BP announced today that it intends to carry out a share repurchase, or buy-back, 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.
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.
BP 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.”
Press Release, March 22, 2013