BP stock warning: what to know because BP discarded stake in Russia’s Rosneft

British Petroleum (NYSE:BP) shares fell 6% today after the company announced it was abandoning its stake in Russian oil giant Rosneft.

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Basically, BP said it was give up your stake in Rosneft after 30 years due to the Russian invasion of Ukraine. Energy analysts say this is the Western company’s most important move to punish Russia.

However, this move is costly for BP. Rosneft represents about half of the company’s oil and gas reserves and as much as a third of production. The sale of its 19.75 percent stake will result in a cost of as much as $ 25 billion.

What happened to BP stock

BP joins a a growing list of corporations which sever ties with Russia following its invasion of Ukraine. BP’s decision is particularly important, as the London-based company is the largest foreign direct investor in Russia.

“I am deeply shocked and saddened by the situation in Ukraine, and my heart is affected. That is why we have thoroughly reconsidered BP’s position at Rosneft, “said CEO Bernard Looney in a press release.

Why it matters

While investors in BP shares are responding to his decision, others are looking for similar decisions in other oil and gas companies operating in Russia. That includes Shell (NYSE:SHEL), which attracts attention due to its own share in Gazprom.

Her move also highlights increasing pressure carried out by governments and citizens over corporations to put the public interest ahead of profits and to stop doing business with Russia. British Minister for Business, Energy and Industrial Strategy Kwasi Kwarteng welcomed BP’s decision to divest its stake in Rosneft.

I welcome BP’s decision to leave its stake in Rosneft.

The unprovoked Russian invasion of Ukraine must be a call to awaken British companies with commercial interests in Putin’s Russia.

– Kwasi Kwarteng (@KwasiKwarteng) February 27, 2022

As investors consider a divestment, BP shares are declining due to higher-than-average trading volume. However, the company said that this decision will not affect its financial goals or its broader focus on renewable energy. The company will be required to assume a non-cash debit of $ 11 billion. It may also face another non-cash debit of up to $ 14 billion.

In 2021, BP received about $ 640 million in revenue from Rosneft. These revenues were in the form of dividend payments and accounted for 3% of total cash flow.

What’s next for BP

Shares of BP suffered a blow today at the news of their decision to withdraw from Rosneft. However, the company’s shares have performed well so far in 2021, as crude oil prices rose above $ 100 a barrel for the first time since 2014. In the last six months, the BP share price has increased by 23%.

On the day of the publication of Joel Baglole did not hold (directly or indirectly) any positions in the securities referred to in this Article. The opinions expressed in this article are those of the author and are the subject of InvestorPlace.com Guidelines for publication.