| Investors are waiting for details Markets continue to comprehend the deal concluded a week ago between BP and the shareholders of the Tyumen Oil Company to consolidate oil companies. Political assessments are known. Vladimir Putin and Mikhail Kasyanov, as well as Russian politicians and officials of lower rank, unanimously declared that the oil deal was an unprecedented investment breakthrough of foreign capital into Russia.
Meanwhile, the words of the head of BP, Lord John Brown, who called the deal “a turning point in the history of the entire oil and gas industry,” deserve much more attention, because the goal of BP’s corporate strategy, of course, is not to increase the investment attractiveness of the Russian economy. The strategic choice of one of the key players in the oil market is business expansion through new territories and prospects for extensive expansion into new markets. And it is precisely this event - the world's second vertically integrated oil and gas company has decided on its further development - that is relegating the Russian focus of BP's new strategy to the background for international investors.
Over the past few years, BP has been optimizing its business, primarily by balancing the ratio of profit generation and investment in development. And if in 2001 the corporation's shareholders received $2.9 billion, then in the past the amount more than doubled - to $6.8 billion. This happened as a result of the company's withdrawal from a number of projects that were unpromising, from the point of view of BP management. We must not forget that the main reserves of BP can be considered depleting, which pushed management to search for new deposits.
Having accumulated significant free funds, BP's management, according to a number of foreign experts, was faced with a choice in its future strategy. This was also prompted by the fact that, as a result of restructuring, the company achieved maximum efficiency at all stages of its production cycle. In other words, BP, as an investment object, lost the prospect of growth, as a result of which last fall the company’s capitalization decreased by almost 25% (about $45 billion).
It is not surprising that the bet was placed on Russia, whose oil and gas complex is developing very dynamically. “Despite the fact that business in Russia is still fraught with significant risks, including political and issues of construction of export pipelines,” write analysts at AGEdwards, “the deal will increase BP’s production by 13% and create a springboard for its expansion into the Far East ( in particular to China), as well as potential for further growth."
According to the parties, Alfa Group, Access/Renova and BP are creating a joint company in which BP will receive a 50% stake. The new company will include the assets of TNK and Sidanco, the volume of oil production will be 1.2 million barrels of oil per day, oil reserves are estimated at 5.2 billion barrels. BP contributes to the merged company its own assets in Sidanco, a share in Rusia Petroleum, a share in the Sakhalin-4 and Sakhalin-5 development project and a network of gas stations in Moscow. Alfa Group and Access/Renova contribute their assets to TNK and Sidanco, shares in RUSIA Petroleum, Rospan and the Sakhalin-4 and Sakhalin-5 projects.
However, Russia is only the first target of BP's new expansion; moreover, these investments are of a financial nature. Lord Brown announced that this year alone the company will invest $10 billion in the five largest centers for the development and exploitation of oil and gas fields, with a total investment in them amounting to more than $20 billion. These centers include oil and gas fields on the shelves of the Gulf of Mexico, in Trinidad, in Angola, Azerbaijan and on the shelves of the Asian Pacific Ocean. These centers will cover about 50% of BP's entire oil and gas business over the next five years, according to Lord Brown. According to BP analysts, the production of crude oil and natural gas in the five investment centers will increase by an average of 3-4% by 2005 and by 5% by 2007.
Despite the importance of BP's strategic actions and statements, the stock market reacted very cautiously to them. Since the beginning of February, the price of BP shares has not changed significantly. Thus, two weeks ago the company’s securities cost 6.10 euros. Then, by the time the deal was announced in Russia, the share price dropped to 5.83 euros. And yesterday at the close of trading the price was 6 euros. At the same time, the shares moved along with the market.
The manager of one of the leading international investment banks, with whom the Vremya Novostei newspaper correspondent spoke, says that investors have two reasons for caution. First, he said, the threat of a possible war in Iraq and the associated unpredictability of the oil market does not allow investors to be overly optimistic about BP's actions. The second reason is of a corporate nature: “No one is completely clear when and in what final form this transaction will be completed, or how the new company will actually be managed,” says the banker. Alexey GRIVACH, Andrey DENISOV |
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