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    BP Announces Share Buy Back; Returns $8 Billion Investment in TNK-BP to Shareholders

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Summary

BP will use $8 billion of the money it raised from this week's Russian restructuring for share buybacks of its own stock. According to the company, this $8 billion is equivalent to its original investment in TNK-BP.

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Natural Gas & LNG News, News By Country, Russia

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BP Announces Share Buy Back; Returns $8 Billion Investment in TNK-BP to Shareholders

In a statement on Friday, BP announced plans to carry out a share repurchase, or buy-back, programme with a total value of up to $8 billion.
 
The decision to buy back shares follows the completion this week of the sale of BP’s 50 percent 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 percent of Rosneft. As a result, BP now holds a 19.75 percent 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.”

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