BP plc (NYSE:BP) (LON:BP) announced its plan to return capital to shareholders by repurchasing $8 billion worth of shares after completing the sale of its 50 percent stake in TNK-BP to Rosneft’ NK OAO (MCX:ROSN). The company also reinvested a part of its gains from the transaction in shares of the Russian oil company.
BP plc (NYSE:BP) (LON:BP) received a payment of $12.48 billion in cash (including $0.71 billion in TNK-BP dividends received by BP in December 2012) and 18.5 percent stake in Rosneft’ NK OAO (MCX:ROSN). Its total interest in the Russian oil giant is now 19.75 percent.
In December last year, the Russian oil giant secured two loan agreements worth a total amount of $16.8 billion from a group of international banks to purchase 50 percent stake in TNK-BP. The banks include Bank of America Corp (NYSE:BAC) Merrill Lynch, Barclays PLC (NYSE:BCS) (LON:BARC), BNP Paribas SA (PINK:BNPQY) (EPA:BNP), JPMorgan Chase & Co. (NYSE:JPM) and Mizuho Corporate Bank, which provided Rosneft with a five-year loan and a two-year loan worth $4.1 billion and $12.7 billion, respectively.
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Barclays PLC (NYSE:BCS) (LON:BARC) invested $8 billion in the shares and assets in the development of TNK-BP in 2003. Since then, the company received $19 billion in dividends from its investment.
In a statement, 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 program should also allow our shareholders to see benefits in the near-term from the value we have realized by reshaping our Russian business.”
On the other hand, 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’ NK OAO (MCX:ROSN) and together developing opportunities to create value for both companies.”
According to the Dudley, the size of the repurchase program of the BP plc (NYSE:BP) (LON:BP) will exceed the required amount to offset the dilution of the earning per share of the company due to the sale of its stake in TNK-BP and the reduction of its asset base after implementing its $38 billion divestment program.
BP plc (NYSE:BP) (LON:BP) plans to retain $4.48 billion from the cash it received from the transaction to reduce its liabilities and maintain a strong balance sheet. The company estimated that its shares buyback program will be completed within 12 to 18 months.
BP plc (NYSE:BP) (LON:BP)’s stock price jumped by 2.58 percent to nearly $42 per share on Friday, around 1:37 PM in New York.