TNK-BP’s long-term strategies in Russia include the development of gas assets, such as Rospan. That project is in preliminary stages of development at this point. 

TNK-BP was formed in 2003 as a result of the merger of BP’s Russian and Ukrainian oil and gas interests with assets of Alfa Group and Access Renova Group. TNK-BP has come to be Russia’s third largest oil company, employing nearly 100 000 people and operating in practically all of Russia’s major hydrocarbon regions.

The rating agency Fitch left its long-term foreign and local currency issuer default rating for the Russian asset of British Petroleum TNK-BP International at “BBB-”.

The short term issuer default rating for TNK-BP was set at “F3”. The rating agency affirmed the USD 8 billion dollar guarantee debt issuance program at “BBB-”. The outlook for all issuer default ratings was set as “stable”. 

TNK-BP is the third biggest producer of oil and gas in Russia. The company’s extraction volume was 1.734 million barrels of oil equivalent daily for the first three quarters of 2010, without taking into account the production volumes at its equity affiliates. Overall, production increased 3.4 percent in large measure thanks to the growth of production in the Orenburg region as well as greenfield production at the Verkhnechonskoye and the Uvat fields. The expansion figures for 2010 are higher than the results of the company’s performance in 2009, when the growth of hydrocarbon production was 2.9 percent. The contribution of greenfield production to total output in the first nine months of the year stood at 10 percent. In 2009, greenfields accounted for only 6 percent. The company was able to show to market participants that it is able to deliver results for critical projects in a timely manner. Furthermore, the increasing share of greenfield production significantly enhances the company’s business image in the industry.

Among the negative developments analysts at Fitch noted that the commissioning of the Yamal fields was pushed back to 2015. It was earlier believed that Yamal could come online as early as 2013. The launch of the Purpe-Zapolyarnoye oil pipeline was also rescheduled to 2015.  

TNK-BP’s long-term strategies in Russia include the development of gas assets, such as Rospan. That project is in preliminary stages of development at this point. 

In 2009, TNK-BP stated that gas extraction contributed only 12 percent to combined hydrocarbon output. The contribution of gas production to EBITDA was 3 percent. The contribution of gas to the company’s total production is not expected to rise substantially prior to 2015. At the same time, TNK-BP is intensely pursuing the utilization of captive and commercial associated gas at power plants. 

TNK-BP intends to take full advantage of the government’s scheme to liberalize the natural gas price on the Russian domestic market by the year 2014. Fitch forecasts that in 2011 the price of gas will increase by 0.15 percent in relation to the price for the previous year.

The rating agency expects that the EBITDAR (earnings before interest, taxes, depreciation, amortization, and rent) figure for TNK-BP will be around USD 8.5 to USD 10.2 billion throughout the period of years from 2010 to 2014. These forecasts are made on the basis of Fitch’s oil price estimates of USD 75 per barrel of West Texas Intermediate Crude in 2010, USD 67.5 in 2011, and USD 60 in 2012. The EBITDAR in 2009 was USD 8.6 billion. These figures are comparable to those of most similarly situated oil and gas companies. Fitch further anticipates that the company’s EBITDA per barrel of oil equivalent will go down from USD 14.1 to USD 13 in the next four to five years. 

According to the rating agency’s experts, the balance sheets of TNK-BP look normal. The company’s credit rating profile corresponds to debt maturity timeframes.

As of the end of September, TNK-BP’s overall unadjusted indebtedness was USD 6.3 billion. The obligations are all unsecured, and the average dates of maturity are 4.7 years. In the first three quarters of the year the company reduced its debt by nearly USD 700 million. The volume of repayments and the amounts to be refinanced for 2010-2011 currently stand at USD 1.1 billion. It is expected that TNK-BP will succeed in raising sufficient funds for arranging the refinancing of the company’s obligations as they come due. The company has good access to financial institutions and capital markets to raise enough money. 

As the situation now stands, the company does have healthy liquidity levels. Cash on hands is USD 1.9 billion. The company also has available credit lines in the amount of USD 500 million. In October of 2010, TNK-BP entered into an arrangement with 16 banks to provide for a USD 2-billion club loan facility. The company will have access to a USD

1 billion loan and a USD 1 billion committed tranche to be used for general corporate purposes.   

In October of 2010, TNK-BP also announced that it will acquire several upstream pipeline assets from BP in Venezuela and Vietnam. These purchases will have a price tag of USD 1.8 billion. The assets in Asia and South America will allow TNK-BP to diversify its profile outside of Russia.   

Fitch projects TNK-BP’s mid-cycle credit ratios will not change. As such, it is expected that revenues from operations to net leverage will be below 1.5. Funds from operations interest coverage ratio will stay at above 10. 

Overall, Russia continues to be the largest oil producer in the world, with the output of 10 million barrels per day as of October 2010. The production figure is 20 percent more than the extraction volume in Saudi Arabia, which is the second largest oil producer. Russia’s combined production in the 10 months of 2010 was more than 420 million metric tons, representing an increase of 2.4 percent on a year-on-year basis. Gas extraction in Russia increased by 14 percent, reaching the volume of 527 billion cubic meters. 

TNK-BP controls many exploration, production, refining, and marketing companies in Russia and Ukraine. TNK-BP is among the biggest vertically integrated companies in the country. It has the third-largest hydrocarbons reserves and production volume in the country. The company is an asset of British Petroleum that has a controlling stake in the venture. Other shareholders include Alfa Group, which has 25 percent, Access Industries, which has 12.5 percent, as well as Renova, which holds 12.5 percent.