OREANDA-NEWS. October 11, 2010. TNK-BP announced plans to acquire BP’s Algerian oil and gas assets. According to TNK-BP’s Deputy Board Chair Maxim Barsky, experts estimate the value of BP’s Algerian energy assets at about USD3bn. He also added that TNK-BP has sufficient funds to purchase these assets on its own. Meanwhile, Energy Minister Sergey Shmatko told journalists that TNK-BP could also offer some assets in exchange for the BP’s Algerian property, reported the press-centre of OTKRITIE Financial Corporation.

View: The potential acquisition of BP’s energy assets in Algeria (and in Vietnam and Venezuela) could change TNK-BP’s international profile substantially, as it has thus far been concentrated only in Russia and Ukraine. That said, we believe the M&A activity will raise the issue of future capital spending and shareholder returns. We doubt that TNK-BP will pursue all the potential acquisitions of BP’s upstream assets, particularly since existing participants in some of BP’s international projects possess preemptive rights and would likely compete with TNK-BP in the bidding process.

Valuation and Action: The potential impact of such acquisitions on TNK-BP (especially in terms of future dividend payments) is rather difficult to quantify at this point. Hence, we believe the news should be neutral for the stock. We maintain our positive view on TNK-BP given its profitable growth and compelling valuation.