BP called the amount of losses due to withdrawal from Russia

BP called the amount of losses due to withdrawal from Russia



The British oil and gas company BP estimated the loss from the exit from Russian assets, including a stake in Rosneft, at $24.4 billion, according to the company's financial report under IFRS, published on August 2. Earlier, in the reporting for the first quarter, it was about a loss of $25.5 billion.

On February 27, 2022, BP announced its intention to sell its 19.75% stake in Rosneft and shares in other joint projects in the Russian Federation in connection with Russia's special operation in Ukraine. The British holding also owns stakes in three joint ventures with Rosneft: Taas-Yuryakh neftegazodobycha (20%), Yermakneftegaz (49%) and Kharampurneftegaz (49%).

At the same time, in the report, BP actually admits that due to the counter-sanctions imposed by Russia, it is deprived of the opportunity to exit its Russian assets, and also cannot sell its shares on the Moscow Exchange. “Therefore, it is not possible to calculate the likely outcomes of any of the exit processes,” the report says. Because of this, BP considers the book value of its assets in Russia to be zero.

Earlier, a source in Rosneft told Vedomosti that, despite public statements about the breakup of partnership with Rosneft, BP has not yet initiated any procedures to exit either from the capital of Rosneft itself or from the shareholders of joint ventures. The same was stated on SPIEF–2022 Rosneft CEO Igor Sechin, pointing out that the British company wants to “wait out the unfavorable geopolitical situation without real losses.” He also noted that with an investment of just over $10 billion, the British company's total income from its Russian assets amounted to about $36 billion.

At the same time, the example of other Western majors, which also announced the curtailment of business in Russia, suggests that an exit from assets is possible. But this is not a sale, but rather a free transfer of shares to new owners.

Norwegian Equinor announced its withdrawal from the Russian Federation on February 28 and less than 3 months later confirmed the exit from all assets in Russia. It took French TotalEnergies about 4 months to withdraw from the Kharyaga PSA, while Anglo-Dutch Shell managed to withdraw from projects in Russia in less than 3 months by selling its stakes in Gydan Energy and Shell Neft. Equinor, TotalEnergies and Shell transferred their stakes in Russian assets almost for free, according to their reports. The reports use the word transferred, which means not a sale, but a transfer.

Despite heavy write-downs related to Russian assets, BP managed to demonstrate exceptionally strong financials in the second quarter. The company made a profit of $9.3 billion after a loss of $20.4 billion in the first quarter. Underlying replacement cost income (equivalent to net income) for April-June was $8.45 billion, three times more than in the same period in 2021. The company explained this by strong refining margins, “continued exceptional performance” of oil trading and higher sales volumes liquid hydrocarbons.

Net debt of BP in the II quarter decreased by almost $10 billion to $22.8 billion in annual terms. The results of the second half of the year allowed the company to increase the dividend from 5.460 cents to 6.006 cents per ordinary share, as well as announce a buy-back program (repurchase of shares) for $3.5 billion. The company also maintains a high level of capex. Capital expenditures in the second quarter and half of 2022 amounted to $2.8 billion and $5.8 billion, respectively, compared to $2.5 billion and $6.3 billion in the same periods in 2021. BP also confirmed its forecast for capex for 2022 .at the level of $14-15 billion.

Igor Yushkov, an analyst at the National Energy Security Fund, noted that “Rosneft» for BP is a colossal asset that the British company does not want to lose. According to the expert, BP announced its withdrawal from Russia "in the most emotional period" when the West reacted to the start of a special operation in Ukraine. “But now the company is playing for time and does not want to exit the assets,” the expert believes. The head of the Energy Development Center, Kirill Melnikov, also suggested that BP would try to preserve its Russian assets: “The company has already written off the full cost of assets in its financial statements and is not taking part in their management, so now it can take a wait and see attitude.”

Melnikov noted that the joint projects of BP and Rosneft are at the stage of exploration or at the early stage of production; their status will depend not on partnership with BP, but on Rosneft's need for a new resource base in the coming years. According to the expert, the Russian company will be able to continue the development of these projects, including independently.



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