? Russians or Chinese could buy underpriced BP, says analyst
? Japanese firm MOEX pays $1bn of Gulf disaster cost
BP chief executive Bob Dudley has been warned that he must break up his huge oil business into three separate parts to increase its stock market value or face the possibility of a takeover by the Russians or Chinese.
The advice came from a leading City investment house days after the Russian president, Dmitry Medvedev, criticised Dudley for messing up a proposed share swap with Moscow-based Rosneft.
Shares in BP rose 4% on the back of takeover talk from Investec Securities and an announcement from the embattled oil group that it had secured a $1bn (�620m) cash injection from a Japanese partner for its part in last year's Gulf of Mexico accident.
The valuation of BP plunged 30% last year after the Deepwater Horizon crisis but 12 months on under the new leadership of Dudley it continues to underperform by 14% the oil sector led by Shell and ExxonMobil.
The research note from Investec analysts calls for a "radical, full demerger of BP" to close the acute discount by speeding up the sale of assets and the move into new developing markets. "Bob Dudley should go the whole hog and hive off the US (Amoco) and North Sea (Britoil) businesses to renew BP ? no longer 'Beyond Petroleum' but as 'Bric-ish Petroleum' ? a higher growth global player focused on the investment challenges of 2030 ? not 1930," they argue. (Bric is a reference to Brazil, Russia, India, and China.) "If BP does not close the discount, we think the Russians, Chinese or Indians will look hard at the sub 6x multiple", which denotes it is underpriced.
The analysts say that a break-up strategy would not damage "BP's Glencore-esque trading business" nor the synergies of integration in markets like US mid-West refining. Such a move would take BP back to its earlier days before it bought Britoil in the UK and then expanded much more dramatically with a massive takeover of Amoco in America.
Meanwhile BP, which has put $20bn of its own money into a special escrow account to pay for clean-up and other costs emanating from the Macondo well, said Mitsui's exploration arm, MOEX, which owned 10% of the well, had paid out $1.1bn.
Mitsui originally argued that it should not have to pay its share of the costs on the grounds that the problem was caused by BP negligence. MOEX has now dropped this claim and analysts said this weakened the case of 25% well shareholder Anadarko Petroleum, which has also used the same argument.
"This is the first recognition by one of the partners that actually...blame is shared and should be shared and therefore the costs should be shared as well," Societe Generale analyst Irene Himona said, adding: "It is very significant because clearly now it means that BP can try and ensure that everybody else who is involved will also meet their obligations."
Source: http://www.guardian.co.uk/business/2011/may/20/bp-british-petroleum-breakup-analyst
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