BP PLC (LSE:BP.) will give up its 19.75% stake and its two board positions in Russian state-backed oil company Rosneft (AIM:ROSN) following pressure from the UK government.
On Friday, it was reported by the Financial Times that UK business and energy secretary Kwasi Kwarteng had called on BP to explain their holdings in Rosneft (AIM:ROSN), which BP has held a stake in since 2013.
BP chair Helge Lund said that BP had worked in Russia for over 30 years with “brilliant Russian colleagues”.
“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,” Lund said.
Rosneft shares fell off a cliff following Russia’s invasion of Ukraine, losing more than half its value in the week by close last Friday, hitting ₽307.95 in a wider selloff of Russian shares.
The company accounted for around 20% of BP’s profits in 2021, equivalent to £2bn.
BP will pay a US$11bn charge of foreign exchange losses accumulated in recent years and a non-cash adjusting item charge, which is the difference between the fair value of the Rosneft shareholding at the end of March 2022 and the carrying value of the asset: US$14bn at the end of 2021.
It also means Rosneft will no longer factor into BP’s dividend payments, though BP maintained previous guidance on annual EBIDA per share growth of 7-9%.
BP chief executive Bernard Looney has resigned "with immediate effect" from the Rosneft board, along with BP-nominated director Bob Dudley.
“Like so many, I have been deeply shocked and saddened by the situation unfolding in Ukraine and my heart goes out to everyone affected”, said Looney.
“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, but are also in the long-term interests of bp.”
Kwarteng welcomed BP’s decision in a warning to other Russian-affiliated UK companies.
“I welcome BP’s decision to exit its shareholding in Rosneft oil company,” Kwarteng tweeted.
“Russia’s unprovoked invasion of Ukraine must be a wake up call for British businesses with commercial interests in Putin’s Russia.”
BP’s share price is down 9% from February highs of 417.2p, closing on Friday at 378.5p.