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. Last Updated: 07/27/2016

Dudley Plays Down TNK-BP Asset Sale

Itar-TassTNK-BP's CEO Robert Dudley
Russia's No. 2 oil producer, TNK-BP, said Friday that it was looking at possible asset disposals but had not yet decided to sell oil production units in the European part of Russia.

"At the very best, today's headlines are premature. They are a little bit risky. We have not made any such decision as written in today's press," TNK-BP's CEO Robert Dudley told a news conference, responding to press reports about the plans.

Vedomosti reported earlier that TNK-BP planned to sell assets in European Russia worth up to $3 billion to focus on production on the other side of the Ural Mountains in Western Siberia.

The newspaper quoted sources close to the company as saying TNK-BP would sell Saratovneftegaz, which has an annual output of 1.6 million tons of oil; the Orsknefteorgsintez refinery, which has a processing capacity of 3.5 million tons per year; and Orenburgnefteprodukt, which owns 100 filling stations.

"These are low-profit assets," Vedomosti quoted one of the sources as saying. "The company can sell ... as part of an asset restructuring program."

Vedomosti quoted sources as saying fast-growing Russneft, run by Mikhail Gutseriyev, was one potential buyer. Russneft has said it plans to build or buy a refinery within two years.

TNK-BP may also sell Udmurtneft, which has an output of over 5.5 million tons of oil per year, but there is still no decision, a source said.

Saratov and Udmurtneft produce around one-tenth of TNK-BP's total annual output of more than 70 million tons (1.4 million barrels per day). Analysts put the total value of the assets at $2.5 billion to $3 billion.

TNK-BP is consolidating its subsidiary companies and plans to have pooled almost all its Russian assets in a new company, TNK-BP Holding, by the end of this year. It will offer shares in the new company to minority owners of several subsidiaries.

But Dudley said on Friday that the new shares, which could account for as much as 6 to 7 percent of TNK-BP Holding's equity, would not necessarily be listed on any stock exchange.

"It remains to be seen whether TNK-BP will actually list this company," he said. "But whether or not these shares are listed, they will be traded."

On Thursday, TNK-BP announced it had set up a $5 billion borrowing facility which it will use for financing in coming years. That gives it a fund for new investments without the need to raise more money on the equity markets.

Dudley said capital investment would total $2 billion in 2005, including $136 million on exploration. The firm would continue to spend more than $100 million per year on exploration and would bid aggressively for new oil licenses.

He said he believed TNK-BP could help open up Eastern Siberia, the remote region which is key to Russia's ambitions to develop its sales to East Asia.

Dudley said TNK-BP's oil output would grow by 6 to 7 percent this year.