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BP has announced its intention to carry out a share repurchase programme with a total value of up to $8 billion.
Today’s decision to buy back shares follows the completion yesterday of the sale of BP’s 50% interest in TNK-BP to Rosneft. The programme is expected to return to BP shareholders an amount equivalent to the value of the company’s original investment in TNK-BP.
In 2003 BP invested around $8 billion in cash, shares and assets in the formation of TNK-BP. Over the following decade BP received a total of $19 billion in dividends from the joint venture. BP sold its interest in TNK-BP to Rosneft, followed by a reinvestment in Rosneft shares, for an overall consideration of $12.48 billion in cash (including $0.71 billion in TNK-BP dividends received by BP in December 2012) together with shares representing 18.5% of Rosneft. As a result, BP now holds a 19.75% interest in Rosneft.
Commenting on the decision BP Group Chief Executive Bob Dudley said: “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.
“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.”
Dudley said that the size of the proposed buy-back programme, which is expected to exceed that required to offset the earnings per share dilution expected as a result of the sale of TNK-BP, also reflected the reduction in BP’s asset base following its major $38 billion divestment programme over the past three years.
The company intends to retain the additional cash consideration of $4.48 billion received from the sale of its interest in TNK-BP to reduce BP Group debt as part of its continuing commitment to maintaining a strong balance sheet.
BP Chairman Carl-Henric Svanberg said: “We expect our stake in Rosneft will generate long-term value for BP and its shareholders. But this buy-back programme should also allow our shareholders to see benefits in the near-term from the value we have realised by reshaping our Russian business.”
In October 2012 BP and Rosneft announced agreement in principle for the sale and purchase of BP’s 50 per cent interest in TNK-BP for $17.12 billion in cash and 12.84 per cent of Rosneft shares.
Following adjustments in accordance with the terms of the agreement excluding a $0.71 billion dividend received by BP in December 2012 from TNK-BP, Rosneft has today paid BP a final amount of $16.65 billion.
BP has used $4.87 billion of the cash consideration to acquire 5.66 per cent of Rosneft shares from ROSNEFTEGAZ. This amount includes the adjustment from the offer date to completion according to the terms of the purchase agreement.
