Rosneft, BP likely to miss deadline for share swap - sources
MOSCOW. May 16 (Interfax) - BP and Rosneft are unlikely to complete their share swap by the deadline of midnight GMT tonight, sources close to both companies told Interfax.
One of the sources said various possibilities for the share swap were being considered, but that they would take time to work out and discuss.
Another source said that if a solution had been found the markets would know about it by now. "Only a few hours remain before the deadline, so at best the companies will announce tomorrow morning that the deal is off," the source said.
The sources said the companies were, though, trying to do all they could to meet the deadline as "they are under pressure from above."
One option might be for the partners to buy the AAR consortium which is vigorously opposing the deal out of the TNK-BP joint venture. At the initial stage, Rosneft would own 25% plus one share and BP would increase its stake to 75% minus one share. In time, Rosneft and BP would swap these stakes, with BP owning 25% plus one share and Rosneft 75% minus one share, one source said.
Rosneft and BP struck a deal on January 14 to explore the Arctic shelf in which the state-owned Russian oil major will receive 5% of voting shares in BP worth $7.8 billion in exchange for roughly 9.5% in Rosneft. Some of the 9.5% are shares that Rosneft acquired when the assets of the bankrupt Yukos were sold. BP bought 1.4% of Rosneft in the latter's IPO in 2006 and it will now own 10.8% of the company.
In addition, Rosneft will own 66.67% and BP - 33.33% of a joint venture that would explore and develop three license blocks - EPNZ 1, 2, 3 - in the Kara Sea on the Russian Arctic shelf containing 49.7 million tonnes oil, 1.8 trillion cubic meters gas and 49 million tonnes condensate. Production is expected to begin after 2015.
But the AAR consortium said almost as soon as the BP-Rosneft deal had been announced that BP was violating the terms of the shareholders agreement with TNK-BP, and it took the matter to court.
An arbitration court governed by Swedish law on May 6 allowed BP to swap 5% of its own shares for 9.5% of the shares in Rosneft, but with one almost impossible condition: the Russian side must accept not the British company as its partner in the Arctic shelf, but its joint venture TNK-BP. The tribunal also watered the content of the share swap deal down: the shares cannot be sold or exchanged, and they do not give the companies the right to nominate members of each other's board of directors.
Sources said in the middle of April that BP had offered to buy AAR out of the TNK-BP joint venture for $27 billion, but the latter declined on the grounds this is a long-term investment. The Financial Times has said talks between BP and AAR to buy the latter out collapsed the day before an initial deadline for BP's share-swap with Rosneft in April. The paper quoted sources close to the deal as saying the talks collapsed because an "unrealistic" amount was offered for the AAR stake, even though this carried a premium. AAR values its stake on a valuation of $70 billion for the whole company with payment in cash and shares. That would have worked out at around 10% of BP's shares.