Bolshevik Petroleum

14 January 2011 By Fiona Maharg-Bravo

The UK oil major is swapping 5 pct of itself for a stake of the same $8 bln value in Russia’s Rosneft, inflicting dilution when its stock is depressed. In return, it accesses Arctic prospects as a junior partner to Moscow. It’s not pretty. But if BP finds oil, it may be worth it.

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UK oil major BP agreed a share swap deal with Russian statebacked peer Rosneft as part of an exploration partnership in the Arctic continental shelf.

Rosneft is taking a 5 percent stake in BP, while the UK group will take a 9.5 percent position in Rosneft, both investments being in ordinary voting shares.

Based on BP's closing price in London on Jan. 14, the group would be issuing $7.8 billion of new stock in the deal.

BP will issue 989 million shares to Rosneft and will receive 1.01 billion shares in the Russian group. The swap ratio was based upon the volumeweighted average prices of the shares in their main trading venues in the 15 trading days ending Jan. 12.

The shareholdings are subject to lockup restrictions for two years, the companies said, after which time they would be subject to certain disposal restrictions.

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