BP Starts Talks on Sale of Stake in TNK-BP

Oil supermajor BP plc (NYSE: BP) announced today that it will begin a 90-day “good faith” negotiating period with its Russian partner in TNK-BP related to the sale of some or all of BP’s 50% stake in the joint venture. The Russian firm, Alpha Access-Renova (AAR), has expressed interest in buying half of BP’s stake in TNK-BP. The negotiation period is required under the terms of the existing agreement between BP and AAR.

According to TNK-BP’s 2011 operational results presentation, the company’s EBITDA in 2011 was $14.6 billion and net income was $9 billion. The company’s proved reserves of barrels of oil equivalent total 9.1 billion barrels under SEC guidelines. BP’s proved reserves total 17.75 billion barrels of oil equivalent, including the TNK-BP barrels. For comparison, Exxon Mobil Corp. (NYSE: XOM) reported proved reserves of 24.9 billion barrels of oil equivalent at the end of 2011.

At today’s share price, BP’s market cap is $132.5 billion, and like all oil companies, BP’s value is heavily determined by its proved reserves. Selling off a quarter of its reserves should deliver more than $30 billion to BP’s coffers.

During the negotiating period BP is permitted to seek other interested parties, but there is no guarantee that a sale will occur.

BP’s shares are up slightly at $41.73 in a 52-week range of $33.62-$48.34.

Paul Ausick