BP shares tank on Russia exit

Shares in British energy giant BP slumped Monday, wiping billions of dollars from the company’s value after it said it was exiting Russia over the country’s invasion of neighbour Ukraine.

BP was down 5.6 per cent around midday on London’s benchmark FTSE 100 index, which was down 1.5 per cent overall.

BP on Sunday said it was pulling its 19.75-per cent stake in energy group Rosneft, ending more than three decades of investment in Russia.

The British company’s chief executive Bernard Looney also announced his resignation from the Rosneft board.

“Russia’s attack on Ukraine is an act of aggression which is having tragic consequences across the region,” said the company’s chairman Helge Lund.

“BP has operated in Russia for over 30 years, working with brilliant Russian colleagues,” he added.

“However, this military action represents a fundamental change.”

Kwasi Kwarteng, Britain’s business minister, welcomed the announcement.

“Russia’s unprovoked invasion of Ukraine must be a wake up call for British businesses with commercial interests in Putin’s Russia,” he tweeted.

Analysts said it was likely to be a substantial write-off for BP.

“Just how BP will manage this exit is unclear,” noted Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

“But it looks like it will be highly difficult for the company to recover anywhere near what was considered to be the full value of the stake, estimated to be $14 billion at the end of 2021.”

Oil price cushion

Others noted that the loss would be cushioned by soaring profits at BP thanks to the highest oil prices in more than seven years.

“While Russia provides a material amount of production to BP through its Rosneft investment... the Russian barrels are less profitable than the rest of the company’s portfolio,” said Allegra Dawes, energy sector analyst at Third Bridge.

“BP has clearly stated its intent to reduce oil production this decade and to focus on the energy transition,” Dawes added, saying its exit comes “when BP is in a strong financial position to forego the future income”.

Also as a result of Russia’s invasion, Norway’s state-owned energy giant Equinor on Monday said it would stop its investments in the country and pull out of its joint ventures there.

Equinor had $1.2 billion in assets at the end of last year in Russia, where it has had a partnership with Rosneft since 2012.

“In the current situation, we regard our position as untenable,” Equinor’s president and chief executive Anders Opedal said in a statement.