BP to Buy Back $8 Billion in Shares

The British oil company completed the sale of its stake in the venture, TNK-BP, to Rosneft, the Russian state oil company, on Thursday for $12.48 billion in cash and shares in Rosneft. The deal will give BP a 19.75 percent holding in Rosneft.

The $8 billion is roughly the equivalent of what BP originally paid for 50 percent of TNK-BP in 2003. Over the last ten years BP also received $19 billion in dividends from TNK-BP, the company said.

BP said that the remaining $4.48 billion from the stake sale would be used to reduce debt.

The company’s chief executive, Robert W. Dudley, said in a statement that the buyback was expected to exceed what was required to offset the earnings per share dilution as a result of the TNK-BP sale.

He said the buyback also reflected the reduction in BP’s size following its $38 billion in divestments, excluding TNK-BP, over the last three years. BP has been on a selling spree as part of an effort to raise cash to pay for liabilities resulting from the 2010 Gulf of Mexico oil spill that killed 11 people and spewed millions of barrels of crude oil.

At a news conference Thursday at BP’s headquarters in London, the two companies announced that Mr. Dudley would be nominated to join the Rosneft board. BP will also have an additional board member. Rosneft on Thursday also bought the other 50 percent of TNK-BP from a group of Russian oligarchs for $27.7 billion.

An ebullient Igor Sechin, Rosneft’s chief executive, said that the two companies were already looking into what projects BP could work on with Rosneft. “We are going to work definitely with BP offshore, “ he said. “We are definitely going to avail ourselves of the experience and competencies of BP.”

Mr. Dudley said that Mr. Sechin had gone without sleep for roughly 40 hours straight completing the transaction.

He said that the global oil and gas industry was changing and that new technologies gave Russia the opportunity to exploit “more expensive” to develop resources like “offshore oil, shale gas, and tight oil, which is produced using similar techniques to shale gas.

Mr. Dudley suggested that he was not troubled by the fact that Rosneft already has important strategic ventures in the Arctic with ExxonMobil, Statoil and Eni. “We all applaud Russia’s progressive approach of strategic ties with international oil companies,” he said.

As a significant minority shareholder in Rosneft, BP will benefit from these ventures, Mr. Sechin said.

Article source: http://www.nytimes.com/2013/03/23/business/global/bp-to-buy-back-8-billion-in-shares.html?partner=rss&emc=rss