HOUSTON – Investors wiped out as much as $4.4 billion from BP’s market value Thursday after the U.S. announced a new round of sanctions against Russia, but shareholders may have overestimated how much the sanctions will affect the company.
Increased international tension over Russia’s aggression in Ukraine spurred the Obama Administration’s sanctions Wednesday, along with promises the impact on U.S. companies would be minimal. The sanctions target the ability of Russia’s state-owned Rosneft to borrow western capital, but that probably won’t affect the oil company’s relationship with BP, its biggest investor, said Brian Youngberg, an analyst with Edward Jones.
“As of now, I don’t think there’s going to be any real impact on the operations,” Youngberg said. “Today’s sanctions are more tied to how Rosneft funds its growth.”
BP owns a 19.8 percent stake in Rosneft and gets 1 million barrels of oil per day of its production from Russia, nearly a third of its global output. But its stake in Rosneft only made up about 10 percent of its profit in the first quarter, and BP doesn’t appear to believe the sanctions will affect its business there, either.
In an emailed statement, the company said it “is studying the latest sanctions issued and on first impression, it appears that their focus is to restrict access of sanctioned persons to U.S. medium and long term debt and equity capital markets.”
One way sanctions might bite BP is if they eventually hinder Rosneft’s ability to pay its dividends, Phil Adams, an analyst with corporate bond trader Gimme Credit, wrote Thursday.
“Russian retaliation is likely to be aimed at U.S. companies, but BP has more American employees than any other nationality, so we shall see,” Adams wrote. BP is based in London.
Its unruffled analysis came as Rosneft CEO Igor Sechin warned Thursday that the sanctions would mostly harm the company’s U.S. partners and will be “detrimental to American stockholders of companies,” according to Itar-Tass, Russia’s largest state-owned news agency.
“The decision to put Rosneft on the sanction list is groundless, biased and illegal due to no role of the company in the crisis in Ukraine,” Sechin said.
Exxon Mobil Corp., which is working with Rosneft through joint ventures to drill exploratory wells in Russia, also isn’t likely see much effect from the sanctions, mostly because none of its shared projects are expected to generate revenue for several years, Youngberg said.
Exxon Mobil declined to comment. Sechin had said at first glance the sanctions don’t appear to affect his company’s deals with Irving-based Exxon Mobil.
BP shares traded on the New York Stock Exchange fell $1.41 Thursday to $50.87.