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BP Plc’s Rosneft exit a positive development in “less than ideal” circumstances - analyst

Published: 15:53 28 Feb 2022 GMT

Rosneft - BP Plc’s Rosneft exit a positive development in “less than ideal” curcumstances

Blue-chip City brokers reckon the end result of BP PLC (LSE:BP.)’s forced exit from its Rosneft (AIM:ROSN) stake will be a net positive, even though the circumstances are “less than ideal”.

Analysts at JP Morgan, in a note, retained an ‘overweight’ rating for the oil supermajor with a reduced 500p price target (versus a current price of 358.25p).

“While we acknowledge that the timing and forced exit of Rosneft (AIM:ROSN) is less than ideal, we believe that the benefit of an arguably improved ESG perception may help offset the cash annuity provided through Rosneft (AIM:ROSN),” JPM said in a note.

“Taking a further step back, we believe the positive macro backdrop and upside risk to oil prices owing to reduced OPEC spare capacity (made worse by Russia’s diminished production) offer further mitigation to the earnings loss associated with exiting ROSN.”

It meanwhile also noted that the removal of the “Russia overhang” should help offset the financial impacts.

Analysts at Barclays, meanwhile, said: “In seeking to exit its holding in Rosneft, BP's management is being proactive in recognising a fundamental shift in the environment.

“Whilst BP may not receive what it might see as fair value for the stake, the recommitment to planned shareholder payouts is welcome and disposal makes bp a far stronger investment case.”

At Citibank, analyst maintain a ‘neutral’ view for BP whilst pointing out that there’s not an obvious buyer, not in western Europe.

“Despite the stated intentions, it is not really clear whether there are any buyers for BP's Russian stake: it may be a pathway that takes substantial time to unfold,” Citi analysts said.

“In the interim, we adjust our earnings (down 23% for 2022-30) to align to the new accounting treatment that BP will use and cash flow (down 7% for 2022-30E) to reflect that, even without a sale, the Russian dividend stream now carries high uncertainty over remittance.

This morning, BP PLC (LSE:BP.) announced it will give up its 19.75% stake and its two board positions in Russian state-backed oil company Rosneft 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, which BP has held a stake in since 2013.

In a statement, 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.

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