TNK-BP May Halve 2007 Dividend

MTDudley speaking at TNK-BP's new Arbat office in 2004. From right, Fridman and Britain's Prince Andrew look on.
TNK-BP International, owned 50-50 by British oil major BP and a group of Russian billionaires, may halve dividend payments for 2007 amid a corporate conflict between its shareholders.

The firm sharply increased its capital investments last year and, unlike 2006, sold no assets.

TNK-BP International, which in the past has paid some of the biggest dividends among Russian oil companies, said Tuesday in its disclosure documents that its management had recommended cutting the dividend to $2.6 billion from $5 billion in 2006. The proposed lower dividend reflects TNK-BP's bigger investment last year, the company said in an e-mailed statement Tuesday evening.

The decision has yet to be approved by TNK-BP's board, which last week failed to meet in Cyprus after the Russian shareholders, Mikhail Fridman's Alfa, Len Blavatnik's Access and Vekselberg's Renova, demanded the resignation of the firm's long-serving chief executive, Bob Dudley.

BP rejected the demand, and Dudley on Saturday said the company had reached a "watershed," where its progress was "not irreversible."

Analysts have said the TNK-BP shareholder is being prompted by pressure for a state energy company, such as Gazprom, to gain control of the venture.

The sharp dividend cut would compare with a much smaller drop in net profits, to $5.3 billion from $6.6 billion in 2006, when TNK-BP had extra income from the sale of mid-sized oil producing unit Udmurtneft.

Net profit declined by 21 percent if proceeds from the sale of Udmurtneft are included. It rose by 24 percent if the proceeds are excluded.

Capital investment went up from $2.3 billion to $3.5 billion, or by 53 percent, the company said. Combined, the drop in profit and the increase in capital investment left the company with $2.5 billion less for dividends.

TNK-BP International is the parent company of listed TNK-BP Holding.

The firm said its 2007 revenues rose to about $39 billion from $35.5 billion in 2006. EBITDA were $9.4 billion.

The Russian shareholders in TNK-BP favor foreign expansion even if that would constitute competition to BP's other operations.

Then-President Vladimir Putin last year urged Russian tycoons to focus on expanding their businesses abroad and hinted that they should leave strategic sectors such as the oil industry to state-controlled firms.

So far, TNK-BP has focused on domestic operations. The company said it acquired a record number of 27 exploration licenses last year. Some of the exploration licenses are in Timan-Pechora, one of the regions where exploration will qualify for tax holidays under proposals backed by Putin last week.

The Timan-Pechora licenses could result in major reserve growth, said Pavel Sorokin, an analyst at UniCredit Aton.

Reuters, MT)