BP CEO: New Russian Oil Co Production Growth Almost 11%
30 Apr 2003
DOW JONES
BP PLC's Chief Executive Officer John Browne said Tuesday that calendar first-quarter oil and natural gas production at Russian subsidiary TNK-BP grew by nearly 11% year-on-year to 1.2 million barrels of oil equivalent a day. He added that the deal that created TNK-BP in February is "progressing smoothly" towards completion in mid-summer. Another BP official later predicted a closing date in July. At a media briefing, Browne said TNK-BP's dividend would amount to at least 40% of the company's cash flow and possible rise to fully 100%. Replying to questions about last week's $13 billion takeover of OAO Sibneft by Russia's biggest oil company OAO Yukos, Browne said the blockbuster deal "simply validates our opinion" about BP's own $6.75 bilion investment to create TNK-BP. While generally well regarded by the investment community, BP's transaction has attracted some questioning given the relative riskiness of investing large sums in Russia and the oil company's previously disappointing experience in the country. "We're very pleased about the timing of our transaction," he said. BP's chief executive officer for exploration and production, Tony Hayward, said 45% TNK-BP's production would be exported, allowing the company to take advantage of higher market prices than found in Russia, where domestic oil companies have sold oil for as little as $4 a barrel. The new company will have a cash flow of $3 billion to $4 billion this year, provided oil prices stay around the mid-$20s a barrel, Hayward said. Development costs of $1.50-$2.00/barrel - significantly lower than the international average - offered a strong competitive advantage, he added. The YukosSibneft tie-up "is a sign that consolidation in Russia is going to continue," Hayward said, predicting that ultimately there will be just three or four major Russian oil companies. BP's upstream head said the company's asset disposal program in the U.K. North Sea was complete, but he declined to discuss any future moves. BP has said it plans to make $3-$6 billion in asset divestments this year, in order to maximize returns. Asset sales in the Gulf of Mexico and the U.K. North Sea - including the once mighty Forties field - netted almost $1.5 billion.
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