BP to buy back eight billion dollars worth of shares

FTSE 100 oil and gas producer BP intends to carry out a share repurchase programme with a total value of eight billion dollars.

The decision to buy-back shares follows the completion on March 21st of the sale of BP's 50% interest in TNK-BP to Russian oil company 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 $8.0bn in cash, shares and assets in the formation of TNK-BP. Over the following decade, BP received a total of $19bn in dividends from the joint venture.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

BP sold its interest in TNK-BP to Rosneft, followed by a reinvestment in Rosneft shares for an overall consideration of $12.48bn in cash, including $0.71bn 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.

Bob Dudley, BP Group Chief Executive, 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 $38bn divestment programme over the past three years.

BP intends to retain the additional cash consideration of $4.48bn 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.

MF