Dudley gets back his seat at the table

Elizabeth Fournier
JUST over four years ago, Bob Dudley left Russia in something of a hurry. Then boss of the firm’s TNK-BP tie-up with AAR – the consortium of oligarchs who yesterday agreed to sell out to Rosneft – Dudley spent the next five months attempting to run the joint venture from a secret location, as the relationship with the oligarchs soured and he feared his Russian visa could expire and not be renewed.

After yesterday’s deal with state oil firm Rosneft, Dudley – now chief executive of the whole of BP – can return to Russia with his head held high.

Since being drafted in to supervise the firm’s response to the Deepwater Horizon disaster in April 2010 and then succeeding Tony Hayward as CEO in October that year, Dudley’s tenure at the top of BP has so far been dogged by the fallout from the Gulf spill – and an ongoing tussle with AAR.

He’ll be hoping that yesterday’s deal ­– a whopping $17.1bn in cash plus 12.84 per cent of the Russian state oil giant and more to come – will draw a line under the conflict of the past, and so far the signs look good.

The combined total value of $28bn is one heck of a return on BP’s initial $8bn investment in TNK-BP back in 2003, with dividends from the joint venture paying out $1.8bn in 2010 and $3.7bn last year. It’ll provide a boost to the oil major’s balance sheet and reduce the firm’s debt ratio below its target rate of 10-20 per cent, according to Killik & Co. For a company still facing undetermined liabilities in the Gulf of Mexico it’s a welcome boost, especially to investors hungry for an increased dividend.

The deal is also a good physical fit. The Russians need BP’s advanced exploration technology to tap their vast Arctic fields, and, unlike the US politicians who were quick to distance themselves from “British Petroleum” in the wake of the Gulf spill, Putin has adopted a more sympathetic stance, spreading the blame among subcontractors – including several US firms.

But let’s not forget that Dudley has tried to jump into bed with Rosneft before back in 2011, only to have AAR promptly roll over and shove him out the other side by blocking the deal just two months later. Canaccord also raises concerns about possible dilution of earnings, estimating a hit of 6-7 per cent for 2013-15.

There are already more layers to BP’s Russian relationship than you’d find in the most complex set of Russian dolls. Though with Putin on board Dudley stands no chance of being the biggest doll in the nest, investors will be hoping that this time he’s nearer the top of the hierarchy.