TNK-BP Will Borrow $1Bln and Trim Costs

TNK-BP plans to raise about $1 billion in medium-term debt in a "difficult" market to fund projects and refinance borrowing this year, chief operating officer Tim Summers said Friday.

The company, Russia's third-largest oil producer, will also cut 2009 capital expenditure by about 10 percent from a planned $3.3 billion, which already represented a 27 percent cut from 2008's investment of $4.4 billion.

TNK-BP's board decided not to declare dividends for the second half of 2008 at its meeting in Zurich on Friday and will review the issue later, Summers said.

The 50-50 venture between BP and a group of four Russia-connected billionaires plans to repay about $1.8 billion this year, he said. TNK-BP has about $6 billion debt, some of which "is long-dated," said Summers, who has been TNK-BP's acting chief executive since Dec. 1.

"The bond markets look quite difficult to access at the moment" as the current macroeconomic environment provides "opportunities" to acquire assets, Summers said.

TNK-BP reopened a search for a new CEO after shareholders halted talks with Denis Morozov, the former chief executive of Norilsk Nickel. Former CEO Robert Dudley left after a battle between BP and the billionaires' consortium AAR over strategy and management.

BP is drafting a shortlist of candidates for the new CEO. Summers said his contract for the role has been extended until mid-year.

"One or two of the shareholders have indicated their wish to take time to get the right person for the role. Therefore, I think it's a question of getting the right person as opposed to fitting in any particular timeline," he said.

TNK-BP plans to start pumping crude at its Uvat project in Siberia next week. Oil will be supplied into the new 264-kilometer pipeline for injection into the national network, he said. Production will be between 20,000 barrels per day and 30,000 barrels per day this year. The company plans to invest about $2.5 billion in the Uvat project at the initial phase of development, Summers said.

Depending "on the ultimate potential of the reservoir" it will be possible to produce as much as 9 million tons per year (180,000 bpd) "coming from that region" with several deposits, he said. "It will take time" to reach that output rate.

TNK-BP has restored gas extraction to the "seasonal normal levels" this month after Gazprom, the country's gas export monopoly, ended restrictions on supplies into the nation's pipeline network, imposed in January, Summers said.

Gazprom cited lower demand for gas from Russian consumers as one of the reasons for gas pumping limitations.

TNK-BP increased oil and gas production by 2.6 percent to 601 million barrels of oil equivalent last year, Summers said. (Bloomberg, Reuters)