TNK-BP profits soar as Hayward awaits Russian exile

27th July 2010, Comments 0 comments

TNK-BP, the Russian joint venture of BP and one of its crown jewels, revealed soaring profits on Tuesday as it emerged that outgoing BP chief Tony Hayward is set to become a director at the firm.

TNK-BP -- jointly owned 50 percent by the embattled oil giant and 50 percent by a group of Russian billionaires -- said first-half profits jumped more than 20 percent to 2.4 billion dollars (1.86 billion euros) on rising production.

The results underlined the profitability of TNK-BP, Russia's third-biggest oil firm, on the day its British parent announced a loss of 16.9 billion dollars in the second quarter of 2010 after the Gulf of Mexico oil spill.

BP also announced on Tuesday that as a part of the management reshuffle prompted by its oil spill, the widely-mocked Hayward would be nominated as a non-executive director of TNK-BP.

"Siberia awaits Hayward," headlined business daily Vedomosti, referring to the Soviet and Tsarist practice of exiling political prisoners to Russia's freezing East.

His nomination is the latest twist in the short but turbulent seven year history of TNK-BP, which almost imploded during a venomous shareholder conflict but has performed solidly over the last year.

"During the first six months of 2010, TNK-BP continued the track record of strong operating and financial performance," said one of its Russian owners, billionaire Mikhail Fridman, who is acting TNK-BP chief executive.

"This is the 11th successive quarter of production growth... This set of results once again confirms the company's growth potential going forward," he added.

Revenues for the first half rose to 20.7 billion dollars from 14.5 billion the year earlier. Net profits rose to 2.4 billion dollars from 2.0 billion in the same period last year.

For the second quarter in 2010, net profits were 1.16 billion dollars, it said.

Oil and gas production in the first half of 2010 increased by 4.5 percent to 1.743 million barrels of oil equivalent per day (boed) compared to the first half of 2009.

TNK-BP operates huge oil fields in East Siberia, West Siberia and the Volga-Urals region. Over the last year it has ramped up production at key fields like Uvat and Verkhnechonsk.

The 2008 management dispute saw its then chief executive Robert Dudley accused of damaging the Russian shareholders' interests and effectively forced to leave Russia.

However the dispute was patched up after Dudley's departure and the shareholders agreed to appoint Maxim Barsky TNK-BP chief executive effective from 1 January 2011, with Fridman taking the reins in the interim.

Ironically, BP announced on Tuesday that Dudley would be replacing Hayward as the overall BP chief executive.

German Khan, one of Russian co-shareholders, known collectively as Alfa Access-Renova (AAR), said they "fully supported" Dudley's appointment as BP chief executive.

The shareholder conflict "was not of a personal nature but of differences of approach in management," he said, according to RIA Novosti. "I have sent Bob my congratulations."

There has been speculation that BP could even sell its stake in TNK-BP, a move that would rake in an estimated 15 billion dollars in proceeds and at single stroke improve its financial situation.

Analysts have said the Russian gas giant Gazprom and its largest oil firm Rosneft would be interested purchasers but TNK-BP has dismissed such a scenario.

Late last month Deputy Prime Minister Igor Sechin, the government's pointman on energy matters and close ally of Prime Minister Vladimir Putin, met Hayward in Moscow for a meeting whose subject remained a mystery.

TNK-BP's Russian shareholders were not discussing a buy-out of BP's stake, Khan said.

© 2010 AFP

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