BP and Total – the Russian discount

As the market waits for ‘Level 3 sectoral sanctions’ against Russia…

Has anyone noticed how the respective share prices of BP and Total have already performed versus the MSCI World Energy this year?

It’s interesting that BP shares have suffered more than Total. The latter both owns an 18 per cent chunk of Novatek — which is subject to debt issuance sanctions by the US — and also has a direct stake in the massive $27bn Yamal LNG project. Total owns a fifth of it.

BP has enough on its hands with its 20% stake in Rosneft, but has no direct exposure to projects.

Still, having said that, BP really depends on Rosneft’s upstream production. In 2014-15, according to Credit Suisse, Rosneft will account for 38 per cent of BP’s overall oil and gas production. Sanctions on Rosneft certainly don’t help BP. But Monday’s arbitration award in favour of former Yukos shareholders (guess who ended up with those assets?), could raise some serious issues for BP’s ownership in Rosneft.

No shocker, then, that despite beating expectations on second quarter earnings on Tuesday, BP’s shares had slipped into the red by mid-morning.