BP faces shareholder pressure over Russian stake amid Crimea standoff

Vladimir Putin Wags Finger

BP will come under pressure at its annual meeting this week to explain how its decision to take a 20% stake in Russia's biggest oil company Rosneft is going to be affected by the country's standoff with the west over Crimea.

BP's annual meeting, held at the ExCel centre in London's docklands on Thursday, could see a barrage of questions from shareholders over Rosneft, continuing legal threats in the US, executive pay and environmental issues – and the general direction in which the company is headed.

The British oil group has already been drawn into the row over Russia's annexation of Crimea with calls for Rosneft's delisting from the London Stock Exchange. The demand came from Bruce Misamore, the former finance chief at Yukos – the oil company that was set up by former oligarch Mikhail Khodorkovsky and later folded into Rosneft while Khodorkovsky was in jail.

There is a risk that Russian president Vladimir Putin could expropriate assets from western companies, including BP, said independent analyst Louise Cooper. BP's Rosneft stake accounts for a third of its production volume and gives it a stake in possible future Arctic exploration.

In addition, BP still operates under the cloud of the Deepwater Horizon disaster. It has already paid out billions in compensation to victims but could face further penalties of up to $20bn (£12bn), on top of the existing $40bn bill, if it is found guilty of gross negligence by the US Department of Justice.

HSBC oil analysts Gordon Gray and Peter Hitchens said the 2010 disaster in the Gulf of Mexico remains a key uncertainty. They wrote in a recent note: "In the case of gross negligence 1) BP's balance sheet looks strong enough to weather it on our estimates, and 2) we would expect a multi-year appeal process to mean the near-term financial impact would be limited."

They also thought BP's strategy presentation in early March "did a good job of shifting the strategic emphasis from the post-Macondo [Gulf of Mexico] recovery to its longer-term growth potential".

BP can point to a recent deal with US environmental protection authorities that will enable the oil firm to bid for new drilling rights in the Gulf of Mexico.

BP boss Bob Dudley could face questions over his pay, which tripled last year, despite the legal threats still hanging over the company. The American, who took the helm at BP towards the end of 2010 after the exit of Tony Hayward, received $8.7m (£5.2m) in salary, bonus and share awards last year, up sharply from $2.6m in 2012.

BP's share price, around 488p, is still far below the 650p it was at just before the Gulf of Mexico disaster.

Powered by Guardian.co.ukThis article was written by Julia Kollewe, for theguardian.com on Sunday 6th April 2014 14.07 Europe/London

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