BP plc is taking some of the proceeds from the sale of its half-stake in TNK-BP and repurchasing shares valued at up to $8 billion, the operator said Friday.
The buybacks are expected to return to BP shareholders “an amount equivalent to the value of the company’s original investment in TNK-BP,” it said. On the news BP’s shares rose 2.62% ($1.07) in early trading Friday to stand at $41.96. It had closed on Monday at $40.66.
BP on Thursday completed the sale of its stakes in the Russian oil company to OAO Rosneft, which with its full purchase of TNK-BP has become the world’s largest publicly traded oil company (see Daily GPI, March 22).
Ten years ago BP invested close to $8 billion in cash, shares and assets into forming TNK-BP with a group of Russian billionaires (see Daily GPI, Oct. 27, 2003). Since its formation, BP has received a total of $19 billion in dividends from the joint venture. With the sale and subsequent agreements, BP now owns almost 20% of the Russian oil giant. It also is gaining power on its board of directors.
“BP is moving on to the next phase of its business in Russia, becoming the largest private shareholder in Rosneft, Russia’s leading oil company,” said Group CEO Bob Dudley. “In the process we have also released cash, equivalent to at least six years of BP’s anticipated future dividends from TNK-BP. We look forward now to working closely with Rosneft and together developing opportunities to create value for both companies.”
The size of the proposed buybacks, which are expected to exceed what would be required to offset the earnings per share dilution on the sale of TNK-BP, also reflects the reduction in BP’s asset base following its $38 billion divestment program over the past three years, Dudley said.
At current volumes, BP expects the buyback program to take 12 to 18 months. About $4.48 billion in cash received on the sale of the TNK-BP stake is being retained to reduce overall debt.
“We expect our stake in Rosneft will generate long-term value for BP and its shareholders,” said Chairman Carl-Henric Svanberg. “But this buyback program should also allow our shareholders to see benefits in the near-term from the value we have realized by reshaping our Russian business.”
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