BP is expected to report a significant loss in the fourth quarter for its stake in Russias Rosneft as performance was hurt by plunging oil prices and weaker ruble.
Marking its first loss in Russia, BP is on its way to report a Rosneft loss of up to $750 million, City analysts projected. The negative result is due to the rubles 47% drop during the recent three months, the analysts said.
BP obtained its 19.75% stake in the Russian oil giant back in 2013, when the UK company sold its 50% share of the TNK-BP joint venture to Rosneft. The stake in Russias largest publicly traded oil company is one of BPs highest-profile investments.
During the first nine months of last year, Rosneft was responsible for almost a third of BPs overall gas and oil production and accounted for around 8% of underlying replacement cost income.
“Rosneft is almost certain to make a loss in the fourth quarter as a result of the dramatic fall in the ruble and oil price,” said Iain Reid, an energy analyst at BMO Capital Markets, cited by the Financial Times.
BMO projected that BP will lose around 75% of its Rosneft dividend, which is due to the middle of 2015. In July last year, the company received $693 million in dividend payouts. The loss from Rosneft will also drag down overall earnings by at least 5% during the fourth quarter, BMO said.
Rosnefts loss will be highly due to rubles drop as the companys debt was mainly in dollars and euros. However, the oil company is obliged by government laws to report to Russian officials in rubles at the end of each quarter, Mr. Reid said, while also adding that he expects Rosnefts loss to stand at $630 million.
Investment bank Tudor Pickering Holt also backed the statement that Rosneft will report a loss for the fourth quarter and estimated it at $750 million. The bank also said that decreasing export revenues and unfavorable currency rates would bring the Russian companys full-year results “to a level which means virtually no 2015 dividend for BP.”
BP may be forced to write down the value of its Rosneft share, in line with international accounting rules. In its 2013 report BP said its Rosneft stake is worth $13.6 billion.
BP dropped 0.13% on Friday and closed at GBX 410.45. On Monday the stock fell 4.15% to trade at GBX 393.40 at 15:21 GMT, marking a one-year decrease of 18.30%. The company is valued at £75.09 billion.
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