BP falls 8% after cutting ties with Russian oil giant Rosneft, adding to mounting financial woes following the Ukraine invasion

• BP stock fell as much as 8% on Monday after the company said it's cutting ties with Rosneft.
• The British oil company said it will sell its 20% stake in Russia's oil giant and that its CEO will step down as a Rosneft director.
• Russia's attack on Ukraine "has led the BP board to conclude, after a thorough process, that our involvement with Rosneft, a state-owned enterprise, simply cannot continue," BP said.

BP stock dropped as much as 8% on Monday and shed about $7 billion in market value after the British oil giant said it is cutting ties with Russia-based Rosneft.

Because of Russia's aggression towards Ukraine over the past week, BP said it would sell its 19.75% stake in Rosneft and remove BP's CEO from Rosneft's board of directors. BP has held a stake in Rosneft since 2013 and is considered to be the oil giant with the most exposure to Russia.

"Russia's attack on Ukraine is an act of aggression which is having tragic consequences across the region. BP has operated in Russia for over 30 years, working with brilliant Russian colleagues. However, this military action represents a fundamental change. It has led the BP board to conclude, after a thorough process, that our involvement with Rosneft, a state-owned enterprise, simply cannot continue," Chairman Helge Lund said.

The decision to divest the Rosneft stake could cost the company more than $20 billion in losses. At the end of 2021, BP valued it at about $14 billion. But shares of Rosneft have since plunged in value, falling 43% on Monday alone. BP's stake is now worth about $5 billion, based on Rosneft's stock price on Monday.

But Russia's central bank has instructed the country's brokers to not execute any sell orders of Russian securities by foreign investors, so there's no telling what value BP will be able to unload its stake for.

In addition to the potential equity losses, BP said it expects to record $11 billion in foreign currency exchange losses. In other words, BP's stake in Rosneft has been significantly hurt by the record decline in Russia's ruble, which dropped significantly on Monday following a ramp up in financial sanctions from Western countries.

Despite the financial setback for BP, the company reaffirmed its commitment to paying dividends and buybacks, and said it should be able to increase its payout 4% each year through 2025 as long as oil prices remain above $60 per barrel.