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Reuters Breakingviews: BP's Russian honeymoon

Tuesday, April 30, 2013 - 03:34

April 30 - BP's first profitable days as 20% owner of Rosneft are welcome. How boss Bob Dudley manages the new relationship is key, argues Reuters Breakingviews.

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Why BP's Russian honeymoon is not the end of the story joining me is breaking news global resource economist Kevin Allison I'm Kevin Q1 beat expectations by -- a billion dollars almost a billion dollars that's pretty it. That's right BP's -- putting quite a good quarter and they probably deserve to have to bask in the glow a little bit of calling this the Russian honeymoon because -- Just completed this huge trade of their 50% stake in Russia's third biggest oil producer for 20% stake in. The biggest producer rosneft and a bunch of cash -- put and good operating performance it shows that. The turnaround is gaining some traction so yes a good quarter market likes it that the market until atop the shares or more than 3% the market clearly likes what why -- why. Send its hesitation. Skepticism of -- well. It is a honeymoon period they didn't -- offshore rigs just had this deal common is a huge open question a few huge open questions hanging over BP. First the outcome of the gulf spill trial which is still ongoing they still don't quite know how that's gonna work out what the size of the potential fines that might be in for -- The future of the Russian relationship is an absolutely huge question they've traded a 50% stake in a very profitable dynamic Russian producer. For 20% stake in a couple of board seats and Ross yeah and can they manage that relationship can they turn it into something that gives them. Benefits as a company not just as a financial holding but as a kind of equity accounted. Business that they're part of trying to influence this decision making helping turn Ross snapped into -- and global super rich. Are you impressed at W. I think that Dudley is made the best of a pretty difficult situation in Russia and remember Dudley has a long history in the country he lives again KBP before he was chucked out of the country after conflict with some of its shareholders. He's managed when I think it's a very very difficult situation very. Politically dynamic situation Russia pretty well. But on the other hand BP. Is now a minority investor in a state owned company with that can potentially have its own motivations outside just those were taking -- How relevant is it that they. They they don't come separates out oil and gas in these numbers am oil looks looks looks. Quite well supported gas trading apparently hidden within the upstream oil and gas production section is down a little as that's. Since then it's a little bit less relevant than saying last year because gas prices especially in the US have risen substantially they're up there up quite a bit. So did they drag from a kind of extremely low gas prices moderating a little bit but. But in general I think I do think it makes sense to -- count the upstream bundled together. To look at overall production and if you do look at production in BP's case. Underlying production accounting for all their disposals and everything. It has improved this quarter and crucially the barrels that they are producing -- more profitable barrels -- this was BP's turnaround strategy is. We're gonna shrink but we're gonna produce more profitable barrels. My contention though is it's gonna take a long time before you know whether BP is actually shrunk to greatness as though they might like to or whether mr. shrunk to mediocrity with. A kind of hitching its wagon to than this -- percent stake in her. So benefit of the doubt for now -- jury's out yes all right Kevin thanks for that Kevin Allison from breaking news for more tennis audience what's our US bring you said every day told studies to 1630 GMC. I'm -- of trouble as is righteous.

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Reuters Breakingviews: BP's Russian honeymoon

Tuesday, April 30, 2013 - 03:34

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