Citi’s analysts pour oil on BP’s troubled waters

THE good folk at BP can be forgiven for being a bit miffed with the bankers at Citigroup Global Markets. Citi’s analysts Alastair Syme and Michael Alsford have issued a research note that questions BP’s hopes of realising between $25-30bn for its stake in its Russian subsidiary TNK-BP.

The note, entitled “Russian value-release remains a complex issue”, includes the suggestion that BP faces a damages claim from AAR, mounting to several billion dollars. Fridman, one of the billionaires behind AAR, is considered the most likely buyer of the BP-TNK stake.

Surprisingly for a research note, it is based mainly on conversations with AAR, which is in conflict with BP and it does not reflect BP’s view. A source close to BP yesterday said the note appeared a “little unfair”. Although the note refers to “our discussions with AAR management,” it omits to mention that Citi, a big partner of BP’s, also took Fridman to meet a broad selection of UK shareholders to brief them on his thoughts on BP's investment in Russia.

Alsford, one of the research analysts named on the note, said he had not met with AAR and referred The Capitalist to the Citi press office.

Alert: Russian value-release remains a complex issue

The issue of valuation hangs over all these proposals and, within that, the issue of damages that AAR claims are owned for BP’s attempted tie-up with Rosneft in early 2011 (the claim is this deal breached the AAR-BP shareholder agreement that placed

TNK-BP as the sole vehicle for both companies in Russia). We believe the damage claims that AAR will seek amount to several billion dollars.