British oil and gas firm BP PLC (NYSE: BP) has announced plans to exit its 19.75% stake in Russia-based energy company Rosneft following Russia’s invasion of Ukraine.
Additionally, Bernard Looney, the CEO of BP, will resign from Rosneft’s Board, along with former BP group CEO Bob Dudley, who was nominated by the company to serve on Rosneft’s Board. Dudley has been a Director on Rosneft’s Board since 2013 and Looney since 2020.
BP will change the accounting treatment of its Rosneft stake following the resignations, which will also result in a material non-cash charge in the first quarter of this year.
The change in accounting treatment also means that starting the first quarter, BP will not report Rosneft as a separate segment.
Helge Lund, the Chairperson at BP, said, “Russia’s attack on Ukraine is an act of aggression which is having tragic consequences across the region. BP has operated in Russia for over 30 years, working with brilliant Russian colleagues. However, this military action represents a fundamental change. It has led the BP Board to conclude, after a thorough process, that our involvement with Rosneft, a state-owned enterprise, simply cannot continue.”
“We can no longer support BP representatives holding a role on the Rosneft Board. The Rosneft holding is no longer aligned with BP’s business and strategy and it is now the Board’s decision to exit BP’s shareholding in Rosneft. The BP Board believes these decisions are in the best long-term interests of all our shareholders,” Lund added.
BP is a vertically-integrated company operating in all areas of the oil and gas industry, including exploration and extraction, refining, distribution and marketing, power generation, and trading.
Following the announcement, shares of the company closed nearly 5% down on Monday. The stock lost another 0.3% in the after-hours trading session to end the day at $29.12.
Wall Street’s Take
After BP revealed its plans to sell its stake in Rosneft, Cowen & Co. analyst Jason Gabelman maintained a Hold rating on the stock and lowered the price target from $31 to $30 (2.7% upside potential).
Gabelman said, “BP will exit its Rosneft ownership, though it is unclear how much compensation will be received.”
Moreover, Stephen Richardson of Evercore ISI reiterated a Buy rating on BP but reduced the price target to $36 from $40 (23.3% upside potential).
Overall, the stock has a Moderate Buy consensus rating based on 5 Buys, 3 Holds and 1 Sell. The average BP price target of $36.95 implies 26.5% upside potential. Shares have gained 24.4% over the past year.
TipRanks’ Stock Investors tool shows that investors currently have a Very Positive stance on BP, as 44% of investors on TipRanks increased their exposure to the stock over the past 30 days.
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