BP’s Rosneft deal blocked; earnings fall short

Doubts returned over BP’s prospects for a return to growth on Tuesday as a British court blocked its plans for a tie-up with Russia’s Rosneft and the oil company’s profit missed expectations.

BP’s oligarch partners in Russia’s TNK-BP have won an injunction blocking a plan for a share swap and exploration deal with state-controlled Rosneft, one of the lawyers in the court said.

AAR, the holding vehicle through which the oligarchs own half of TNK-BP, had argued that the tie-up breached an agreement that BP would seek AAR’s approval before entering any major new ventures in Russia.

A Rosneft spokesman said the court move should not derail the deal, and analysts said the dispute would eventually be resolved.

“We did expect the injunction to be granted, but we also think that the final resolution of this dispute will be reached between the Russian partners and the state, not in the courts,” said Chris Weafer, chief strategist at UralsIB in Moscow.

Disappointing oil production guidance and new oil spill charges also overshadowed BP’s results day, in which it flagged a return to paying dividends for the first time since the Gulf of Mexico spill.

Speaking ahead of the injunction, BP’s CEO Bob Dudley predicted a financial deal with AAR, even suggesting they could get involved in the Arctic project with Rosneft.

BP’s results were in contrast to a better-than-expected increase in quarterly profit at Exxon Mobil Corp on Monday.

BP has sought to put last year’s Gulf of Mexico oil spill disaster firmly behind it and on Tuesday held out the prospect of long-term growth via new exploration partnerships and a fresh focus on getting oil and gas out of the ground.

Yet guidance for another 11 percent drop in output in 2011, after a 9.4 percent drop in 2010, left some analysts questioning BP’s “shrink to grow” strategy.

“BP’s future pace of development in the Gulf of Mexico now looks highly uncertain in the wake of Macondo. We also would highlight the uncertainty in the U.S. unconventional gas business,” Alastair Syme at Citigroup said in a research note.

The growth promises were also overshadowed by a court hearing due later on Tuesday at which BP’s partners in TNK-BP will seek an injunction to block its joint venture with Rosneft.

Dudley, who ran TNK-BP until he was forced to flee Russia after a previous spat with the billionaires turned hostile, said the injunction might well be granted, but insisted that BP expected to settle the dispute with its Russian partners.

The CEO said the oligarchs could be placated via a financial settlement, by BP including TNK-BP in the exploration venture, or by BP offering TNK-BP some other strategic help.

Analysts said it was important BP did settle the spat.

“The company has clearly pinned its hopes on Russia, but the new JV has already gone wrong, antagonising the TNK-BP partners … There remains substantial uncertainty surrounding the company,” said Dougie Youngson, analyst at Arbuthnot Securities.