BP, the U.K. oil and petrochemicals company, plans to sign an agreement to retain its half stake in TNK-BP Holding, but will first be forced to oust TNK-BP’s CEO to enable a 8-month dispute with billionaire investors - that has threatened BP’s future in the project - to come to an end.
Under the deal, the 50-50 equity split between BP and TNK-BP, Russia's third-largest oil company, would stay the same, but BP-appointed Chief Executive Robert Dudley would be removed from his post by the end of the year.
He is set to be replaced by a native speaking Russian and three independent directors on the TNK-BP board.
The agreement also provides the option for an equally shared initial public offering of up to 20% of a subsidiary of TNK-BP.
Eight-months of allegations of industrial espionage, bureaucratic harassment and visa denials have –incredibly – seen the storm end in agreement.
The move comes amid fears that BP would lose up to 25% of its stake in TNK-BP without any compensation. The high-profile power struggle at the top has resulted in Dudley fleeing the country, allegedly because of harassment.
BP confirmed discussions were in progress but declined to comment further, while an unnamed spokesman for several of TNK-BP's Russian shareholders also chose not to comment.
Meanwhile, the shareholders will be examining a proposal to sell stock in a unit of TNK-BP to help boost the company's market value.
The peace agreement at the top will see BP’s stake in the 50-50 venture remain intact, while at the same time sympathetically meeting the Russian billionaires, the Alfa-Access-Renova (AAR) consortium of oligarchs, demands for a more independent board.
TNK-BP accounts for almost a quarter of BP's global output and reserves and it is BP’s hand in the world's second-largest oil exporter, Russia.
The elongated dispute has hit both TNK-BP's output and discouraged investors in the Russian stock market, contributing to a 30% decline in the Micex index this year.
BP's Russian troubles also rebounded on the group's reputation on Thursday when Standard & Poor's lowered its corporate credit rating for the oil multinational.
Citing doubts over the long-term ownership of TNK-BP, S&P cut the rating on BP's corporate debt from AA+ to AA. The agency also said that it had lowered the long-term corporate credit rating of BP Finance to AA- from AA.
As S&P cut BP's ratings, it boosted the credit status of its arch-rival Royal Dutch Shell, raising Shell's long-term credit rating to AA+ from AA.
However, in the markets BP’s shares rose 4% on the back of the news that agreement had been found.
TKN-BP’s transformation into a major independent oil company with international operations and bigger downstream interests could soon emerge as a director competitor to BP itself.
A spokesman for BP said: “We don't have a problem in competing with TNK-BP in key areas. We don't have a problem with [creating] an international oil company.”
