Almost a year since the Gulf of Mexico spill hobbled BP on its western front, the company finds itself bogged down in Russia, said the report. An arbitration court has ruled that BP's proposed drilling alliance with Rosneft breaches terms of an existing joint venture with TNK-BP. Any resolution will probably be costly. The fight with TNK-BP is especially damaging because Robert Dudley, [image-nocss] BP's chief executive, once led the venture.
Worse, said the newspaper, BP is considering swapping 5% of its equity for a stake in Rosneft even if TNK-BP succeeds in blocking the drilling alliance outright. The reasoning is hard to justify, the report said.
Add it up and BP looks exposed, it said. Adjust for the gain in global stock markets since the gulf fiasco, and BP's market value of $146 billion is $75 billion below where it was before the spill.
Even if BP were to be found grossly negligent, the post-tax bill would be just under $50 billion. The problems in Russia, which account for about 10% of BP's profit, justify some additional discount.
Though Shell, known for being ultracautious, would be unlikely to make a hostile offer, Exxon must be tempted, said the Times. The cost savings from its 1998 deal to buy Mobil were about 10% of combined operating expenses. On that basis, an Exxon-BP combination could yield annual savings of $12 billion, said the report.
The industry already has cut fat over the last decade, so a more realistic figure may be $10 billion, the report said. Taxed and capitalized, this would be worth about $70 billion. That is enough to pay for a 30% premium for BP shareholders and still leave room to resolve the issues over the Russian deal and the gulf spill.
Any deal still looks complex. Antitrust watchdogs would probably require ExxonMobil and BP to sell American refining and marketing activities, said the report. The gulf and Russian liabilities remain big overhangs. And there are political challenges for any advance on Britain's national oil champion.
A deal in the short term does not look likely, the Times concluded, but the longer BP's shares languish, the more the financial logic will overcome other worries.Click herefor previous CSP Daily News coverage of BP takeover speculation.
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