BP SHARES edged up yesterday in the market’s first chance to react to its $16bn (£10.1bn) deal and share swap with Russia’s state oil firm Rosneft.
BP closed up 0.24 per cent at 500.7p, beating an overall decline in the FTSE 100 index, despite a likely dilution of earnings per share through the deal.
As BP began a charm offensive to sell the merits of the Arctic exploration project to investors, industry experts were broadly supportive of the move to access Rosneft’s fields in the Arctic circle.
Credit Suisse analysts said the project represented “a major breakthrough for relationships between majors and Russia”. They added: “The technically challenging nature of Arctic developments explains Russia’s decision to open up access to [BP].”
Figures from Dealogic show the tie-in is the third biggest deal in BP’s history, behind its two US acquisitions of Amoco, for $53bn, and Arco, for $26.8bn, in the late 1990s.
Michael Tamvakis, professor of commodity economics and finance at Cass Business School, pointed to BP’s history of being the first to drill in difficult locations. “Getting into bed with the Russians isn’t the safest thing BP can do – the Arctic territory is still disputed for one thing – but it’s one of the only options BP has right now,” he told City A.M.
“This could be a sign that BP is considering withdrawing from deepwater sites such as the Gulf, and in any case makes BP more difficult to look at as a takeover target.”
Fred Lucas at JP Morgan in a note to investors, questioned why the firms plan to wait four years to drill when they already have positive seismic results: “Even allowing for a short three-month work window due to Arctic weather, Big Oil still moves far too slowly, in our view.”