BP faces the music as Russian row adds to Dudley's woes

The last thing BP needed ahead of its AGM today was the apparent collapse of its high-stakes tie-up with Russian oil giant Rosneft...

by James Taylor
Last Updated: 19 Aug 2013
BP’s AGM today was always going to be a spicy affair: it’s the first since the disastrous Gulf of Mexico oil spill, which caused widespread devastation to the environment, not to mention the oil giant’s share price and reputation. Shrimp fisherman are coming all their way from Louisiana to make their displeasure known, and several big investors are likely to vote against BP’s accounts and bonus payouts. And to make CEO Bob Dudley’s life even more difficult, a resolution of the current row with his Russian joint venture partners (over its proposed Rosneft deal) looks further away than ever. Somehow we doubt he’ll have been looking forward to today very much…

The Rosneft deal isn’t a write-off just yet. The deadline was supposed to expire at midnight, but the two sides said this morning that they’ve agreed an extension until May 16, the idea being this will give BP time to persuade the courts that the deal can go ahead.

The trouble is that there’s no sign of hostilities thawing between BP and the Russian oligarchs who own the other half of their joint venture TNK-BP. Quite the reverse, if anything. The Russians’ argument is that the Rosneft deal breaches their JV agreement, which bars BP from entering into a ‘strategic’ relationship with anyone else in Russia – and so far, the courts have agreed. BP has apparently tried to buy them out, but the two sides are miles apart on valuation (BP says $50bn, the oligarchs reckon more like $70bn). And Sky News is now reporting that the Russians plan to demand confidential BP emails and documents to prove the Rosneft deal is in fact strategic, not financial. So BP is going to have a job getting that mess sorted in the space of a month.

Dudley must have hoped that he’d be able to trumpet the Rosneft deal at today’s AGM as a sign that BP is bouncing back. But instead, it has become something else for investors to worry about. The principal focus of today’s AGM will be the Gulf disaster, and BP’s reaction to it. But some investors are also unhappy about the remuneration report, including the £1m golden handshake for Tony Hayward (to tide him over until his next highly-paid non exec gig at Glencore). And then there’s the ongoing problem of BP’s apparently entirely ineffectual chairman Carl-Henric Svanberg, who hardly covered himself in glory after the spill and has seemingly been no use whatsoever in Russia either. So what’s he still doing there? It can’t be for his presentation skills, judging by the reaction to his speech today.

Dudley still seems to have plenty of credit with shareholders, who generally appear to like the cut of his jib; his address today, where he insisted that BP was changing but admitted it needed to ‘earn back your trust’, got a relatively sympathetic reception. So perhaps the most useful thing he could do today is vote against Resolution 16 – the re-election of Carl-Henric Svanberg...

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