biggest oil company in 2013.
The energy minister was quoted speaking on the sidelines of a government meeting saying, “as far as I know it (the stake sale) will be as a part of the sale to BP PLC (NYSE:BP) (LON:BP), because, in fact, it is also a privatization”. The giant state owned oil producer is currently in the process of acquiring oil companies, including a major competitor, TNK-BP from British major BP (BP.L), and locally based AAR consortium, in a deal estimated to be worth $55 billion combined.
The acquisition of TNK-BP from British major BP (BP.L) will see the British oil drilling company spend some $4.8 billion in its planned acquisition of the 5.66 percent stake in Rosneft. The 5.66 percent stake is part of its 75.2 percent shareholding, currently owned by the government via state energy holding company Rosneftegaz.
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The privatization plan by the Russian state on its oil companies is strategized to sell takes in a wide range of companies and banks, with a view of raising funds for state budget and enhanced competitiveness. The state expects to have completely offloaded its 75.2% stake held at Rosneft by the end of 2016, beginning next year. The giant oil producer also sold shares through an initial public offering in 2006, worth $10 billion, notes Reuters.
Elsewhere, BP PLC (NYSE:BP) (LON:BP) has raised its dividend, citing a prospective high growth rate through 2014. The company also expects to record higher than expected quarterly profits. British Oil Company BP Plc will receive $12.4 billion in cash from its sale of TNK-BP (TNBP.MM), along with some 19.75 percent stake in the state owned Rosneft.
However, the company is still tormented by the events of 2010, as it continues to settle numerous payments related to the catastrophic offshore oil spill in the U.S. Reuters notes that prior to the $12.4 billion, the oil company had already raised $35 billion, plus an additional $11 billion already in the pipeline.
The report also notes that, BP PLC (NYSE:BP) (LON:BP) has already spent $14 billion in clean up processes and paid at least $8 billion in claims from the affected entities. Additionally, the company is offering an additional $7.8 billion to individuals and business as part of the settlement claims.
While the sale, of its stake in TNK-BP may have eased the headache of dealing with the AAR consortium, investors are raising questions over the oil producer’s future with the government controlled Rosneft. They fear that state interference may hamper the Russian company’s performance.
Richard Griffiths of Oriel Securities, is quoted saying, “the sale of TNK-BP to Rosneft, while removing the headache of being in partnership with AAR, still leaves BP as a large minority in a company heavily influenced by the Russian state and a Macondo settlement with the U.S. DoJ appears no closer,” contrary to BP’s chief executive officer, Bob Dudley’s sentiments, as he said, it was “a great company with great opportunities”.