BP faces £1.1bn divi block as Russian rivals 'flex muscles'

OIL giant BP's Russian joint venture partners yesterday threw down the gauntlet on a rival tie-up with state oil group Rosneft by saying they will block a $1.8 billion (£1.1bn) dividend payment.

The dramatic move by the AAR consortium of billionaires, which owns the other half of TNK-BP, threatens to overshadow today's fourth-quarter results from the British company, which is expected to reinstate its own dividend, suspended after last year's catastrophic Gulf of Mexico spill.

It also comes as AAR seeks a court injunction today against BP's proposed $16bn (10bn) j/v with Russian rival Rosneft after the two unveiled a proposed Arctic exploration deal last month.

The dividend block for the October to December period means BP could miss out on a $900 million payout that was due to be distributed in February. Stan Polovets, chief executive of AAR, said after a board meeting in Moscow: "The decision for now is not to approve the dividend."

Some analysts played down the impact of AAR's move. One said BP's own Q4 divi decision was unlikely to be affected, with group chief executive Bob Dudley expected to restore the payout at about 7 cents a share.

Jason Kenney, oil analyst at ING in Edinburgh, said the standoff between the rival parties was "a storm in a teacup". He said it had to be put in the financial context of an expected $30bn of asset disposals by the British group by the middle of this year.

Kenney also said TNK-BP had been set up in 2003 to distribute dividends, and so BP's Russian partners would also be blocking themselves from getting payouts by their action. "It's muscle-flexing (by AAR], but to their own detriment if they take it too far," he said. Analysts believe BP's divi will be reinstated because, despite the Gulf spill, its finances are strong, with $22bn of assets already sold, and oil nearing $100 a barrel.

However, they said any long-term cut to the TNK-BP payout could limit BP's scope to raise its own dividends over time.

A BP spokesman said: "We will obviously seek to find a businesslike resolution to these issues and to sort them out in due course." He said a meeting was scheduled for the TNK-board sometime in "mid-February".

Russian deputy prime minister Igor Sechin, who is also Rosneft's chairman, said last week that he was going to meet TNK-BP shareholders soon to try to iron out differences.

AAR maintains that its British partner via the Rosneft tie-up is breaching its contractual agreement that TNK should be the prime vehicle of BP's business in Russia and the Ukraine.

However, BP will argue in court that TNK is not a credible off-shore operator to take part in the Rosneft tie-up, their main skills being in onshore, brownfield redevelopment.

Doug Youngson, an energy specialist at Arbuthnot Securities, said: "It's not surprising the Russian partners are upset, and it's not clear how it's going to be resolved."

Exxon Mobil Corp, the world's biggest privately-owned oil company, reported a 53 per cent rise in Q4 to $9.25bn (5.76bn), compared with $6.05bn in the same quarter a year ago.

The American giant's strong performance was helped by a lower tax rate and a surge in natural gas production in the United States and Qatar.

Analysts said Exxon was also helped by a recovering global economy and higher profits in its chemicals and refining businesses.