BP's Hayward Hails Rosneft Performance

Itar-TassRosneft chairman Igor Sechin appearing on a live video feed on a screen behind the firm's chief executive officer, Sergei Bogdanchikov, at the company's annual shareholders meeting in Moscow on Thursday.
In a surprise appearance at Rosneft's annual shareholders meeting Thursday, BP chief executive Tony Hayward praised the state-run company's performance and hinted that the British firm would be a reliable partner in developing new fields.

BP, whose company is locked in a battle with its Russian partners in privately owned TNK-BP, has a $1 billion stake in Rosneft, bought in the firm's initial public offering in 2006.

Along with BP, another oil major, Petronas of Malaysia, was represented at the meeting, with its vice president George Ratilal also making a speech.

Hayward met with Rosneft CEO Sergei Bogdanchikov on Thursday to discuss current cooperation and plans, Bogdanchikov told reporters after the meeting.

In his speech at the meeting, Hayward hailed BP's investment in Rosneft, which he said had yielded a profit of 50 percent, and described the companies' partnership as "reciprocity in action."

"You promised production growth and have delivered. You promised reserve replacement and have delivered," Hayward told the meeting, which was presided over by Deputy Prime Minister and Rosneft chairman Igor Sechin.

Hayward said BP made the investment because it was committed to Russia, a "great nation" that is "one of the world's great hydrocarbon provinces," and because it viewed Rosneft as an efficient company after they had worked together offshore at Sakhalin.

Rosneft will need good partners if it wants to keep growing, a challenge that will require developing difficult new fields in eastern Siberia, Sakhalin and in the Arctic, Hayward said.

"If Rosneft is going to continue to deliver it will require effective partnerships, new technology and expertise," he said.

On a more general note, he said investor-friendly taxes, support of the rule of law and property rights were key for Russia to develop further.

BP is at odds with a group of Russian billionaires, with whom it jointly runs TNK-BP, over future strategy and personnel issues.

Thursday's Rosneft meeting voted in favor of a dividend of 16.5 billion rubles ($696 million), equivalent to 10.47 percent of earnings.

Bogdanchikov said the company would increase the payouts after 2010 if it reduced its debt to the size of its operating profit and met growth targets.

The company plans capital expenditures on oil-field development for 2008 of 227.7 billion rubles ($9.6 billion), about one-third of it in Yuganskneftegaz, Rosneft vice president Sergei Makarov said. Other large investments are going into the vast Vankor oil field in eastern Siberia and the upgrade of the Tuapse refinery on the Black Sea.

Makarov said that under corporate goals, dividends would grow by at least 10 percent annually.

Rosneft's board met immediately after the shareholders meeting and reappointed Sechin as its chairman. Sergei Naryshkin, Kremlin chief of staff, and Gleb Nikitin, deputy head of the Federal Property Management Agency, were elected as deputy board chairmen.

CEO Bogdanchikov, Barclays Capital chairman Hans-JЪrg Rudloff and VTB CEO Andrei Kostin were among those board memebers re-elected Thursday. Federal Property Management Agency chief Yury Petrov replaced Cabinet deputy chief of staff Kirill Androsov on the board.

Some of the 900 individual shareholders who turned up for Thursday's meeting were not so pleased with the dividend, however, and some were stunned as they heard about the annual remuneration of $200,000 for independent directors.

"Why so much?" one shareholder was heard yelling in a closed-circuit television broadcast of the meeting relayed to reporters.

The meeting, however, was quieter than last year's, when Rosneft directors met their shareholders for the first time since the IPO. On Thursday, Sechin repeatedly assured shareholders that they would have all their questions answered and sent company vice presidents into the audience to talk to participants.

"Those who asked about personal meetings [with company managers] can consider that they have been scheduled," he told the meeting at one point.

One small shareholder, a retired military officer who would give only his first name, Pyotr, said he would get a mere 590.4 rubles ($25) as last year's dividend on his 369 shares. Speaking after the meeting, he said he was still pleased with the company's performance. "We need to look to the future," he said.