BP has announced its intention to exit from the company’s 19.75% stake in state-owned Russian oil company Rosneft, worth approximately $14 billion.
The BP share price was rocked by the news and dropped by 5% to 359p in early trade on Monday.
The energy giant is estimated to take a hit of $25 billion, which it is expected to begin report in its Q1 2022 financial results, following confirmations that the company would no longer recognise a stake in Rosneft’s reserves, net income and production.
The company reportedly chose to drop its stake following a twenty-minute call from Business Secretary Kwasi Kwarteng to discuss the implications of BP’s stake in the Russian petroleum producer, which it has held since 2013.
The move came as BP executives Bernard Looney and Bob Dudley also announced their departure from the Rosneft board.
“Like so many, I have been deeply shocked and saddened by the situation unfolding in Ukraine and my heart goes out to everyone affected,” said Looney.
“It has caused us to fundamentally rethink BP’s position with Rosneft.”
BP chair Helge Lund added: “Russia’s attack on Ukraine is an act of aggression which is having tragic consequences across the region.”
“BP has operated in Russia for over 30 years, working with brilliant Russian colleagues. However, this military action represents a fundamental change.”
“It has led the BP board to conclude, after a thorough process, that our involvement with Rosneft, a state-owned enterprise, simply cannot continue.”
“The Rosneft holding is no longer aligned with BP’s business and strategy and it is now the board’s decision to exit BP’s shareholding in Rosneft.”
“The BP board believes these decisions are in the best long-term interests of all our shareholders.”
Analysts have weighed in that BP made a wise decision to sell its Rosneft stake, however they cited that the company will be in a poor negotiating position to find a buyer for its shares.
“In a move that feels seismic but at the same time completely unsurprising, BP has announced plans to offload its stake in Russian oil company Rosneft,” says Russ Mould, investment director at AJ Bell.
“Remaining invested in Rosneft could almost be literally construed as fuelling the Russian war effort and that would not have been a sustainable position for much longer.”
“Despite the financial cost shareholders are likely to be relieved that BP has taken pre-emptive action.”
“There had already been indications that the UK government was uncomfortable with BP‘s Russian links although forcing it to exit its holding in Rosneft would probably have required legislation.”
“Attention will now turn to how exactly BP will affect an exit and likely bidders for its stake.”
“Ultimately the company is in a weak negotiating position and may have to accept a cut price deal.”
