OREANDA-NEWS. August 02, 2010. BP told PdVSA (Venezuela’s state oil company) that it is interested in selling stakes in 3 projects that are located in Venezuela to TNK-BP Holding, Bloomberg reported. BP has a 16.66% stake in Petromonagas (crude production of 110MBD), and minority interests in Petroperija and Boqueron. BP put the value of the assets at approximately USD1bn, with due diligence of Venezuela assets now in progress. A TNK-BP source stated that the company was considering the purchase of BP assets beyond those in Venezuela, though specific details were not provided, reported the press-centre of OTKRITIE Financial Corporation.

View: We believe the acquisition would be marginally positive for TNK-BP, as it seeks geographic diversification of its business, much like other Russian oil majors. TNK-BP is a participant in the National Oil Consortium of Russian companies operating in Venezuela, which was formed in October 2008. Increasing TNK-BP’s presence in Venezuela will bolster the company’s influence within the consortium. At the same time, it is hard to quantify the impact on TNK-BP at this point, as we need more clarity concerning the quality of these assets and some indication of the profitability of their business. According to TNK-BP, in the current conditions it has no difficulty in earmarking a lump sum of about USD1bn for these assets.

Valuation and Action: TNK-BP trades on a 2010 EV/EBITDA of 3.3x. We reiterate our BUY rating on TNK-BP Holding with a target price of USD2.52/share.