BP signs deal with Rosneft: reaction BP intends to be a long term investor in Rosneft - an investment which I believe will deliver value for our shareholders over the next decade and beyond. Rosneft is a company working to become a global leader in the sector. It is developing its substantial asset base with new technologies and improving its management processes and corporate governance. As a major investor BP looks forward to being able to contribute to Rosneft's success and add value through our participation on the Board. In this regard BP is supportive of Rosneft's intention to pursue further equity in TNK-BP in due course. Igor Sechin, President of Rosneft, said: Rosneft's acquisition of a strategic stake in TNK-BP would be a major step in expanding the core business of Rosneft and would be a value creating investment for our shareholders given the significant production growth and synergy potential. Rosneft would welcome BP as a significant investor in the company, and I strongly believe that we would benefit from BP's experience and its track-record of implementing best international practices in Russia. Peter Hutton, analyst at RBC Capital Markets, said: The signing of definitive agreements is conditional on the agreement by the Russian government to sell the 5.66pc. This level is significant, as it provides the basis for BP to claim significant influence on Rosneft, to allow BP to book its share of production and reserves. While the net cash element is $2.7bn below our longer standing expectation of $15bn cash, we believe that the market will temper any marginal disappointment on exact cash terms with recognition that lower cash converts to a level of ownership in Rosneft which allows recognition of production and reserves, and relief that the deal has been largely completed. This should facilitate the sense that BP is indeed "turning a corner," with the potential for that sense to be reinforced next Tuesday in 3Q earnings when BP should also be able to highlight volume growth in key fields in US Gulf of Mexico with the return of Atlantic and Mad Dog. Dr Andrey Golubov, a finance lecturer at Cass Business School, said: This deal is in line with the Russian government's strategy of reversing the privatisation of oil & gas resources which took place in the 1990s. This move further cements Rosneft's position as the largest oil producer in the country and puts it on par with global giants such as ExxonMobil. It is somewhat surprising that the Russian state is allowing BP to become the second largest shareholder in the combined firm with almost a 20pc stake. I see this is a positive development as BP's influence may improve corporate governance standards at the firm and ultimately reduce the corporate governance discount when it comes to the stock market valuation of the company. BP's presence may also mean that the combined firm will have to start paying out more in dividends - again a positive development for minority shareholders. Investec Securities Research analyst Stuart Joyner said: The deal will be viewed positively as it halves exposure to Russia whilst upgrading BP's partnership and reviving hopes of an Arctic entry. In accordance with the heads of terms, BP and Rosneft have an exclusivity period of 90 days to negotiate fully-termed sale and purchase agreements. After signing definitive agreements, completion would be subject to governmental, regulatory and anti-trust approvals, and is currently anticipated to occur during the first half of 2013. In addition, BP will agree not to dispose of any of the Rosneft shares acquired in the transaction for at least 360 days following the completion of the transaction.