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Artemis buys into Rosneft, says it's the winner from BP deal

Managers of the Artemis Global Energy Fund say Rosneft is the real winner from this week's deal, but BP has 'regained a lead' on its competitors.

Artemis buys into Rosneft, says it's the winner from BP deal

Russian state energy company Rosneft is the real winner from this week’s deal with BP (BP.L) to buy the London-listed oil major’s stake in TNK-BP, the managers of the £107 million Artemis Global Energy Fund have said. But still, ‘BP has regained a lead on other majors.’

BP announced on Monday that it was selling its 50% stake in TNK-BP to Rosneft in exchange for $17.1 billion in cash, shares representing 12.84% of Rosneft, and two seats on the board. It will use $4.8 billion of the cash to buy a further 5.66% of Rosneft from the Russian government.

‘For BP this removes a lot of uncertainty, but the beneficiary is going to be Rosneft,’ said John Dodd, who is a partner in and co-founder of Artemis.

In addition to BP’s 50% stake in TNK-BP, Rosneft announced it was buying the remainder from AAR, paying $55 billion to make it the largest listed oil company in the world.

‘We’ve started buying Rosneft. As a long-term investment it’s a very important strategic play,’ Dodd said.

Dodd and his co-manager Richard Hulf – whose fund is the top performer in the global energy sector – said the deal was part of a trend whereby state-run energy companies will have to join forces with their private partners.

Hulf said: ‘It’s part of a trend that we have identified, at least 50-60% of world resources are under the ownership of state companies including Rosneft… state companies need the expertise and balance sheets of private companies. BP has regained a lead here on other majors.’

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The deal has raised concerns that BP is effectively buying into Russian leader Vladimir Putin, but it also brings an end to a lucrative but fractious relationship with TNK-BP co-owner AAR. ‘It’s better the devil you know for BP,’ Hulf added.

Analysts have questioned how long it will take for BP to reap the benefits of the deal, while adding that the investment case for BP remains clouded ahead of a settlement with the US government over the 2010 Gulf of Mexico oil spill.

7 comments so far. Why not have your say?

Graham Barlow

Oct 25, 2012 at 12:00

I have been an investor in BP for years and enjoyed the dividends, I was never completely at ease when Brown went into Russia in the first instance ,but have to admit we have all enjoyed the flow of profits . This in turn saved them from the Obama onslaught following the Gulf of Mexico debacle, which I believe was politically motivated to wring every last dollar out of BP. Now I have to ask myself is this Rosnett deal the ultimate con trick by the Russian state? I am an outsider and all I have to go on is the questionable history of Rosnett, How did they acquire the assets in the first instance? The track record does not bode well on the allegations, and murky dealings over the last 10 years. Does Dudley really know what he is getting into? Will the profits materialise for the shareholders in hard cash? Or are BP getting out of the frying pan into the fire? If someone can really answer these questions is BP a "Hold" or "a "Sell"? Every investment manager must be asking the same questions. Let us have some real inside information. Most of all from the Board of BP. What would you do? Sell and wait to see how things go? I feel mighty uncomfortable at the moment.

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Andrew Stevenson

Oct 25, 2012 at 12:17

Couldn't agree more. Yukos. Shell's treatment......

Ripped off by the Yanks. I'm going on the basis that BP have the technology

to drill in deep water that the Russians need, and as long as they need BP it

will be treated reasonably well. But I don't have much faith in Dudley or the

rest of the board.

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Oct 25, 2012 at 12:45

There are several plus points for the Rosneft deal. The big oil companies are more and more becoming just contractors as national energy companies exert control over strategic national assets. This deal places BP inside the effective National Oil company of Russia, soon to become the largest oil producer in the world. For BP to have 20% of 4 billion barrels plus huge tracts of unexploited land, (and the power of Putin behind it) has the potential to transform the company. The big "IF" is: will Putin play fair with them? Rosneft needs the expertise and funding that BP can bring to exploit the resources. BP needs someone to get Obama off it's back...and Putin will definitely be in power for the next four years. It could just work.

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Terry kirby

Oct 25, 2012 at 14:37

I agre with John Dodd, Rosneft will be the main benificiary not BP. If BP could not handle 50% AAR how will they fare with Rosneft in the driving seat. If I was Graham i would sell BP & reinvest in John Dodd's Artemis Alpha Investment Trust (ATS.L). This way he spreads his risk/

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Oct 25, 2012 at 16:35

Putin/Rosneft will use BP's technology and once they learned and copied BP's know- how then it will be "Good-by" to BP.

Dudly should take some history lessons.

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Andy S via mobile

Oct 25, 2012 at 21:24

Get in while BP is still cheap,don't have more than 3-4% of a portfolio. Fortune favours the brave.

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brian douglas

Dec 20, 2012 at 21:49

I thought fortune followed the brave and bought RBS thinking it would become good and then the shares were split let's hope the same doesn't happen to LTSB

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