Tony Hayward, the chief executive of the troubled oil giant BP, held talks with government officials in Abu Dhabi yesterday. A spokesman for BP in London said Mr Hayward met Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces. Sheikh Mohammed is also the chairman of Mubadala Development, a strategic investment company owned by the Abu Dhabi Government.
The meeting raised new speculation that Abu Dhabi may become a significant shareholder in BP, and helped push the company's shares 4.7 per cent higher yesterday to 362 pence at the close of trade in London. But sources close to BP played down reports that Abu Dhabi was set to take a 10 per cent holding in the company. The BP spokesman said: "We can confirm he met Sheikh Mohammed but cannot talk about what they discussed."
BP has insisted it has no plans to raise new equity in the company, which appears to rule out a big strategic shareholding in the company. But it would be happy for new investors to buy shares in the market. A source close to BP in London said: "It's not a good time to be issuing new shares to anybody. Existing shareholders have suffered in the past few months, and they would not like it. "The point of the visit was to stay close to people who are good, long-term friends of the company, but BP is not begging anybody to buy the shares."
However, Mr Hayward's trip to the UAE has again boosted investor appetite for BP shares, ravaged since the blow-out of a Gulf of Mexico oil well in April. Since The National revealed four days ago that BP was looking to Middle East investors to bolster its financial position, its shares have risen by 11 per cent, adding about US$10 billion (Dh36.73bn) to its market value of almost $100bn. Sheikh Mohammed sits on the Abu Dhabi Supreme Petroleum Council, the powerful policy-directing body that functions as a combination of energy ministry for the emirate and board of directors for the state-owned Abu Dhabi National Oil Company (ADNOC).
BP has a long-standing relationship with ADNOC through oil concessions that are due for renewal. It holds 9.5 per cent of Abu Dhabi Company for Onshore Oil Operations (ADCO) and 14.67 per cent of Abu Dhabi Marine Operating Company (ADMA-OPCO). They are the ADNOC-led consortiums that pump crude respectively from Abu Dhabi's onshore oilfields and most of its offshore fields. The decades-old concessions for the onshore and offshore fields expire in 2014 and 2018, respectively.
Analysts believe strategically, it could make sense for Abu Dhabi to cut a comprehensive deal with BP over concession renewals and a rescue package for the company, to ensure it remains a stable partner for ADNOC in coming decades. That might in the long run include an agreement by BP to issue new shares in the company to ADNOC or an Abu Dhabi sovereign wealth fund. Mubadala, which acts as a sovereign wealth fund, is one of the UAE's biggest investors in energy projects outside the country.
An internationally focused alliance with a major European-based oil company could be attractive to Mubadala. Mr Hayward was also reported by sources close to the company to have had a meeting with the Abu Dhabi Investment Authority, the emirate's principal sovereign wealth fund, which owns a small amount of BP stock. The BP spokesman would not confirm the meeting. A Saudi Arabian newspaper reported yesterday that a delegation of unidentified investors from the kingdom's energy sector had departed for London yesterday for "direct negotiations" with BP.
They were said to be seeking a stake of between 10 and 15 per cent in the company. A BP spokesman declined to comment. Also believed to be under discussion was the partnership between Masdar, Abu Dhabi's clean energy project, and BP Solar, part of the company's move into new energy technologies. Mr Hayward attended a "town hall meeting" for BP staff at the InterContinental hotel in Abu Dhabi yesterday morning before slipping out the back entrance with other BP executives, hotel staff said.
One analyst said an investment by Abu Dhabi would be welcomed by BP and the emirate. "Regional investors tend to be large capital and low key. They let management get on with it. BP needs the money but not the noise," said Saud Masud, the head of research for UBS. A "hybrid solution" combining debt and equity could be used to attract a strategic investor without issuing new equity, Mr Masud said.
* Additional reporting Chris Stanton