Location and Scale of South Kara Sea Licences. Photo credit BP
BP (NYSE:BP) announced yesterday that BP and Rosneft, Russia’s leading oil producing company, formed a global and Arctic strategic alliance. Together, the companies will explore and develop three license blocks, EPNZ 1,2 and 3, on the Russian Arctic continental shelf. This covers about 5,000 square kilometres of the South Kara Sea.
As part of the agreement, BP and Rosneft will swap stock shares. Rosneft will hold 5 per cent of BP’s ordinary voting shares in exchange for approximately 9.5 per cent of Rosneft’s shares.
BP and Rosneft have agreed to establish an Arctic technology centre in Russia. The two companies will work with leading Russian and international research institutes, design bureaus and universities to develop technologies and engineering practices for the safe extraction of hydrocarbon resources from the Arctic shelf. The technology centre will build on BP’s deep offshore experience with emphasis on safety, environmental integrity and emergency spill response capability.
The aggregate value of the BP (NYSE:BP) shares to be issued to Rosneft is approximately $7.8 billion. BP has agreed to issue 988,694,683 ordinary shares to Rosneft. Rosneft has agreed to transfer 1,010,158,003 ordinary shares to BP. The swap ratio is based upon the volume weighted average prices of the shares of the two companies.