BP facing angry AGM as Russia deal nears collapse

LONDON Wed Apr 13, 2011 11:47am BST

BP's Chief Executive Bob Dudley speaks to the media after year-end results were announced at the energy company's headquarters in London February 1, 2011. REUTERS/Suzanne Plunkett

BP's Chief Executive Bob Dudley speaks to the media after year-end results were announced at the energy company's headquarters in London February 1, 2011.

Credit: Reuters/Suzanne Plunkett

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LONDON (Reuters) - BP (BP.L) will face an angry annual meeting on Thursday, with shareholders exasperated at its latest foray into Russia, as its $18 billion (11 billion pound) tie-up with Rosneft (ROSN.MM) looks close to collapse.

BP's new Chief Executive Bob Dudley had hoped the share swap and Arctic exploration deal with Russia's largest oil producer would be a turning point for the company after last year's calamitous oil spill in the Gulf of Mexico, another issue likely to prompt irate exchanges and protest votes at the AGM.

"It will be a particularly bad-tempered affair," one top 15 shareholder said of the AGM.

Not all investors like the idea of increased exposure to Russia, and the spat the deal has prompted with BP's partners in Russian venture TNK-BP TNBP.MM has left some questioning Dudley's judgement.

"Why are we getting mixed up too deeply with the Russians? I'm not too happy," said Brian Peart, spokesman for the UK Shareholders' Association, who also owns 10,000 BP shares.

BP's billionaire partners in TNK-BP secured a court injunction blocking the plan to swap 5 percent of BP shares for a 10 percent stake in Rosneft and to invest up to $2 billion in a new venture to explore for oil in the Russian Arctic.

Fears the spat could jeopardise BP's 50 percent interest in TNK-BP -- responsible for over a quarter of BP's production -- have caused BP's shares to lag rivals by 12 percent since the deal was inked in January, analysts at RBS said.

The agreement on the $16 billion share swap expires on Thursday, so unless BP secures an extension or reaches a deal with its TNK-BP partners, the whole tie-up could dissolve hours after the AGM finishes.

Rosneft said earlier on Wednesday the share swap deadline stood, though a final decision on whether to postpone would be made on Thursday.

The Arctic exploration deal has also been stalled by court action and, if the share swap expires, Rosneft could drop BP in favour of rivals Royal Dutch Shell (RDSa.L) or Exxon Mobil (XOM.N), which previously discussed exploring the blocks with Rosneft.

Newspapers have variously reported that BP is trying to buy out its Russian partners in TNK-BP and considering whether to sell out of the venture.

Analysts said both options were unlikely and that a compensation payment to the Russians or a total abandonment of the deal were more realistic alternatives.

PROTEST VOTE

Investors are also expected to voice their frustration at the Gulf of Mexico oil spill, which the investigation commissioned by U.S. President Barack Obama largely blamed on BP management failings.

The rig blast that killed 11 men and caused America's worst-ever oil spill also halved the company's share price and forced a suspension of the dividend.

Some of BP's biggest investors including Calpers and the Florida State Board Administration, along with a raft of smaller ethical investors, have said they will vote against the approval of the annual report and the re-election of Bill Castell, head of the directors' safety committee.

"The vote on Bill Castell will be the real lightning rod, and it's probably rightly so," the top 15 investor said.

Votes against BP's directors usually only represent around 1 percent of the poll, so even a few percentage points against Castell or other members of the safety committee would be significant.

Directors usually withdraw their nomination if there is a chance of a significant vote against them, but BP might resist such a move in this case lest those suing the company in the United States portray it as an admission of fault.

Investor advisory groups the Association of British Insurers and PIRC have also flagged concerns about two executive directors receiving bonuses in spite of the spill, with PIRC urging investors to vote against the remuneration report.

(Additional reporting by Tommy Wilkes in London, Douglas Busvine and Melissa Akin in Moscow; Editing by Will Waterman)

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