BP to Russia’s Rosenef -nearly 20% stake BP to offload & major exits to Rosenef Board
Invading another Sovereign Nation has consequences and Russia is about to face an unprecedented consequences in a variety of sectors. Hit Putin where it hurts: money and oil
Preemptive Disclosure — I’m not a fan of big oil, for a variety of reasons. So when something big happens in this market sector I tend to assume “oh how is big oil going to shirk their environmental responsibilities” much to my surprise about 2 hours ago BP made a major announcement. Recently I explained how “the fog of war” can make discerning facts from fiction (disinformation, misinformation and propaganda) rather difficult. And at times like these it is imperative that reporting is fact based, with original documents to support said finding of facts. Accordingly and has been my long time standard operating procedure, I’ll endeavor to not only provide you with original documents but then (literally) highlight what I “think” is important…
Brief BP & Rosenef History circa 2013
I think it’s important that you know how this business relationship came to fruition and how today’s BP announcement is a seismic shift. In 2013 BP became one “of the biggest foreign investors in Russia.” In that context it’s also important to remind you that this partnership was consummated in 2013, prior to Russia unlawfully invading Ukraine’s Crimea region. Below I’ve embedded the Johns Hopkins National Security Report by Jonathon Cosgrove
That report is an extremely in-depth analysis and it’s worth while to take the time and read it —under that backdrop —even after Russia invaded Ukraine, specifically Crimea —BP didn’t exit their newly formed partnership with Rosenef. Hence why today’s announcements is seismic and significant. See BP’s official six page statement1to its shareholders and essentially to the world. Not only is BP “offloading” their nearly 20% holdings/shares in Rosnef, two major resignations also occurred. BP’s statement, which reads in part:
bp chief executive officer Bernard Looney is resigning from the board of Rosneft with immediate effect.
The other Rosneft director nominated by bp, former bp group chief executive Bob Dudley, is similarly resigning from the board.
The resignations will require bp to change its accounting treatment of its Rosneft shareholding and, as a result, it expects to report a material non-cash charge with its first quarter 2022 results, to be reported in May.
However is the next two paragraphs in BP’s statement that truly warrants your undivided attention. Because these are direct statements from bp’s Chairman Helge Lund and bp’s CEO, Bernard Looney -their statements which reads in part:
bp chair Helge Lund said: “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… 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
bp chief executive officer Bernard Looney added: “Like so many, I have been deeply shocked and saddened by the situation unfolding in Ukraine and my heart goes out to everyone affected. It has caused us to fundamentally rethink bp’s position with Rosneft. I am convinced that the decisions we have taken as a board are not only the right thing to do…
bp chief executive officer Bernard Looney‘s statement continues…
…Our immediate priority is caring for our great people in the region and we will do our utmost to support them. We are also looking at how bp can support the wider humanitarian effort.”
To understand the short term and long term implications of bp’s recent decision, their statement explains the two material charges and proffered the rationale that with the nearly 20% offloading, their decision..
“has determined that it no longer meets the criteria set out under International Financial Reporting Standards (IFRS) for having “significant influence” over Rosneft. bp will therefore no longer equity account for its interest in Rosneft, treating it now as a financial asset measured at fair value.
To help you understand the importance and significant impact to bp…this isn’t a few million —we are talking about tens of billions in valuation. But also keep in mind that Oil can be an extremely volatile asset and is subject to market conditions, specifically supply and demand —particularly exasperated by Russia unilaterally declaring full on war against Ukraine. This move by bp is breathtaking both in terms of scope and materiality. With any luck the net impact will hurt Putin -where it hurts him the most —a gut punch to his gilded and diamond encrusted wallet. That is one commonality between Putin and Trump both value money above lives of their citizens. And both are motivated by “transactions” versus the hard work of diplomacy and being a decent global citizen.
…carrying value stood at around $14 billion..
…First, it is expected to give rise to a non-cash adjusting item charge at the time of the first quarter 2022 results, representing the difference between the fair value of bp’s Rosneft shareholding at 31 March 2022 and the carrying value of the asset. At the end of 2021 this carrying value stood at around $14 billion.
Second, in addition, the change is expected to result in non-cash adjusting item charge, principally arising from foreign exchange losses accumulated since 2013 that under IFRS were previously recorded directly in equity rather than the income statement. At the end of 2021 these totalled around $11 billion, and this adjustment will not impact equity.
Additionally I want to draw your attention to the cost per barrel cited throughout bp’s statement in short bp is giving its shareholders an actual performance threshold, meaning bp is starting with stunning clarity that the “floor” for them is;
…At around $60 per barrel…
bp remains confident in the flexibility and resilience of its financial frame, underpinned by an average 2021-25 cash balance point of around $40 per barrel…
This includes reaffirming the guidance regarding its expectations for shareholder distributions – dividends and buybacks – out to 2025 that was given with its 2021 full year results in February 2022.
In short this is me telling you that you should pay attention to the cost per barrel because that could spell out future financing issues for Rosenef and former “equity” partners like bp. I’d also encourage you to keep an eye on China, Saudi Arabia, UAE and Qatar —undoubtedly one of them will likely step in to fill the vacuum created by today’s bp’s announcement.
On Friday Febrile 25, 2022 British Business Secretary Kwasi Kwarteng voiced serious concerns over bp’s Rosenef holdings —and as previously noted about 2 hours ago bp issued their statement
The question is will Exxon soon follow suit -or will Exxon continue their long and at times complicated history with Russia. For now it is unclear what if anything Exxon will do. Additionally I was trying to do additional research on Exxon & Russia and oddly RT(.)com comes up with this 403 error message..
…HTTP 403 error code, is issued by a server if a client (browser) lacks the required access rights
I don’t know if that’s a glitch on my end but I attempted via 3 vpns, a static ip and various devices. Don’t get me started about MAEs -I’m literally <3 hops away from where nearly 87% of all internet traffic traverses — so it’s not an IP speed or capacity on my end…but I ran a few looking glass traces and it appears RT(.)com might be under a protracted DDOS attack —and that is incredibly satisfying to me. Because after several attempts to access RT(.)com I got this love note <snort>
Putin to the world “what war”
I don’t know how many of you are aware of this, but back in 2015 (after Putin unlawfully invaded and subsequently annexed Crimea) —Putin signed a decree and the soldiers “KIA” will not be disclosed2 because Russia hasn’t declared their war, a war —so Ukraine said a “big f_ckyou Vlad” and subsequently launched this website:
The Ukrainian Government launched it about 12 hours ago. This is some next level psychological warfare masterfully executed by Ukraine. That website includes multiple videos of captured Russian invaders and it includes passport or other identification documents found on dead Russian invaders. Additionally this does give some veracity to the recent public reporting that Putin recently deployed mobile crematoriums. In some respects President Zelenskyy’s strategic move to create that website will also help Russian families determine if their sons were a casualty of Putin’s War on Ukraine. While simultaneously sending a “mind f_ck” to Putin. But then again I’m not a foreign policy or military expert, so I would encourage you to draw your own conclusions.
…And yes of course your daily dose of saltwater therapy…
ICYIM -I won’t be publishing tomorrow because how dare my bonbons get in the way of my extracurricular Substack activities. No really tomorrow is going to be pretty insane and I’ve preemptively decided that I won’t have time to research and publish an article. Apologies but I wanted to set your expectations.
Wow. Let the ripple effects begin. Maybe clean energy gets a lucky break and a chance after all. SUCK IT PUTIN
You’re nearly through your crazy busy season!! God we miss you on Twitter. Xxoo